Fleet Department Life Cycle Costing (Return on Investment Optimisation) 

What is Life Cycle Costing?

Life Cycle Costing (LCC) also called Whole Life Costing is a technique we use to establish the total cost of vehicle ownership. It is a structured approach that addresses all the elements of cost and is used to produce a spend profile of the vehicle over its anticipated life-span. The results of a Fleet Department LCC analysis are used to decide which make and model of vehicle are most suited to the customers requirements. At Fleet Department our service includes a full LCC analysis as part of our package - and our fleet administration service comes entirely free of charge

Why is it important?

The visible costs of vehicle purchase represent only a small proportion of the total cost of ownership. Most vehicle suppliers will provide acquisition or monthly lease costs only. At Fleet Department we use the very latest technology and leading industry expertise to analyse the Life Cycle Costs of a customers vehicles. This technique has been developed over many years and today is capable of producing an accurate forecast of the vehicle operating costs.

There are 4 major benefits of the Fleet Department LCC analysis:

  • evaluation of competing options in purchasing;
  • improved awareness of total costs;
  • more accurate forecasting of cost profiles; and
  • performance trade-off against cost.

Option Evaluation. Fleet Department LCC analysis allows evaluation of competing proposals on the basis of through life costs. Our LCC analysis is absolutely relevant to every vehicle purchasing and leasing decision, from 1 to 1000 vehicle fleets

Improved Awareness. Application of LCC analysis provides businesses with an improved awareness of the factors that drive cost and the resources required by the purchase. It is important that the cost drivers are identified during our brief telephone or face to face interview with you. We then ensure that this is applied in the choice of vehicles we present to you. In addition, awareness of the cost drivers will also highlight areas with existing vehicles which would benefit from review.

Improved Forecasting.The application of LCC analysis allows the full cost associated with a procurement to be estimated more accurately and leads to improved decision making. Additionally LCC analysis allows for much more accurate forecasting of future vehicle expenditure.

Performance Trade-off Against Cost. In vehicle acquisition decisions cost is not the only factor to be considered when assessing the options. There are other factors such as the overall fit against the requirement and the quality of the goods and the levels of service required. LCC analysis allows for a cost trade-off to be made against the varying attributes of the purchasing options.

Principles

The cost of ownership of a vehicle is incurred throughout its whole life and does not all occur at the point of acquisition. In many instances the disposal cost will be negative because the item will have a resale value. However, with residual value fluctuations it is increasingly important to apply analysis intelligence to the cost of disposal or termination. Fleet epartment will take this into account at the planning stage.

There are three stages to a Life Cycle Cost that we will analyse based upon your use and mileage profile:-

  • Acquisition costs - i.e. the cost of the vehicle either as a purchase or lease 
  • Operational costs - are those incurred during the operational life of the vehicle 
  • End of life costs - are those associated with the disposal, termination or replacement of the vehicle. In many cases, disposal cost can be negative because the asset has a resale value.

Our LCC analysis is provided to all customers and culminates in a professional summary offering our recommendations based upon the following 10 point assessment :-

  • Delivered Price / P11D Value - including the specially negotiated discount by our buying consortium
  • Depreciation - based on the projected difference between a vehciles list price and the industry leading Cap Monitor RV forecast
  • Service and Maintenance - the projected cost of keeping the vehicle in good repair over it's operational life cycle
  • Residual Value - the projected value of the vehicle at the end of the term based upon CAP Monitor forecasts
  • Target Contract Hire Rate - provides a benchmark when we negotiate terms on behalf of our customers with dealers and manufacturers
  • Fuel Consumption - Using independent average fuel consumption figures, daily fule pricing analysis and projected pump pricing for the life cycle of the vehicle under review
  • Benefit in Kind Taxation - showing both a % for the particular vehicle and an employee's 'cost per month' figure
  • Insurance Group - Using independent statisics
  • Vehicle Road Tax Rates - Current rates from the DVLA
  • Co2 Emissions - Provides a good benchmark of the vehicle operaing costs - the higher the Co2, the more the operating costs

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Tel:  0845 680 9920                  Fax: 01252 526289                Mobile: 07791 341514