Management

How to Calculate a Shuttle’s Total Cost of Ownership

AJ Thurber, VP, Sales & Marketing, Grech Motors
Posted on November 21, 2019

Adding a luxury shuttle to your operation involves many factors and not just whether it will add to the revenue stream.

While that’s an important consideration, it must be weighed against the cost total cost of owning the vehicle. A vehicle that costs more to operate than the amount of revenue it generates isn’t a good investment — and is, in fact, a recipe for financial disaster.

That’s why it is crucial to keep a close eye on the total cost of ownership (TCO) to help maximize both the asset’s value and its value to the bottom line.

Zeroing in on Costs

TCO can be broken into fixed and operating costs.

Fixed costs include:

  • Depreciation
  • Acquisition costs
  • Insurance
  • Titles/tags/tax

While operating costs include:

  • Fuel
  • Maintenance
  • Tires
  • Oil

Fixed costs are those expenses related to owning the vehicle and operating costs are those associated with using the vehicle. The combination of the two comprise the vehicle’s total cost of ownership.

The fixed costs are inescapable and need to be factored into your budget as part of the ongoing expense of owning the vehicle.

That being said, depreciation, the biggest cost associated with owning a vehicle, can be controlled by planning when the vehicle is purchased, keeping the vehicle in good operating order, and choosing a vehicle model that has good resale value.

On the other hand, you have much more flexibility in controlling operating costs. Fuel, for example, can be controlled by optimizing routing, limiting idling, using fuel cards, etc. Maintenance is another area that can be controlled by implementing a strong preventive maintenance program for vehicle care and emerging issues, and a strong safety program to help minimize crashes (and downtime) caused by poor driving behavior.

The TCO Continuum

Simply put, there is no single factor influencing TCO — and while the choice of a vehicle may be determined by TCO, it’s value to the operation should be the primary consideration.

The good news is that most shuttles have good TCO, but that doesn’t mean that it can be left to take care of itself. In fact, managing TCO is key goes hand-in-glove with profitability.

And it begins during acquisition and ends with resale. TCO exists on an operational continuum that touches every aspect of the vehicle’s use.

For example, controlling mileage will help reduce fuel use and wear and tear, while helping to improve safety (since fewer miles are being driven). This one operational change will result in a lowered TCO across the board.

On the day-to-day operational side, a vehicle that is well-maintained and cared for will be noticed by demanding high-end clients, leading to more business — which will balance the cost of owning the vehicle.

Cycle Time

Keeping an eye on TCO at every level will pay off in the long run. When the luxury shuttle reaches its optimal cycle point, that attention you’ve paid to TCO from preventive maintenance to strict driving policies aimed at cutting down wear and tear to routine cleaning will likely be recouped with a higher resale value.

Particularly for a luxury van, having a natural vehicle lifecycle in place — and a means to take advantage of opportunities or extend the lifecycle when necessary — is an important part of the TCO equation.

Running a vehicle too long will end up costing the fleet and its company more than the costs of acquiring a new vehicle. For example, older vehicles tend to experience deteriorating performance and more maintenance — both of which will affect the bottom line with more fuel costs and non-productive downtime. While you may own the asset outright and it may be still producing revenue, the cost of asset is now siphoning resources from the bottom line—it’s costing you more to own and operate the vehicle than it is making.

TCO is complex and requires attention to detail, but it’s worth every moment of time you spend tracking it.

The experts at Grech can help you keep an eye on TCO, and with our comprehensive warranty (an important source of TCO value) and customer service, you’ll be able to maximize your return on investment, and add to the bottom line.

Related Topics: Grech Motors, Luxury Shuttles

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