How to track and reduce fleet management costs

What are fleet management costs?

Fleet management costs encompass all expenses associated with operating and maintaining a fleet of vehicles and assets. Regularly monitoring and analyzing your fleet management costs helps you identify areas for more cost-effective improvement, benchmark against industry standards, and adjust your operations to improve fleet efficiency and maximize profitability. There are generally two types of fleet management costs: fixed costs and variable costs.

Fixed costs are expenses that remain relatively constant regardless of how much your vehicles are driven. Examples of fixed costs include:

• Vehicle acquisition or leasing costs

• Insurance premiums

• Registration and licensing fees

• Depreciation

In contrast, variable costs fluctuate based on vehicle usage and other factors. Examples of variable costs include:

• Fuel expenses

• Vehicle maintenance and repairs

• Tire replacements

• Tolls and parking fees

To fully understand the financial impact of fleet operations, it's crucial to consider the total cost of ownership (TCO). TCO is a comprehensive measure that accounts for all costs associated with a vehicle or asset over its entire lifecycle, all the way from acquisition, depreciation, and disposal.

Here are a few more components of TCO that fleet managers can consider:

• Acquisition costs (upfront purchase price or lease payments)

• Fuel costs

• Insurance costs and registration fees

• Downtime costs

• Compliance and regulatory costs

• Accident, liability, and safety-related costs

• Environmental costs and credits

• Fleet size

• Depreciation

• Financing costs (interest on loans or leases)

• Driver wages and benefits

• Technology expenses (such as fleet management software)

Understanding and tracking the cost of fleet management is essential for effective budgeting, cost control, and long-term planning. By having a clear picture of your fleet's TCO and cost analysis, you can make data-driven decisions about vehicle selection, fleet expenses, maintenance strategies, and cost-saving initiatives.

What are some key cost drivers in fleet management?

Understanding and effectively managing the primary cost drivers in fleet operations is essential for controlling total cost of ownership (TCO) and maximizing profitability. From fuel consumption to compliance fees, every aspect of fleet management has cost implications that can impact your bottom line. Here are few of the major costs of fleet management:

1. Fuel consumption

Fuel is one of the largest variable expenses for fleets. Fuel costs are influenced by a combination of factors, including the type of vehicle in operation—whether gasoline, diesel, or electric—as well as driving habits, idle time, and route planning. By implementing targeted fuel management strategies, fleets can significantly reduce their fuel usage and fuel spend. Some fuel management strategies include implementing route optimization tools that shorten drive time and minimize mileage, coaching drivers on more fuel efficient driving behaviors, and transitioning to electric vehicles (EVs) when possible. 

2. Vehicle maintenance

Regular and proactive vehicle maintenance is crucial for keeping fleet vehicles safe, reliable, and compliant with industry regulations. However, fleet maintenance also represents a large portion of operating costs. Rising parts and repair costs, combined with supply chain issues, have increased maintenance costs even higher in recent years. To reduce these maintenance costs, fleet managers can develop comprehensive preventive maintenance schedules across their fleet vehicles to minimize wear and tear, use telematics to monitor real-time vehicle diagnostics, and leverage targeted data insights to extend the vehicle lifecycle and reduce unexpected breakdowns. 

3. Vehicle downtime

When vehicles are out of service due to mechanical issues, scheduled repairs, or accidents, it results in downtime, which can impact productivity and revenue. Downtime can disrupt delivery schedules, delay service appointments, and require the use of temporary rental vehicles, all of which add to the total operating cost. Minimizing downtime through real-time fleet tracking and regular maintenance can help improve uptime and fleet efficiency, ensuring fleet operations stay on schedule and customers remain satisfied.

4. Safety and insurance costs

Safety-related expenses, including accidents, vehicle repairs, rising insurance premiums, and liability costs, are another critical component of fleet TCO. Unsafe driver behavior, frequent accidents, false claims, and non-compliance with safety regulations can result in higher safety  costs over time. Fleets can lower these safety risks by equipping vehicles with dash cams and telematics systems, leveraging a video-based safety solution to streamline incident investigation, offering regular safety trainings to ensure safer driving practices, and using real-time data from AI-powered solutions to detect and prevent unsafe driver behaviors before they occur. Fewer accidents lead to fewer claims, which in turn can reduce insurance premiums and enhance the overall financial health of the fleet.

5. Regulatory compliance and fees

Maintaining compliance with complex transportation regulations involves a mix of direct costs—such as licensing, registration, and permitting—and indirect costs like administrative labor and system upgrades. Fleets are also responsible for adhering to safety standards, emissions rules, and mandates like the electronic logging device (ELD) and Hours of Service (HOS) regulations. Failing to comply can result in fines, audits, and reputational damage. Fleet managers can reduce the cost and risk of regulatory compliance by leveraging a fleet management solution to streamline compliance tasks, automate recordkeeping for hours of service, and stay up-to-date with the most recent regulatory standards.

6. Theft and loss of high-value assets and vehicles

Theft and misplacement of vehicles, large equipment, and small equipment represent major cost drivers for many fleet operators. Vehicles and large equipment are not only expensive to replace but can also cause serious delays when projects are halted due to unavailable machinery. Similarly, valuable small equipment is easy to steal and lose due to their miniature size. To reduce theft and misplacement, fleets can leverage GPS tracking and asset tag technology to gain complete visibility across vehicle location and asset location, improve utilization, enhance job completion, and boost operational efficiency.

7. Driver wages and driver retention

Driver wages is one of the largest fixed costs in fleet management, encompassing not only wages but also benefits packages, ongoing training, and employee turnover. Recruiting and onboarding new drivers can be time-consuming and expensive, especially in today’s labor market. Fleets can improve driver retention through competitive pay, supportive work environments, strong safety cultures, professional development opportunities, and investing in safety technology that engages and celebrates drivers for safe driving behavior.

How to calculate fleet management costs

To make informed decisions and optimize your fleet's budget, it's crucial to understand how to calculate your total fleet management costs. Two key metrics to focus on are total cost of ownership (TCO) and cost-per-mile (CPM). Below is a guide on how to calculate these metrics:

Calculating total cost of ownership (TCO):

1. Identify direct costs: Start by gathering data on all direct costs associated with your fleet, such as vehicle acquisition, fuel, maintenance, repairs, safety, insurance, driver wages, and more.

2. Factor in indirect costs: Next, consider indirect costs that impact your fleet's bottom line. These may include administrative expenses, downtime costs, compliance penalties, and depreciation.

3. Determine the timeframe: Decide on the period for which you want to calculate TCO, such as monthly, annually, or over the vehicle's lifetime.

4. Sum up all costs: Add up all direct and indirect costs for the chosen timeframe to arrive at your fleet's TCO.

Calculating cost-per-mile (CPM):

1. Track total miles driven: Record the total miles driven by each vehicle in your fleet over a specific period, such as a month or year.

2. Determine total costs: Calculate the total costs incurred during the same period, including fuel, maintenance, driver wages, and other relevant operational costs.

3. Divide costs by miles: Divide the total costs by the total miles driven to obtain your fleet's cost-per-mile.

By regularly calculating and monitoring your fleet's TCO and cost-per-mile, you can gain valuable insights into your fleet operations, identify cost-saving opportunities, and make informed budgeting decisions.

Unlock the power of real-time data with Samsara

Samsara offers comprehensive fleet management software built to improve efficiency, safety, and sustainability across your fleet operations. 

For example, Maxim Crane, North America’s largest crane rental company and lifting solutions provider, leveraged Samsara to gain a holistic view into the health of their fleet, how safe their employees are performing, and what’s happening on the road. Before Samsara, Maxim Crane’s maintenance program was reactive, meaning they could only address issues once equipment broke down. This often necessitated expensive "hotshot" delivery of parts and weekend overtime for repairs on job sites, leading to increased costs and customer delays. Samsara enabled a shift to a planned, predictive maintenance program, and as a result, they saved approximately $13 million in 2024—about $1 million per month in maintenance costs. 

To learn more about how you can improve fleet efficiency and maximize profitability, check out Samsara’s Fleet Management Platform and reach out to our team today.