Developing an Effective Fleet Replacement Program Indianapolis, IN March 6, 2013

Developing

an Effective Fleet

Replacement Program

Indianapolis, IN

March 6, 2013

Paul Lauria

Presentation Overview



Why the timely replacement of vehicles and

equipment is important



Why organizations often under spend on

fleet replacement



Making the case for an effective fleet

replacement program



Developing empirically validated vehicle

replacement cycles



Developing a multi-year fleet replacement plan



Developing a business case for fleet

modernization

Why is the timely replacement of

vehicles and equipment important?



Promoting effective customer service



Promoting employee and public safety



Promoting employee productivity



Managing vehicle repair costs



Managing fleet maintenance and repair

activities and costs



Managing vehicle capital costs



Projecting a positive image to customers

and the general public



In sum, contributing to the bottom line

Why do organizations do a poor job

of replacing vehicles in a timely

manner?



Lack of willingness to devote sufficient

funds to the timely replacement of

fleet assets



Not lack of ability to pay for timely

Life Cycle Costs of a Vehicle

4

Costs (000)

Replacement Cycle (years)

Capital, Operating and Total Cost Trend Lines

(Single-Axle Dump Truck – Large Rocky Mtn-Area Fleet)

Basic Truths About Fleet

Replacement

1.

A fleet of properly replaced vehicles is

cheaper than one with improperly

replaced vehicles

2.

If you can afford to operate an old

fleet you can afford to operate a less

old one

3.

Not spending money on fleet

replacement does not save a company

money or help the bottom line –

except in the short term; over the long

term, it hurts the bottom line

Why do organizations have old

fleets?



Lack of understanding of vehicle life cycle cost

principles (the U-shaped curve)



Lack of understanding of the magnitude and

lumpiness of fleet replacement costs



Lack of appreciation of the importance of the

fleet to overall organizational success



Skepticism about the need for every vehicle in

the fleet



Lack of visibility of fleet operating costs



Use of capital financing methods that

discourage consideration – and management –

of vehicle total cost of ownership (TCO)



Comparing apples with oranges - marginal repair or

rebuild cost versus total capital cost

How do you get more capital dollars

for fleet replacement?



Show that old vehicles cost more than

young ones using an empirical

analysis technique such as life cycle

cost analysis

Sample Optimal Replacement Cycle

Analysis

8

Replacement Cycle in Years: 1 2 3 4 5 6 7 8 9 10

Meter at replacement 9,407 18,814 28,221 37,628 47,035 56,442 65,849 75,256 84,663 94,070

CAPITAL COST

Annual Depreciation $58,684 $29,342 $19,561 $19,561 $12,793 $10,680 $6,150 $6,398 $5,344 $4,464

Cumulative Depreciation $58,684 $88,025 $107,587 $127,148 $139,941 $150,621 $156,772 $163,170 $168,514 $172,978

OPERATING COSTS

Annual Maint and Repair Cost $2,473 $6,296 $11,011 $16,511 $22,758 $29,740 $37,462 $45,935 $55,178 $65,214

Annual Fuel Cost $11,361 $11,819 $12,295 $12,791 $13,306 $13,842 $14,400 $14,981 $15,584 $16,212

Total Annual Operating Cost $13,834 $18,115 $23,306 $29,302 $36,064 $43,583 $51,862 $60,915 $70,762 $81,427

Cumulative Operating Cost $13,834 $31,949 $55,255 $84,556 $120,620 $164,203 $216,066 $276,981 $347,743 $429,170

TOTAL COST

Annual Total Cost $72,518 $47,457 $42,867 $48,863 $48,857 $54,263 $58,013 $67,314 $76,106 $85,890

Cumulative Total Cost $72,518 $119,975 $162,842 $211,704 $260,562 $314,825 $372,837 $440,151 $516,257 $602,148

NPV of Cumulative Total Cost $68,413 $110,649 $146,641 $185,345 $221,854 $260,108 $298,689 $340,923 $385,970 $433,931

Costs to Include in a Vehicle Life

Cycle Cost Analysis



Capital



Purchase price



Upfitting cost (labor and parts)



Residual value



Operating



Maintenance and repair



Fuel



Other



Acquisition and disposal



Taxes and registration

10

Sources of Vehicle Cost Data



Existing Purchase or Lease Contracts



Vehicle and fuel purchase prices



In-House or Fleet Management

Company and/or Fuel Card

Management Information Systems



In-house maintenance and repair labor and

parts costs



Commercial maintenance and repair

charges



Fuel consumption and/or commercial fuel

Sources of Residual Value Data



Automotive Lease Guide – alg.com



Automotive Lease Guide provides residual value

information to the automotive industry



Black Book – blackbookusa.com



Black Book National Auto Research provides residual

value information and used vehicle valuations



Ritchie Bros. Auctioneers – rbauction.com



Ritchie Bros. Auctioneers is the world’s largest auctioneer

of industrial equipment.



Manheim Market Report – manheim.com



Manheim Auctions is the largest and highest volume

wholesale automobile auction company in the world



IronPlanet – ironplanet.com



IronPlanet is a leading online auction marketplace for

buying and selling used construction and agricultural

equipment

Life Cycle Cost Analysis

Considerations



Longitudinal versus cross sectional data



Internal cost data accessibility and accuracy



Maintenance technician labor costs



Parts management costs



Sublet repair management costs



Asset management and administration costs



Assumptions



Inflation rates



Fuel efficiency degradation factor



Discount rate



Sensitivity analysis of key assumptions

Recap



Effective fleet replacement practices

enhance company performance and

profitability; poor practices detract from

them



Establishing an effective replacement

program requires understanding both the

economic benefits and fiscal impacts of

timely vehicle replacement



The goal of optimal vehicle replacement

cycle analyses is to demonstrate that

effective replacement practices reduce fleet

costs over the long term

Questions

For More Information

Paul Lauria

Mercury Associates, Inc.

16051 Comprint Circle

Gaithersburg, MD 20877

301 519 0535

[email protected]

Developing

an Effective Fleet

Replacement Program

Indianapolis, IN

March 6, 2013

Paul Lauria

Why is the timely replacement of

vehicles and equipment important?



Promoting effective customer service



Promoting employee and public safety



Promoting employee productivity



Managing vehicle repair costs



Managing fleet maintenance and repair

activities and costs



Managing vehicle capital costs



Projecting a positive image to customers

and the general public

Why do organizations do a poor job

of replacing vehicles in a timely

manner?



Lack of willingness to devote sufficient

funds to the timely replacement of

fleet assets



Not lack of ability to pay for timely

replacement of assets

Life Cycle Costs of a Vehicle

Costs (000)

Capital, Operating and Total Cost Trend Lines

(Single-Axle Dump Truck – Large Rocky Mtn-Area Fleet)

Basic Truths About Fleet

Replacement

1.

A fleet of properly replaced vehicles is

cheaper than one with improperly

replaced vehicles

2.

If you can afford to operate an old

fleet you can afford to operate a less

old one

3.

Not spending money on fleet

replacement does not save a company

money or help the bottom line –

except in the short term; over the long

term, it hurts the bottom line

Why do organizations have old

fleets?



Lack of understanding of vehicle life cycle cost

principles (the U-shaped curve)



Lack of understanding of the magnitude and

lumpiness of fleet replacement costs



Lack of appreciation of the importance of the

fleet to overall organizational success



Skepticism about the need for every vehicle in

the fleet



Lack of visibility of fleet operating costs



Use of capital financing methods that

discourage consideration – and management –

of vehicle total cost of ownership (TCO)

How do you get more capital dollars

for fleet replacement?



Empirically identify optimal vehicle

replacement cycles



Develop a plan that quantifies

long-term fleet replacement costs

Developing a Fleet

Replacement Plan

Why develop a replacement plan?



To determine and quantify the extent to

which a backlog of vehicle replacement

needs exists



To develop an understanding of the

magnitude and annual volatility of future

fleet replacement costs



To provide the foundation for developing a

business case justification for increasing

fleet replacement spending



To support the evaluation of alternative

capital financing approaches

Replacement Plan Process

1.

Obtain fleet inventory

2.

Categorize assets by type, purchase price,

and unique operating characteristics (if

any)

3.

Establish planning parameters for each

asset category



Recommended replacement cycle



Purchase price (in today’s dollars)



Purchase price inflation rate

4.

Apply parameters to fleet inventory to

project future replacement dates and costs

for each asset in the fleet

Sample Replacement Cycles

26

Vehicle Type

Recomm Replacemt

Cycle (Months)

Auto, Compact, 4 Door

84

Light Truck, Pickup

96

Truck, Med Duty, Utility Body

120

Excavator

144

Backhoe / Loader

144

Truck, Dump, CC

120

Truck, Dump, 12-14 Cubic Yard

120

Van, 1 Ton, TV Inspection

120

Truck, Catch Basin, Vacuum Jet

120

Heavy Equip, Mobile Rubber Tire

Sample Purchase Prices

Vehicle Type

Current Purchase

Price

Auto, Compact, 4 Door

$15,000

Light Truck, Pickup

$17,000

Truck, Med Duty, Utility Body

$49,000

Excavator

$63,000

Backhoe / Loader

$100,000

Truck, Dump, CC

$120,000

Truck, Dump, 12-14 Cubic Yard

$122,000

Van, 1 Ton, TV Inspection

$153,000

Truck, Catch Basin, Vacuum Jet

$304,000

Heavy Equip, Mobile Rubber Tire (50 Ton)

$380,000

Baseline Fleet Replacement Plan

28

Fleet Replacement Statistics

Total number of units in the fleet

906

Number of asset types

180

Average asset age (years)

9.2

De facto average replacement cycle (years)

18.4

Average recommended replacement cycle (years)

10.0

Average current asset purchase price

$ 53,607

Gross fleet replacement cost

$ 44.9 M

Average annual fleet replacement cost

$ 4.5 M

Average annual replacement expenditures (FY 2008-12)

$ 2.7 M

Current replacement backlog

$ 22.2 M

Number of assets that exceed recomm replacement age

466

Percentage of assets that exceed recommended age

51.4%

Smoothed Replacement Plan

30

How do you get more capital dollars

for fleet replacement?



Empirically identify optimal vehicle

replacement cycles



Develop a plan that quantifies

long-term fleet replacement costs



Quantify fleet costs under alternative

replacement scenarios

Determining Fleet Costs

Under Alternative

Replacement Spending

Scenarios

Fleet “Modernization” Plan

“Status Quo” Replacement Plan

34

Comparison of Status Quo and

Modernization Replacement Plans

Year

Assets Replaced

Cost (Millions)

Status Quo Modernization Status Quo Modernization

2014

46

115

$ 2.72

$ 17.50

2015

66

93

$ 2.78

$ 18.03

2016

65

111

$ 2.89

$ 18.57

2017

37

119

$ 2.95

$ 19.13

2018

24

85

$ 3.05

$ 19.50

2019-2023

314

523

$17.03

$ 27.51

Total

552

984

$31.42

$ 55.20

Impact of Modernization and Status

Quo Plans of Average Asset Age

Estimating Future M&R Costs Under

Alternative Replacement Plans

(Heavy Trucks)

Annual M&R Cost in Year t =

21.1 x Asset Age in Year t^0.27

x Gals of Fuel Consumed in Year t^0.32

x Original Asset Purchase Price in Nominal

(inflation adjusted) Dollars in Year t^0.28

Changes in Vehicle Fuel Efficiency

Ratings and Standards Over Time

38



Annualized change in EPA MPG ratings, 1985-2012:



0.5 percent



Annualized change in EPA MPG ratings, 2007-2012:



4.1 percent



Annualized change in CAFE standards, 2011-2025:



6.0 percent



Annualized change in heavy duty truck fuel

economy standards, 2014-2018:



2.4 percent (for vocational trucks) to 5.3 percent

Illustration of Fleet Modernization’s

Impact on Fuel Consumption and Costs

Suppose:



A fleet of 100 work trucks



Average annual usage of 6,000 miles



Average fuel efficiency rate of 4 MPG



Average cost per gallon of fuel of

$3.75

Annualized

Increase in

Avg MPG

Reduction in Average Vehicle Age (years)

0.5

1

1.5

2

2.5

3

3.5

4

2.4% $555,838 $549,255 $542,751 $536,323 $529,971 $523,695 $517,492 $511,364 $ 6,662 $ 13,245 $ 19,749 $ 26,177 $ 32,529 $ 38,805 $ 45,008 $ 51,136

Sample Reduction in Annual Fuel Costs as

a Function of Reduction in Truck Age

Impact of Modernization on

Average Asset Age

0 1 2 3 4 5 6 7 8 9 10 Current Age 2015 2017 2019 2021 2023 2025 2027 2029 2031 V e hicle Age Year

Economic Impact of Status Quo and

Modernization Replacement Plans

42

Status Quo Replacement Plan Costs (millions) by Fiscal Year

Cost/Value 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total/Avg Gross Replacement Expenditures $ 2.7 $ 2.8 $ 2.9 $ 3.0 $ 3.0 $ 3.2 $ 3.5 $ 3.3 $ 3.4 $ 3.5 $ 31.3

Average Asset Age (years) 8.6 8.2 8.0 8.3 8.8 8.8 8.2 8.6 8.4 8.5 8.4

Market Depreciation $ 2.2 $ 2.2 $ 2.3 $ 2.4 $ 2.5 $ 2.7 $ 2.8 $ 2.9 $ 3.0 $ 3.0 $ 26.0 Maintenance and Repair Costs $ 4.3 $ 4.3 $ 4.3 $ 4.5 $ 4.6 $ 4.6 $ 4.6 $ 4.6 $ 4.7 $ 4.8 $ 45.3 Fuel Costs $ 1.6 $ 1.5 $ 1.5 $ 1.5 $ 1.6 $ 1.6 $ 1.5 $ 1.6 $ 1.5 $ 1.6 $ 15.5 Total Direct Costs $ 8.1 $ 8.0 $ 8.1 $ 8.4 $ 8.7 $ 8.9 $ 8.9 $ 9.1 $ 9.2 $ 9.4 $ 86.8 Ending Fair Market Value $ 8.5 $ 9.0 $ 9.4 $ 9.9 $10.3 $10.7 $11.3 $11.7 $12.0 $12.3

Modernization Plan Costs (millions) by Fiscal Year

Gross Replacement Expenditures $ 5.5 $ 5.6 $ 5.6 $ 5.5 $ 5.5 $ 5.5 $ 5.5 $ 5.5 $ 5.5 $ 5.5 $ 55.2

Average Asset Age (years) 7.2 6.5 5.8 5.1 4.9 5.0 5.0 5.0 4.6 4.4 5.5

Market Depreciation $ 3.1 $ 3.4 $ 3.7 $ 4.0 $ 4.2 $ 4.4 $ 4.5 $ 4.6 $ 4.7 $ 4.7 $ 41.3 Maintenance and Repair Costs $ 4.0 $ 4.0 $ 3.9 $ 3.8 $ 3.7 $ 3.8 $ 3.6 $ 3.6 $ 3.5 $ 3.6 $ 37.5 Fuel Costs $ 1.5 $ 1.4 $ 1.4 $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 1.3 $ 13.4 Total Direct Costs $ 8.6 $ 8.8 $ 9.0 $ 9.1 $ 9.2 $ 9.5 $ 9.4 $ 9.5 $ 9.5 $ 9.6 $ 92.2 Ending Fair Market Value $10.4 $12.4 $14.1 $15.4 $16.4 $17.2 $17.9 $18.4 $18.8 $19.0

Net Direct Costs of/(Savings

Modernization Plan Eliminates Current

Backlog; Status Quo Plan Does Not

$0 $5 $10 $15 $20 $25 $30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 (Mil li o n s ) Fiscal Year

Gross Replacement Costs

$0 $5 $10 $15 $20 $25 $30 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 (M il li o n s ) Fiscal Year

How do you get more capital dollars

for fleet replacement?



Empirically identify optimal vehicle

replacement cycles



Develop a plan that quantifies

long-term fleet replacement costs



Quantify fleet costs under alternative

replacement scenarios



Explore alternative methods of

financing fleet modernization costs

Evaluating Alternative

Capital Financing

Methods of Financing Vehicle and

Equipment Acquisitions



Ad hoc (i.e., year-to-year) allocations or

appropriations of cash



Accumulation of cash reserves in a fleet

replacement fund, usually through the use

of an internal leasing or replacement cost

charge-back program



Borrowing cash from financial institutions,

including the financing units of vehicle

manufacturers



Borrowing cash from investors through the

issuance of bonds



Leasing from a leasing company, bank, or

commercial finance company

A Note on Terminology



Financing:

The method used to pay

for the acquisition of an asset



Funding:

The amount of money

required to acquire an asset under

a particular financing method

Why is the type of capital financing

you use important?



Because year-over-year funding

requirements can vary dramatically

depending on the type of financing

used

Fleet Modernization Plan

Cash Needed for Fleet Modernization

by Capital Financing Approach

50

Fiscal Year

Cash

Requirements

2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total

Approach 1

$5.4

$5.4

$5.4

$5.3

$5.3

$5.1

$5.2

$5.1

$5.1

$5.0 $52.4

Approach 2

$5.6

$5.8

$5.8

$5.9

$4.1

$5.1

$5.4

$4.7

$5.0

$5.2 $52.7

Approach 3

$0.6

$1.1

$1.7

$2.3

$2.8

$3.3

$4.1

$4.6

$5.4

$5.7 $31.5

Fiscal Year

Cash

Requirements

2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Total

Approach 1

$3.4

$5.9

$5.0

$6.0

$3.6

$8.7

$8.6

$7.0

$6.2

$7.2

$61.7

Approach 2

$5.3

$5.7

$5.9

$6.2

$6.3

$6.5

$6.8

$6.9

$7.2

$7.3

$64.1

Approach 3

$5.7

$5.6

$5.4

$5.5

$5.5

$5.6

$5.6

$6.5

$6.8

$7.0

$59.3

Why is the type of capital financing

used important?



Because year-over-year funding

requirements can vary dramatically

depending on the type of financing

used



Because year-over-year funding

requirements are a key determinant of

how much money most organizations

devote to fleet replacement



Because the amounts of funds an

organization devotes to fleet

replacement determine whether it has

an old or a young fleet

Purchases Financed with Cash



Annual funding requirements equal

purchase prices of assets to be replaced less

proceeds from the sale of used vehicles



Pros



Vehicles are owned free and clear as soon as they

are paid for



Cons



Pay-before-you-go approach results in lumpy

year-over-year funding requirements



Competition for capital funds almost always

results in under funding of replacement

purchases and old fleets



Does not promote recognition of vehicle capital

costs or management of TCO

52

Cash Purchase Financing

Purchases Financed Using a

Replacement Reserve Fund



Cash reserves are accumulated in a special account

or “revolving fund,” usually through the use of an

internal lease or replacement cost charge-back

system



Pros



Pay-as-you-go approach makes year-over year funding

requirements smooth and predictable



Use of cost charge-back system promotes recognition of

fixed costs



Cons



Revolving funds and cost charge-back systems are difficult

to administer properly and cash reserves are susceptible to

raiding during tough economic times



Costly to establish if fleet is old

Reserve Fund Financing

Reserve Fund Financing

Purchases Financed with Debt



Available from both commercial banks and

many vehicle/equipment manufacturers



Pros



Pay-as-you-go approach that largely eliminated

lumpy funding requirements



Use of cost charge-back system promotes

recognition of fixed costs



Big budget savings if switching from cash

financing



Cons



Requires long-term perspective and commitment



Difficult to stop using once started

Debt Financing

Operating Leases



Two Types:



Open end (widely used by corporate fleets in US)



Closed end (widely used by corporate fleets in Europe, and

by individuals in US)



Pros:



Pay-as-you-go approach makes funding requirements

smooth and predictable



Use of cost charge-back system promotes recognition of

fixed costs



Big budget savings if switching from cash financing



Cost of leasing is not considered to be debt



Can be bundled with asset management services



Cons



Difficult to stop using once started



Somewhat higher cost of capital than loans

Financing Methods Evaluated



Outright Cash Purchase



Replacement Reserve Fund

Cash Needed for Modernization Under

Alternative Financing Approaches

60

Cash Purchase v. Reserve Fund v. Debt Financing

(Net of Used Vehicle Sale Proceeds)

Net Cash Requirements for Fleet

Modernization by Financing Approach

Fiscal Year

Costs/Funding Requirements/Savings 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total

Gross Replacement Expenditures $5.5 $5.6 $5.6 $5.5 $5.5 $5.5 $5.5 $5.5 $5.5 $5.5 $55.2

Replcmt Purchases Less Used Veh Sale Proceeds $5.4 $5.4 $5.4 $5.3 $5.3 $5.1 $5.2 $5.1 $5.1 $5.0 $52.4

Reserve Fund Charges $5.6 $5.8 $5.8 $5.9 $4.1 $5.1 $5.4 $4.7 $5.0 $5.2 $52.7

Loan Payments Less Used Veh Sale Proceeds $0.6 $1.1 $1.7 $2.3 $2.8 $3.3 $4.1 $4.6 $5.4 $5.7 $31.5

Budget Savings, Debt versus Cash Financing $4.9 $4.3 $3.7 $3.0 $2.5 $1.9 $1.2 $0.5 ($0.3) ($0.7) $20.9

Cumulative Cash Savings $4.9 $9.1 $12.8 $15.8 $18.3 $20.1 $21.3 $21.8 $21.6 $20.9 Fiscal Year

Costs/Funding Requirements/Savings 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 Total

Gross Replacement Expenditures $3.9 $6.6 $5.6 $6.6 $4.1 $9.5 $9.5 $7.8 $6.8 $8.1 $68.4

Replcmt Purchases Less Used Veh Sale Proceeds $3.4 $5.9 $5.0 $6.0 $3.6 $8.7 $8.6 $7.0 $6.2 $7.2 $61.7

Reserve Fund Charges $5.3 $5.7 $5.9 $6.2 $6.3 $6.5 $6.8 $6.9 $7.2 $7.3 $64.1

Loan Payments Less Used Veh Sale Proceeds $5.7 $5.6 $5.4 $5.5 $5.5 $5.6 $5.6 $6.5 $6.8 $7.0 $59.3

Budget Savings, Debt versus Cash Financing ($2.1) $0.5 ($0.5) $0.5 ($2.0) $3.1 $2.1 $0.2 ($0.8) ($0.2) $0.7

A Question About Interest



Why pay it?

Achieving Short and Long-Term

Savings Through Fleet Modernization

Status Quo Replacement Plan Budget Requirements (millions) by Fiscal Year

Cost 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Total

Gross Replacement Expenditures $2.7 $2.8 $2.9 $3.0 $3.0 $3.2 $3.5 $3.3 $3.4 $3.5 $31.4 Replacmt Purchases Less Veh Sale Proceeds $2.7 $2.7 $2.8 $2.9 $3.0 $3.1 $3.4 $3.2 $3.3 $3.3 $30.4 Maintenance and Repair Costs $4.3 $4.3 $4.3 $4.4 $4.6 $4.6 $4.6 $4.6 $4.7 $4.8 $45.1

Fuel Costs $1.6 $1.5 $1.5 $1.5 $1.6 $1.6 $1.5 $1.6 $1.5 $1.6 $15.6

Total Budgetary Costs $8.6 $8.6 $8.6 $8.9 $9.1 $9.3 $9.5 $9.4 $9.5 $9.6 $91.1

Modernization Plan Budget Requirements (millions) by Fiscal Year

Gross Replacement Expenditures $5.5 $5.6 $5.6 $5.5 $5.5 $5.5 $5.5 $5.5 $5.5 $5.5 $55.2 Loan Payments Less Vehicle Sale Proceeds $0.6 $1.1 $1.7 $2.3 $2.8 $3.3 $4.1 $4.6 $5.4 $5.7 $31.5 Maintenance and Repair Costs $4.0 $4.0 $3.9 $3.8 $3.7 $3.8 $3.6 $3.6 $3.5 $3.6 $37.5

Fuel Costs $1.5 $1.4 $1.4 $1.3 $1.3 $1.3 $1.3 $1.3 $1.3 $1.3 $13.3

Total Budgetary Costs $6.1 $6.5 $6.9 $7.4 $7.8 $8.4 $8.9 $9.5 $10.2 $10.5 $82.3

Budgetary Savings from/(Costs of)

Recap



Effective fleet replacement practices enhance

company performance and profitability; poor

practices detract from them



Establishing an effective replacement program

requires understanding both the economic benefits

and fiscal impacts of timely vehicle replacement



It is possible to modernize a fleet and save money

at the same time, although this often requires a

change in capital financing approach



If interest costs (i.e., borrowing or leasing vehicles)

enable you to replace fleet assets in a way that is

not possible under outright cash purchase, don’t

shy away from them

For More Information

Paul Lauria

Mercury Associates, Inc.

16051 Comprint Circle

Gaithersburg, MD 20877

301 519 0535

[email protected]

www.mercury-assoc.com

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