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Focus on TCO, not upfront cost, finds CVO Barometer

By / 11 years ago / Latest News / No Comments

Supported by Arval, the annual fleet barometer interviewed more than 4,800 fleet decision makers across 16 countries. The results below show that in the UK, a similar proportion of fleet operators are focused on the purchase price when selecting a vehicle as those concerned with the Total Cost of Ownership. 

In some instances, cost is not the main motivation when selecting a vehicle, or vehicles. The research found that for 19% of the largest companies in the UK, environmental impact is the main priority. However, for many businesses cost control is a crucial element of the vehicle selection process, and spending more that they need to do is not an acceptable situation to be in.

Mike Waters, senior insight & consultancy manager at Arval, commented: ‘The Total Cost of Ownership is always a much better measure than the up-front price of a vehicle or the lease rental. We see numerous examples when we compare two or more comparable cars. Lowest purchase price or monthly rental doesn’t always equate to the biggest cost savings particularly when you factor in tax and fuel spend.’

A Total Cost of Ownership (TCO) approach means taking into account the full range of vehicle costs. As the chart below demonstrates, this includes factors like: depreciation, maintenance, fuel, insurance and administration. It provides a much more accurate view of the cost of a vehicle than just the up-front costs.

Waters added: ‘As well as the potential to waste money over the lease of a vehicle, this can also have an adverse impact on driver satisfaction. The best performing vehicles from a TCO perspective can be the most desirable for drivers. Businesses focused only on initial costs may be taking away the option of a more attractive vehicle, under the false pretence that it will save them money.’

A Total Cost of Ownership approach can be applied to a single vehicle or an entire fleet of vehicles.

Waters concluded: ‘Whether you have one vehicle or one thousand, the opportunity to minimise costs is one that you must take. Even on a small fleet of vehicles, the potential cost savings over a three-year lease can be significant. We are seeing more and more businesses moving to a TCO approach.’ 

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Natalie Middleton

Natalie has worked as a fleet journalist for over 20 years, previously as assistant editor on the former Company Car magazine before joining Fleet World in 2006. Prior to this, she worked on a range of B2B titles, including Insurance Age and Insurance Day.