Own or lease: what’s right for your truck fleet?

Given the scarcity of information on true fleet and leasing costs, business leaders are often forced to make their own lease versus buy decision for truck fleets with incomplete information. In an effort to help business leaders make improved business decisions and optimize limited resources, Ernst & Young conducted the total cost of ownership (TCO) study*, which revealed multiple surprising insights that may help many businesses save millions of dollars over time.

Key TCO study findings can help you determine whether leasing or owning your truck fleet is better for your company.

To effectively evaluate cost savings opportunities, companies must first clearly understand their existing costs and how they compare to companies with a similar fleet size.

Lack of awareness

  • Truck fleet costs are typically not tracked for smaller fleets (a fleet size of 1–24 vehicles) using the industry standard cost per mile on an ongoing basis
  • Small-to-medium (fleet size of 25–99) truck fleet managers do not appear to have a strong sense of their relative fleet cost efficiency, validating the need for customized and targeted fleet total cost of ownership benchmarks.

Evaluation baises

  • Companies financing their fleet with cash often do not incorporate opportunity cost of capital into their purchasing decision process, thus underestimating the total cost of ownership
  • Fleet managers often do not perceive potential leasing financial benefit regardless of their relative economies of scale or whether fleet management is a core business capability.

Benchmarks

  • Total cost of truck fleet ownership differs significantly between different fleet size segments; economies of scale play a significant role in fleet total cost of ownership
  • Economies of scale differences present a potential savings opportunity because small-to-medium fleets can potentially benefit from large-scale outsourcing to leasing companies with significant economies of scale.

* The 2012 Ernst & Young private fleet total cost of ownership study was conducted for Class 8 tractors, Class 6 and 7 trucks, reefer trailers and dry van trailers and included 22 participants across a range of fleet sizes and industries. The study adjusted and normalized data for differences in:

  • Financing
  • Depreciation
  • Fleet age
  • Mileage
  • Administration cost allocation

The complete article was written by:

  • Donna Stella
    Principal, Strategic Direction, Advisory Services, Ernst & Young, US
  • Suchet Singh
    Senior Manager, Strategic Direction, Advisory Services, Ernst & Young, US
  • James Immordino
    Manager, Strategic Direction, Advisory Services, Ernst & Young, US

Read the full articlepdf1.95 MB

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