Episode 019: Total Cost of Ownership & Its Impact on Procurement

2 Aug 2024 · 29 min
28:54

In this episode of the Fleet Success Show, host Josh Turley is joined by Jeff Jenkins and Steve Salzgiver to explore how Total Cost of Ownership (TCO) shapes fleet procurement decisions. After celebrating the podcast’s 1,000‑download milestone, the trio defines TCO as the intersection of fixed (ownership) costs—primarily depreciation, insurance, and administration—and variable (operational) costs such as fuel, maintenance, tires, and oil changes. They explain how these cost curves evolve over a vehicle’s life, creating a “sweet‑spot” where ownership and operational expenses meet, and discuss how warranty periods, resale value, and catastrophic failure risk influence the optimal replacement window (typically a 2‑3‑year window recommended by NAFCA). The conversation moves to practical measurement issues: standardizing fuel cost, accounting for usage variance, and using cost‑per‑mile or gallons‑consumed metrics to avoid misleading averages. They stress the importance of right‑sizing fleets by identifying under‑utilized assets through standard deviation analysis and suggest that sometimes the best replacement strategy is to eliminate the vehicle altogether. Leasing versus buying is examined, with leasing framed as converting CapEx to predictable OpEx and smoothing cost spikes. The hosts also discuss alternative acquisition strategies, including buying one‑year‑old used vehicles to capture depreciation upside, and the “glider” approach—refurbishing chassis/engine combos with new cabs—to bypass costly emissions regulations (DEF systems) and reduce TCO. Real‑world anecdotes from a Utah university’s fleet, city off‑road equipment programs, and the impact of EPA/CAFE regulations on trucking costs are shared. Throughout, they invite listener questions via email, emphasizing that opinions are subjective and encouraging audience engagement. The episode concludes with a recap of key takeaways on TCO‑driven procurement, right‑sizing, and strategic asset management.

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