Fleet Management News & Business Info | Commercial Carrier Journal
Issue link: http://read.dmtmag.com/i/378850
COMMERCIAL CARRIER JOURNAL | SEPTEMBER 2014 77 brand into the specifications. Although identifying such costs requires lots of data entry, you can then extract the statistical data in vari- ous forms and evaluate it. Grouping similar vehicles allows you to calculate a class average and compare individual units with this average. If a vehicle is below average, its historical cost trends, compared with the average for the class, will help determine an eco- nomical replacement time. Total unit costs are affected by each of the following costs and the rates at which they rise, alone and together: s $EPRECIATION 4HIS IS THE COST YOU INCUR due to the declining value of a vehicle as it ages. Equipment depreciates fastest early in its life. A new vehicle has higher principal and interest payments based on its higher purchase price. When the cost of borrowing money is high, when vehicle trade-in incentives or resale prices are low, and when a dif- ficult economic climate affects business growth and profitability, a strong case can be made for extended vehicle trade cycles. Resale values, due to supply of and demand for new vehicles, affect DEPRECIATION RATES $EPRECIATION RATES must be calculated and included in the annual analysis. Federal law allows taxpayers to use an accelerated depreciation method to recover the cost of acquiring and oper- ating an asset. The method is called the modified accelerated cost recovery system (MACRS). It allows an asset to be depreciated on a double-declining- balance method over the asset's depreciable life. Tractors are three-year property in terms of depreciable life, for example, and trucks and trailers are five-year property. s /PERATIONS 4HESE COSTS TEND TO increase gradually due to rising fuel prices, lower miles per gallon and related costs. s -AINTENANCE !S VEHICLES AGE THE COST of servicing and maintaining rolling stock tends to increase. Controlling these costs through effective sched- uled maintenance — including preventive maintenance inspections, driver support and timely component replacement — can help you keep these vehicles longer, provided they don't become obsolete. s $OWNTIME 7HEN A TRUCK SITS IDLE due to a scheduled or unscheduled repair, it costs you money. These costs should be recorded and any unacceptable variations highlighted. Servicing a vehicle during nonuse periods eliminates downtime. s /BSOLESCENCE 7HEN THE VEHICLE CAN no longer perform its job, it is obso- lete. Remove it from the fleet and replace it with a usable vehicle. Use the resale revenue to offset the pur- chase price of the new vehicle. s )NVENTORY (AVE THE NECESSARY CON sumables and components available to maximize vehicle availability with minimal inventory. s ,IFE COSTS 4HIS IS THE SUM OF FIXED and variable expenses over time and mileage. COMMERCIAL CARRIER UNIVERSITY Sponsored by: Produced by: In cooperation with: Commercial Carrier University is an educational initiative for owners and managers of trucking companies that are held at select Truckload Carriers Association events. We're certain you will find this program a valuable resource in managing your business more easily and more profitably. CCU's goal is to provide you with an in-depth road map for success through clear advice on basic and advanced business practices. CCU Titles Available: &w to Evaluate Life Cycle Costs &w to Manage Cashflow &w To Plan For Succession &w to Use Financial Statements &w To Write A Business Plan Visit www.commercialcarrieruniversity.com for more information. CCU manuals are available on USB drives and can be purchased online through eTruckerStore.com.