Depreciation of the principal (original purchase price) is your fleet’s largest cost, but even fully depreciated a vehicle still has significant value. That ends the moment cumulative maintenance cost (parts and labor) equals purchase price, excluding interest. This threshold is so consistent it’s been a benchmark since the earliest days of the automotive industry.
As fleet manager, you’re responsible for determining and funding future repair, replacement, and rebuild costs. I recommend making a decision at the 30% threshold because it takes a year to gather the data to use in proposing capital (depreciating asset) and operating (consumables) budgets for the next year. Using 30% gives you time to identify the situation and start the process. You can still take advantage of the lower operating cost over the next year, but will have money in your budget for the year after that. You can always defer the decision to spend; but if you crash and burn without a cushion, you may not be able to get emergency funding.Read More