If a fleet of company vehicles is an integral part of how your business operates, then controlling fleet expenses probably requires constant attention.
As your business grows, your fleet management costs increase with it, but the relationship between the two isn’t always linear. This means keeping your fleet operations profitable requires smart analysis and decision-making and regular re-examination.
Many business owners may be missing the boat on ways they can reduce their fleet expenses. Today, we’ll take a look at some of the most important types of fleet expenses and what you can do to curtail them.
Operational Fleet Expenses
We’ll start our examination of fleet expenses with the costs related to your company’s day-to-day fleet operations: the things you rely on your fleet for to get the job done.
These are the costs of getting your vehicles where they need to be when they need to be there.
Gas Prices
If your business operates a fleet of company vehicles, paying for gas is probably one of your biggest expenses, and there’s a good chance it’s also one of your biggest sources of frustration.
Since electric options for the type of vehicles that most businesses need for their company fleets — like work vans — aren’t really on the market yet, most fleet managers are left at the mercy of unpredictable fluctuations in prices at the pump.
Since you can’t control the price of gas, managing this major expense depends on doing your best with the things you do have some control over, like how you pay for fuel and how fuel-efficient your fleet is.
There are a lot of strategies for cutting fuel costs that can add up to significant savings for your business. One approach many businesses benefit from is using a fleet fuel card, a specialized type of corporate credit card you give to your fleet drivers so they can fill up.
Using fleet fuel cards, you can earn discounts and rebates on your gas purchases, which can add up to serious savings. Centralizing your fuel spending on a fleet card can also save you time on administrative tasks.
When selecting a fuel card, always read the “fine print” to make sure you don’t get burned by minimum spending requirements or reward caps, and make sure the card you choose is accepted at gas stations in the area where your fleet will operate.
Inefficient Trips
As a fleet manager, you can’t really determine the destinations your fleet will have to reach. Since it all depends on where you need to make deliveries or service calls, it’s in your customers’ hands, not yours.
Just because you don’t decide where your fleet vehicles have to go doesn’t mean you shouldn’t get on top of how they get there, however. This practice is known as route optimization.
Route optimization helps your vehicles reach their destinations quicker while using less fuel. This saves you money and helps you get more productivity out of your existing fleet without needing to acquire more vehicles and drivers.
Proper route optimization requires taking into account your destinations, your deadlines, the number of stops on the trip, any necessary fuel stops, and traffic.
It’s complex, but when done right, it may save you time and money by getting the most value out of every vehicle and every trip.
Maintenance
Spending money on maintenance is an unavoidable part of owning a company vehicle fleet. Or at least, you shouldn’t try to avoid it unless you want to spend even more money dealing with the consequences.
Breakdowns can have a big cost for your business in terms of repairs, lost business from failing to meet your commitments to customers, and higher insurance premiums if mechanical problems lead to accidents.
The best way to avoid these major, unexpected expenses is by implementing a robust preventative maintenance plan for all of your fleet vehicles.
This starts with reviewing the recommended maintenance intervals from the vehicle manufacturer, but also includes accounting for the age of the vehicle, usage of the vehicle, mileage, and date since last service.
Besides preventing breakdowns, good maintenance can also save you money on gas because well-maintained vehicles are more fuel-efficient.
Payments And Depreciation
Of course, we can’t consider the expenses associated with operating a fleet unless we take into account the cost of the vehicles themselves.
You also have to remember that fleet vehicles you purchase are business assets that are subject to depreciation. Unless you plan to drive your vehicles until they’re ready for the scrapyard, this is something that you need to keep in mind.
If your business is considering putting a company vehicle fleet into operation, carefully analyze whether it makes the most financial sense to buy or lease the vehicles you need.
Purchasing vehicles is a significant up-front expense, and your company is fully responsible for every aspect of operating them, from maintenance to mandatory compliance paperwork. On the positive side, you can use the vehicles as you see fit and resell them down the line.
Leasing vehicles means lower initial costs, generally less administrative overhead, and maintenance may be handled for you by the leasing company, depending on the terms of your lease.
On the other hand, some leases have mileage restrictions, and many leasing companies require you to lease a minimum number of vehicles, which means leasing may not be an option for smaller businesses.
Deciding whether buying or leasing is best for your business depends on your budget, your current needs, and your projected business growth.
Insurance
Just like any other vehicle on the road, your company’s fleet vehicles need to be insured. It’s the law, and it protects your business, your drivers, and other motorists that your fleet shares the road with.
Many criteria play a part in determining the price you pay for insurance, including the age of your vehicles, their typical usage, and the driving record of the employees behind the wheel.
You can (and should) shop around to see which provider can give you the best rates. However, one of the best ways to save on insuring your company’s vehicles is to buy a fleet insurance policy.
Compared to buying a policy for each individual vehicle, buying a fleet policy for all of the vehicles your company operates usually ends up being considerably less expensive.
Fleet insurance is also simpler to administer because there’s only one policy that you add to or remove vehicles from, instead of multiple policies for each individual vehicle you need to keep track of.
Mileage Tracking And Reimbursement
If your employees are filling up while they’re on the road for company business, then you need a way to make sure they aren’t paying out of pocket for fuel.
Some companies use a policy of reimbursing a flat amount per mile. Other companies ask employees to save gas receipts and turn them in on a regular basis to be reimbursed.
Both of these approaches come with administrative burdens, with fleet managers having to collect mileage reports and receipts and then issue reimbursements.
A different approach that can save fleet managers time and, therefore, money is to issue employees fleet fuel cards, as we touched on earlier.
With fleet fuel cards, your employees can pay at the pump when they need to fill up — without having to keep receipts or a mileage log and then wait to get their money back.
All of the purchases appear on a single statement, so you don’t need to reconcile accounts and you know exactly how much you’re spending on gas.
Driver Overtime
Another large expense is paying your drivers. Paying them well is an important part of maintaining a successful business, but driver overtime is a whole other story.
First and foremost, driver overtime can significantly increase fleet expenses because of the higher rate (at least 1.5 times) at which you must pay your employees for any overtime hours worked.
So, for example, if you pay a driver $20 per hour, and they work 42 hours in a single workweek, you must pay them $30 per hour ($20 x 1.5) for those extra two hours. That means that instead of paying $800, you’re paying $860.
That can quickly add up and hurt your bottom line.
In addition, overtime can result in driver fatigue, reduced productivity, and increased safety risks. All of that can have a detrimental effect on fleet expenses and the way your fleet operates.
Fuel Taxes
If your business operates any number of commercial vehicles that have two or more axles and that weigh over 26,000 pounds, you’re obligated by law to abide by the International Fuel Tax Association (IFTA).
Those taxes can quickly add up and put a dent in your operating capital, making it harder to save for future expenses (like vehicle replacement).
The best way to reduce fuel taxes is to improve fuel efficiency and to partner with a smart fuel card, like Coast, to get rebates and rewards on the things that you have to pay for every day.
With these expenses in mind, let’s turn our attention to reducing costs.
How To Reduce Fleet Expenses And Cut Costs
Monitor Your Fleet With Technology
Fleet managers and drivers should have access to digital tools and solutions that can make the job easier and help reduce fleet expenses in the process.
Essential fleet technology includes:
Fleet management software can help you understand the important data that drives your fleet and your fleet-based spending, including hours of service, routing, pre- and post-trip inspection checklists, and vehicle maintenance (just to name a few).
Telematics lets you see under the hood — both literally and figuratively — for a more detailed view of how your vehicles are running. With this information, you can prevent breakdowns, dispatch vehicles more effectively, and cut costs throughout your fleet.
Smart fuel cards integrate with fleet management software and telematics (and even with accounting software) to give you a much more accurate view of and control over where your fuel dollars are going.
This 360-degree view of your fleet operations can help you find ways — both big and small — to reduce fleet expenses and cut costs in all corners of your business.
Streamline Recordkeeping
Another efficient way to reduce fleet expenses is to streamline communication and recordkeeping between your drivers in the field and your finance team in the office.
For example, the Coast smart fuel card gives you and your drivers the ability to collect receipts and job codes at the point of sale so that records don’t get lost and your office staff doesn’t waste time (and money) trying to track down information that may or may not exist.
In addition, Coast helps you keep spending under control with real-time expense monitoring and one-click integration with QuickBooks Online.
Focus On Ways To Reduce Fuel Use
Monitor Total Cost Of Ownership And Vehicle Cost Per Mile
Fuel use is often the biggest spend — and, therefore, the largest expense — that your fleet-based business will have to deal with.
Instead of just crossing your fingers and hoping that fuel costs will fall within your budget, use the Total Cost of Ownership and Vehicle Cost Per Mile calculations to reveal new ways to reduce expenses (and not just fuel).
First, make a list of all the fixed vehicle costs, like lease payments, insurance payments, permits, and other expenses, that stay the same month after month.
Second, make a list of all the variable vehicle costs, like fuel, tolls, maintenance, repairs, and other expenses, that fluctuate over time.
Then, use this formula to calculate Total Cost of Ownership (or TCO) for a single vehicle:
TCO = Fixed Vehicle Costs + Variable Vehicle Costs
Once you’ve crunched the numbers and come up with a TCO for that vehicle, use this formula to calculate Vehicle Cost Per Mile (or VCPM):
VCPM = Total Cost of Ownership / Total Miles Driven
For more information on figuring out TCO and VCPM, check out these articles from the Coast blog:
Set Spending Rules
Use a smart fuel card, like Coast, to set spending rules for a single vehicle, several vehicles, or your entire fleet.
With Coast, you can set limits for total spend or by number of purchases. You can set spending limits by time and day and require an odometer reading on every transaction.
You can even flag transactions when they exceed tank capacity or use the wrong fuel grade.
And, if your drivers need to buy more than just fuel, Coast empowers them to spend on the same card while giving you precise limits and controls.
Abide By All Local, State, And Federal Laws
Businesses that operate one or more vehicles can’t afford to overlook the local, state, and federal laws that apply to them either.
These “best practices” include standards that apply to both vehicles and drivers. They ensure that vehicles are safe and roadworthy and that drivers are trained and approved to operate the heavy equipment effectively.
In most cases, these standards are set by the Federal Motor Carrier Safety Administration (FMCSA) and the Commercial Vehicle Safety Alliance (CVSA) and include things like monitoring drivers’ hours of service and maintaining vehicle inspection reports.
If your fleet fails to meet all of the local, state, and federal compliance standards, your business could be subject to fines, and you may have to temporarily take vehicles out of service.
Minimize Waste And Inefficiency
Use The Right Vehicles For The Job
Reducing fleet management costs isn’t always about eliminating things in order to pay less. Sometimes, it’s about minimizing the expenses that you do have —- like waste and inefficiency.
One thing to watch is the type and size of vehicles that you put on the road. Choose the vehicle that is the most fuel-efficient while still able to move employees, tools, and supplies to the job site or service call.
When you’re more readily able to match the vehicle to the job, you’ll be better positioned to save money on fuel, maintenance, and other vehicle expenses.
Maintain A Nimble Fleet
Another way to minimize waste and inefficiency —- and keep fleet management costs under control —- is to maintain a nimble fleet.
Ideally, you want to keep enough vehicles on the road to get the job done but not have so many that some are rarely used.
Keeping one or two vehicles in reserve for emergencies and short, “unplanned” trips down the street to the hardware store is okay, but letting five or more vehicles sit idle for months on end is just a waste of money and resources.
Prevent Fuel Theft
Fuel theft and fraud are also drains on your bottom line that can seriously cut into your profits and working capital.
This type of theft can take many forms, so the extra expenses often get overlooked or go unrecognized until a big chunk of your money is gone.
To prevent this, use a smart fuel card, like Coast. With powerful spending controls, instant alerts and security notifications, and the ability to lock cards in one click, you’re prepared to prevent fuel theft and fraud in all its forms.
For more information about the types of fuel theft and fraud that are out there and the strategies you can use to curtail them, check out this article from the Coast blog: How To Protect Your Fleet From Fuel Theft And Fraud.
Improve Driving Behavior
Eliminate Excessive And Unnecessary Idling
In addition to having the right tools and fleet vehicles for the job, it’s important to train your drivers to think smarter as well.
For example, excessive and unnecessary idling can be a major fleet expense that brings absolutely nothing in return.
When an engine is running (i.e., using fuel) without moving the vehicle toward some destination, it’s just money down the drain.
Doing your best to eliminate that type of idling — and encouraging your drivers to do the same — can help you reduce fleet management costs and save money for other operational needs.
Encourage Fuel-Efficient Driving Techniques
Encouraging fuel-efficient driving techniques is one of the best things you can do to help reduce fleet expenses across the board.
Train your drivers to accelerate and brake smoothly out of and into a stop. This alone can help your business conserve fuel and reduce the impact that gas and diesel prices have on your operation.
But, the savings don’t stop there. Other fuel-efficient driving techniques, like maintaining a consistent speed (with the cruise control) whenever possible, keeping tires properly inflated, and practicing good load management, can help cut fleet expenses even more.
Plan Your Vehicles’ Life Cycles
At the end of the day, every vehicle has a finite useful life cycle. Being caught unaware when that life cycle comes to an end can be an expensive problem for your business.
You can save money and reduce fleet expenses by creating a plan to remarket or otherwise dispose of vehicles based on mileage, depreciation, or other variables.
This will save you from making hasty decisions that can cost your fleet hundreds, if not thousands, of dollars in extra expenses.
Streamline Fleet Management Costs With Coast
Controlling fleet expenses and fleet management costs requires thoughtful analysis and decision-making from business owners and fleet managers in a wide variety of areas, from vehicle lease terms to route planning.
One of the biggest categories of fleet expenses will always be the cost of fuel. The Coast fleet and fuel card helps you save on fuel while also cutting down on time-consuming administrative overhead.
Take control of your fleet expenses with Coast’s powerful and easy-to-use tools designed to help you save money and reduce risk.
- Control transactions with flexible and customizable options that fit your business needs. Coast makes it easy to manage spend limits and approvals by vehicle, driver, department, or location—ensuring your policies are always enforced without the hassle.
- Prevent fraud with telematics integrations that add an extra layer of security to every transaction. Coast’s GPS-powered tools can automatically block purchases if a company vehicle isn’t near the fueling station, keeping unauthorized charges off your statement.
- Identify savings opportunities effortlessly with Coast’s detailed reporting and insights. Coast helps you pinpoint expensive stations and top spenders, allowing you to block high-cost locations directly—so you don’t have to rely on your drivers to make cost-effective decisions.
- Earn rebates on every gallon right on your statement, with savings of up to 10¢ per gallon at 30,000+ stations nationwide. Coast’s extensive rebate network ensures you save on fuel every month without any extra work.
To learn more about how Coast can help your company, visit CoastPay.com today.
Apply in minutes