Replacement scheduling

Scope

All carriers should be aware of their replacement schedules and the benefits and risks of the regularity of their replacement decisions.

Regulatory citations

• None

Key definitions

• None

Summary of requirements

Some carriers believe that vehicles should be kept in service as long as possible, while others believe a vehicle should never be kept longer than the warranty. Still other carriers base their decision on how much money they have into the vehicle in terms of purchase cost, depreciation, and major overhauls. This process can involve a fairly lengthy evaluation of all vehicle costs over time.

Cost of maintaining and overhauling equipment once the warranty expires. With engine overhauls running in the thousands, many carriers have determined that it is beneficial to trade before the vehicle is off warranty and requires an engine overhaul. In-frame or out-of-frame overhauls cost the same as one to several vehicle payments, but the money is being spent on a vehicle that is on the second half of its useful service life.

Percentage of “unscheduled repairs” and “downtime.” Unscheduled repairs, also known as breakdowns, can be very costly to carriers. The cost of on-the-road repairs, the cost of missed customer deliveries, the cost of additional downtime for maintenance and repairs, and the cost of either reimbursing the driver for their lost time or potentially losing the driver need to be considered when deciding when to replace vehicles.

Cost of payments. Vehicle payments are a significant but necessary fixed cost for any carrier. Some carriers view any time a vehicle can operate without payments as the “highly profitable” period in the vehicle's life cycle in the fleet. Because of this, some carriers attempt to get as much life out of the vehicle as possible and accept major component overhauls as a cost of doing business. Carriers that are successful at keeping vehicles for extended periods will generally have a rather extensive maintenance program.

Depreciation costs/tax breaks. Once a vehicle is fully depreciated there are no longer any tax benefits that can be generated. Some carriers factor in this loss of tax benefit when making decisions on vehicle replacements.

Driver acceptance. With driver retention still a concern in the transportation industry, driver acceptance of vehicle replacement must be considered. In general, drivers believe that newer vehicles are more reliable, more comfortable, and easier to operate. However, drivers may not be accepting of new equipment that is “too different” from the equipment they are presently operating.

Fleet image. As a general rule well painted, clean, and reliable equipment will present the image a carrier is trying to project. New equipment automatically presents this image. Older equipment can be kept in a condition that presents this image, but it will be more costly.

“Turnaround” point. Some fleet managers comment that they cannot afford new vehicles. Keep in mind there comes a point where a fleet can't afford to keep the existing vehicle operating. When low driver acceptance reaches a critical point and the cost of maintenance, downtime, and repairs become excessive,the fleet cannot afford to keep the older vehicles.

Intended or planned life cycle at time of purchase. One way to prevent many of the problems associated with vehicle replacement decision making is to purchase vehicles with the intent of replacing them on a “schedule” and budget accordingly. Studying the factors on existing or past vehicles can provide a Fleet Manager with a general idea of when vehicles are “turning the corner” and need replacement.