Understanding When to Retire and Replace Fleet Vehicles

As a fleet operator, one of your fleet management duties is to ensure that your vehicles are cost-effective and efficient. One way to achieve this is by knowing when to retire and replace fleet vehicles. This task can be challenging, but with proper evaluation and consideration of multiple factors, you can make informed decisions that will save you money and ensure the safety of your drivers.

In this article, we will explore the critical factors to consider when deciding when to retire and replace fleet vehicles.

Age and Mileage of Vehicles

The age and mileage of your vehicles are key factors to consider when deciding to replace fleet vehicles. Typically, as vehicles age and accumulate higher mileage, they are more prone to breakdowns and costly repairs. The exact mileage will depend on the vehicle type, build quality, and use.

For example, a well-maintained vehicle that is frequently serviced will last longer than a poorly maintained one. However, as a general rule, vehicles with high mileage or those that have been in service for a long time should be considered for replacement.

Maintenance and Repair Costs

Another factor to consider when deciding to replace vehicles is the fleet maintenance and repair costs. It is essential to track the maintenance and repair costs for each vehicle. If a vehicle consistently requires expensive repairs, or if the maintenance costs exceed the vehicle’s value, it may be more cost-effective to replace it.

If repair costs exceed the vehicle’s depreciation, again it could signal the need for replacement. Additionally, if a vehicle is continually breaking down and spending more time within the workshops than on the road, then once again, it is probably time for this vehicle to be replaced.

Fuel Efficiency

Fuel efficiency is another factor that should be considered when deciding to replace fleet vehicles. Newer vehicles often have improved fuel efficiency, which can result in significant cost savings over time. If older vehicles are consuming excessive fuel, it may be time to replace them with more fuel-efficient models. Additionally, fuel-efficient vehicles such as battery electric vehicles help to reduce your carbon footprint and are much better for the local environment.

Safety Features

Safety features are important when it comes to fleet vehicles, as well as becoming fleet safety certified. Newer vehicles often come equipped with advanced safety technologies that can help reduce accidents and improve driver safety. If your older vehicles lack these features, it may be worth considering replacements to enhance safety.

For example, features like lane departure warning systems, blind-spot monitoring, as well as automatic emergency braking, can help prevent accidents and save lives. Other existing structural problems to your vehicles such as corrosion, defective airbags or faulty brakes will mean vehicles are unsafe to use. These should be replaced immediately.

Emission Standards

It is essential to stay updated on emission standards and regulations.  If your fleet vehicles do not meet current emission standards, it may be necessary to replace them to comply with regulations and avoid penalties.

For example in California, The Advanced Clean Fleet (ACF) Regulation dictates that high priority and federal fleets will need to start removing internal combustions engine (ICE) vehicles by 2025 and begin purchasing zero-emission vehicles moving forward.

Additionally, newer vehicles are often more environmentally friendly than older ones and are better for the environment.

Depreciation and Resale Value

The depreciation and resale value of your fleet vehicles should also be considered when deciding when to replace them. As vehicles age, their resale value decreases, and trade-in or resale value deteriorates rapidly after vehicles hit 5-7 years old (although we have seen depreciation levels fall over the last two years due to the difficulties in manufacturers supplying chassis).

However, if the resale value of your vehicles is significantly low, it may be more financially beneficial to replace these vehicles rather than continuing to operate them.

Technological Advancements

The ever-changing automotive industry is always introducing new technological advancements that can enhance fleet management and efficiency. Newer vehicles often come with improved features such as telematics systems, GPS tracking, and connectivity options, which can make it worthwhile to replace older vehicles. These advancements can help you manage your fleet better and improve your overall business operations.

Business Needs

Assessing your current and future business needs is crucial when deciding to replace fleet vehicles. If your fleet requires vehicles with different specifications or if you anticipate changes in your operations, it may be necessary to replace vehicles to meet those requirements. Additionally, if you are expanding your business, you may need more vehicles to accommodate the growth.

Replacement Cycle

Traditionally many fleets rotate vehicles out every three to five years – or 60,000-100,000 miles – as a matter of company policy. While this predictable cycle helps optimize lifetime costs, we are now seeing many vehicles easily being able to cover this amount of mileage without the urgent need for replacement.

In any case, replacing older vehicles before they become too costly to maintain can save money in the long run, but high mileage doesn’t always equate to automatic replacement nowadays.

Warranty Expiration

We know that major repairs tend to become more expensive after factory warranties expire, which is usually around three years. Therefore, it is essential to consider the warranty expiration when deciding to replace fleet vehicles. Replacing vehicles before the warranty expires can help you save money on repairs and maintenance especially for high use/mileage fleets.

Upcycling

Whilst this is not something that has taken off in the industry just yet, we could potentially see companies ‘repowering’ or ‘upcycling’ their existing fleet vehicles by removing the combustion engine and introducing electric powertrains to these vehicles.

If economically viable, then organizations should potentially look at upcycling their existing vehicles. But of course, there are other factors to consider, including the ability to still receive parts for the vehicles in question, especially on tailored or specialist-use vehicles.

All of the above factors mentioned in this article can be used to introduce a lifecycle vehicle strategy that identifies when to replace vehicles in your fleet. These factors all relate to what’s known as the total cost of ownership (TCO) of a vehicle. TCO is the cumulative cost associated with owning and operating a vehicle which takes into account things like fuel/energy costs, maintenance, and repairs.

Fleet operators considering these factors can determine the optimal replacement timeline for each vehicle type. It is important to remember to continuously monitor and adjust your strategy to ensure that your fleet stays up-to-date and efficient.