Written by Chris Demetriou Published on 16 August 2023 On this page Understanding Fleet Costs Other Key Considerations for Fleet Budgeting Telematics to Reduce Fleet Costs In Summary Expand Now more than ever, effective fleet budgeting and cost control is vitally important for whatever size or type of fleet you are operating. By creating a well-planned budget and implementing cost control measures, as a fleet operator you can optimise your operations, reduce financial surprises, and improve the overall efficiency of your fleet.In this article, I will explore the key strategies and tips for developing a robust fleet management budget and how you can effectively control your costs. Understanding Fleet CostsUltimately fleet costs encompass the total cost of ownership of a fleet (TCO) and the cost of operations for your fleet. It is important for you to consider the below factors when calculating your overall fleet costs, which include:Repairs and maintenanceFuelSalariesVehicle depreciationThe above factors include both fixed and variable costs, but it is important for all fleet operators to understand the difference between both, and to gain a better understanding of how these cost categories can affect how you effectively manage your fleet budget.Fixed ExpensesFixed or ownership expenses are costs that generally remain constant regardless of fleet usage, though it is important to note that they can increase over time. Fixed fleet costs include:InsuranceVehicle excise dutyBreakdown/roadside assistance coverMOTsLicences/permits/tollsLoansDepreciationVariable ExpensesVariable expenses can fluctuate depending on a range of factors, and controlling these costs is essential for effective fleet budgeting. Examples of variable expenses include:Maintenance/repairs/tyresParking feesPenalty charge noticesFuel/energy pricesPart replacementsOther variables, such as accidents, idling and speeding, aggressive driving behaviours, fluctuating fuel/energy prices, can also impact costs – but many of these can be mitigated with a good fleet management telematics system, which I will discuss later in this article. Other Key Considerations for Fleet BudgetingWhen managing a fleet budget, there are several other factors to consider to ensure effective cost control. These considerations include:Negotiating with SuppliersEffective negotiation with suppliers is essential for securing competitive prices for fleet-related products and services. Fleet operators should actively engage with fuel suppliers, maintenance service providers, parts providers and vehicle manufacturers to negotiate favourable contracts and discounts. By leveraging the purchasing power of the fleet, operators can secure volume-based discounts, improved payment terms, and access to exclusive promotions. Regularly reviewing and benchmarking supplier contracts can help identify opportunities for cost savings, and ensure ongoing competitiveness in the market.In-source or Out-source WorkPeriodically evaluating which fleet related tasks can be conducted in-house or outsourced can help maximise efficiency and reduce costs. Potentially tasks which you conduct infrequently might be ideal for outsourcing. Expensive and frequent tasks which you might currently be out-sourcing could be in-sourced if you have the skills and resources within your team to do so.Fuel ConsumptionFuel expenses account for a sizable portion of a fleet's operating costs. Monitoring fuel consumption and implementing strategies to reduce fuel usage can result in substantial savings. Fleet operators should continually monitor fuel consumption and identify areas for improvement, such as reducing idling time, optimising routes, and promoting eco-friendly driving habits.Rental VehiclesRegularly assessing rental vehicle costs and exploring new agreements with suppliers – and comparing costs with other providers – can lead to potential savings.Fleet MaintenancePrioritising fleet maintenance is crucial for preventing major future expenses. Regular maintenance can help reduce unexpected breakdowns and extend the lifespan of your vehicles, ultimately lowering maintenance costs.Labour & Overtime CostsUnderstanding the costs associated with labour and the time it takes technicians to conduct repairs or maintenance work is important. Monitoring and managing labour costs can significantly impact overall budgeting.Driver TrainingIncluding driver training within your fleet budget promotes a professional and consistent work culture. It ensures driver safety and improves fleet efficiency.Road Safety and SecurityAllocating funds for safety and security measures, such as dash cams, can enhance road safety and potentially prevent theft and accident claims.Buy Vehicles Based on TCOWhile the initial price of a vehicle may seem attractive – particularly for fossil fuelled vehicles – considering lifetime costs is important. Purchasing alternative fuel vehicles such as full battery electric vehicles (EV) can save you costs in the longer term.Maintenance, fuel costs, taxation including clean air zones as well as insurance can significantly impact vehicles overall expenses and going electric could save you money. Additionally, organisations moving to EV’s can contribute to any green or environmental objectives they may have, as well as improved reputational image.Fleet Management SoftwareInvesting in fleet management software and telematics which I discuss more below can provide valuable insights into driver behaviour, performance, costs, and maintenance schedules, enabling improved cost control and budgeting.Streamlining Administrative ProcessesStreamlining administrative processes is often overlooked but plays a significant role in cost control and efficiency for fleet operators. Manual paperwork and inefficient administrative tasks can be time-consuming and prone to errors. By implementing digital solutions, such as fleet management software and electronic document management systems, fleet operators can automate administrative processes, reduce paperwork, and improve accuracy.These solutions can streamline tasks such as vehicle registration, licensing, insurance renewals, and maintenance documentation. This can free up valuable time for fleet operators and their staff to focus on strategic initiatives. Telematics to Reduce Fleet CostsWith more and more fleet operators now having to manage tight fleet budgets, implementing fleet management systems such as telematics can help reduce costs and streamline your fleet operations. Below is how telematics can assist you to manage your fleet budget:Tracking Driver BehaviourMonitoring driver behaviour, such as harsh braking and idling, can significantly impact fuel economy and your vehicles lifespans. Utilising telematics systems can help identify and address unsafe and wasteful driving practices. Some telematic systems can even coach your drivers in real-time to drive more efficiently.Keep Vehicles Well-Maintained and Road-WorthyProactive vehicle maintenance and good scheduling reduces the likelihood of breakdowns and potential downtime. Proper maintenance also improves vehicle handling and extends the lifespan of various components. And a good telematics system can let you know if there are any issues with your vehicles immediately preventing longer-term damage.Optimising Driver RoutesEfficient route planning can reduce fuel costs and operating expenses. Using your telematics software system for fleet scheduling means improved route optimisation with the fastest and most fuel-efficient routes for each job. A good telematics system should allow you to state which type and size of vehicle you are driving, ensuring your fleet vehicles avoid low-bridges which they are unable to pass through, as well as help your vehicles avoid narrow streets and low-traffic neighbourhoods.Fleet UsageIdentifying and removing underused or overly specialised vehicles from your fleet can reduce maintenance, storage, and fuel costs. Most telematic systems can easily provide you with this information to conduct a thorough analysis of vehicle use. Identifying non-essential vehicles can lead to significant savings for your organisation. In Summary Developing an effective fleet management budget and implementing cost control measures is essential for optimising your fleet operations and improving overall efficiency. Fleet operators should focus on lowering fleet maintenance costs through regular maintenance, fuel monitoring, exploring alternative fuel options, optimising vehicle utilisation, negotiating with suppliers. And utilising fleet management telematic software to achieve significant cost savings and enhance fleet efficiency.Table: Summary of Cost Control StrategiesCost Control StrategiesBenefitsRegular maintenanceProlongs vehicle lifespan, minimises unexpected repairsMonitoring fuel consumptionIdentifies areas for improvement, reduces fuel costsExploring alternative fuel optionsReduces fuel costs, promotes sustainabilityOptimising vehicle utilisationReduces capital expenditure, ongoing maintenance costsNegotiating with suppliersSecures competitive prices, favourable contractsUtilising fleet management telematic softwareOptimises operations, reduces costsStreamlining administrative processesAutomates tasks, improves accuracyEmbracing data analyticsIdentifies trends, patterns, and areas for improvementWith these tips and strategies, fleet operators can successfully navigate the challenges of budgeting and cost control in the ever-evolving fleet management landscape. By implementing these strategies, fleet operators can also effectively reduce costs and streamline their operations, ultimately improving the bottom line. As the fleet management landscape continues to evolve, it is crucial for fleet operators to stay proactive and leverage technological advancements to stay ahead of the competition. Written by: Chris Demetriou Chris is Head of Corporate Fleet, Transport and Accessible Community Transport at the London Borough of Islington, where he is responsible for over 500 vehicles and 150+ staff as the local authority’s licence holder. With more than 20 years of overall public sector experience, he has extensive knowledge of all things fleet management and vehicle tracking, with a specialist interest in fleet electrification. Currently, he is leading the transition of the Islington council fleet from fossil fuelled to electric and alternative fuel vehicles in line with its 2030 net zero pledge. He is committed to deploying new and innovative technologies wherever possible, including an award-winning electrification programme that has seen the borough upcycle the internal combustion engines of its refuse collection fleet (aka bin wagons). A well-known and respected figure in the fleet and transportation industry, Chris regularly shares his best practice and knowledge at trade shows, most recently speaking at Fleet & Mobility Live – the UK’s largest fleet and mobility conference. Reviewing Expert Market’s vehicle tracking articles with a keen eye to everything from fleet and driver risk compliance to forward-looking trends like V2G (vehicle-to-grid). In his spare time, Chris runs ultra-marathons and is a keen supporter of both Spurs and Saracens. All views and content endorsements expressed here are Chris’ own and do not reflect the views of his employer, the London Borough of Islington.