Challenging conventional wisdom on wholelife costs…

When suppliers help fleet operators to assess the cost of operating different vehicles, they tend to use a wholelife costs model.

One of the most common methods is to use a pence-per-mile (ppm) figure to identify the comparative costs of two models. If one car costs 52ppm and the second 38ppm, the cheaper one is likely to win if all costs have been included correctly.

But the team here at Sewells likes to challenge conventional wisdom and we believe there is a new method that is worth consideration – cost per hour or cost per day. Most other areas of business costs are time-based, so why not vehicles?

Time-based measurements recognise that vehicles don’t just cost money when they are moving. Vehicles cost money when they are parked too (for insurance, depreciation for age and even parking damage from other car users).

Calculating the cost is quite similar to mileage-based costings. You start by establishing the overall vehicle cost. As an example, take a vehicle that will cost around £15,000 over three years. This cost is then divided by the number of days it will be run, not by the expected mileage.

So instead of the vehicle costing 35ppm, it is now listed as costing £13 a day. This figure than then be used for a range of benchmarking activities.

For example, if most of the cars in a fleet are perk vehicles, how much does it cost the company to provide vehicles vehicles to staff per week. Using this model, the answer is around £13,000 a week.

They say time is money and this approach shows this is certainly true of company cars.

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