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Knowing When to Replace an Asset

March 17, 2014


Tracking the Total Life Cycle Cost for each piece of equipment or vehicle in your fleet at point of purchase to sale date is essential in making key fleet management decisions. Fleet Managers need to determine the optimal time for asset replacement, establish replacement models and determine resale value for all assets. If a vehicle or piece of equipment is replaced too early or too late, money is wasted. FleetSoft’s Truck Tracker helps the Fleet Manager record and compile full details on the asset’s costs in one simple Vehicle Total Cost Report.

The ideal time for replacing an asset is calculated using Resale Value, Fixed Costs, Variable Costs and the costs associated with a new replacement unit. To get the most favorable resale value on an asset, replacement should occur when the unit is reasonably depreciated and maintenance costs are still moderate. Truck Tracker provides the ability to accurately track each asset’s Fixed and Variable costs to help you with the replacement calculations.

Fixed Costs - Tracked in Truck Tracker’s Expense Module

Depreciation

Interest

Insurance

Leasing

License & Permits

Variable Costs – Recorded in Truck Tracker’s Work Orders, Services Performed, Parts Inventory and Fuel Modules

Labor/Service

Parts/Tires

Fuel

Truck Tracker compiles these costs into simple reports (Vehicle Total Cost and Vehicle Cost Per Mile) that management can use to get an overview of their fleets costs by unit or unit group.




When calculating whether to keep the same asset or replace the asset with a new model the following comparisons should be made.

New Equipment v.s. Old Equipment

Purchase Price Current Market Value

Service Life Remaining Service Life

Resale Value Fixed Costs

Future Fixed Costs Variable Costs

Future Variable Costs Loss of Productivity (Revenue)

Reviewing a few years or more of Vehicle Total Cost records in Truck Tracker provides enough data to assist you in building a replacement model. The units replacement models will vary based upon the asset’s location, unit type and operation. The data Truck Tracker provides to the Fleet Manager assists in determining what point in an asset’s life cycle the maintenance and repair costs escalate, downtime increases and usage time decreases impacting profitability and productivity. By reviewing the Total Cost data of assets grouped with similar unit types, location and operation, a fleet manager has the information to define a replacement standard for each group.

Implementing these replacement models allows the fleet manager to get the most out of his assets at moderate cost while maintaining resale value.