TCO, instructions for use: controlling exit costs

In fleet management, TCO (Total Cost of Ownership) is an essential indicator. After exploring entry costs in our previous article TCO, How to Master Entry Costs, we now focus on exit costs. TCO includes all expenses related to owning a vehicle or a fleet. It’s a crucial KPI for fleet managers looking to optimize costs and compare vehicles in terms of financial burden.

For both new and experienced fleet managers, controlling and optimizing TCO remains a central issue. To address this, it’s crucial to understand the different components of TCO, which we’ve divided into five categories:

• Entry Costs
• Exit Costs
• Tax and Insurance Fees
• Maintenance and Repair Costs
• Energy Costs

In this article, we focus on exit costs, which refer to expenses associated with the end of ownership or leasing of a vehicle. Two main scenarios arise:

1. If the Vehicle Was Purchased (Outright or on Credit)

When the company owns the vehicle, it must take several steps to minimize exit costs. Depreciation, which is the difference between the purchase price and resale value, is one of the most significant costs. It can account for up to 50% of the TCO.

Minimizing Depreciation

• Maintain the vehicle in good condition: A well-maintained, damage-free vehicle is more attractive to potential buyers. Ensure regular repairs and maintenance are done according to the manufacturer’s recommendations. Tools like CarFleet from Echoes can help monitor maintenance alerts and important deadlines.
• Choose the right options when purchasing: Opt for brands and models known for their reliability and that retain their value well on the secondary market. Avoid unreliable engine options or entry-level versions, which tend to lose value more quickly. Research specialized sources to identify vehicles that offer good residual value.

Reselling the Vehicle at the Best Price

• Advertising and Listings: Post ads on popular sites like LaCentrale or LeBonCoin. Use pricing tools to set a competitive price.
• Prepare the vehicle for sale: Clean the vehicle and take high-quality photos of both the interior and exterior. A good presentation can make a big difference.
• Complete Documentation: Provide an updated maintenance log and keep all repair receipts. This will reassure buyers about the vehicle’s condition.

2. If the Vehicle Is Leased (Leasing / Long-Term Lease)

In the case of leasing, the vehicle is returned to the lessor at the end of the contract. However, the return conditions can result in additional fees if they are not met.

Return Conditions and Penalties

• Mileage: Stay within the mileage limit set in the contract to avoid financial penalties. If you are nearing the limit, it may be wise to redistribute vehicle usage within the fleet.
• Vehicle Condition: The vehicle must be returned in a condition that reflects normal use. Avoid or repair any damage before returning the vehicle to avoid restoration fees.
• Maintenance Tracking: Follow the manufacturer’s recommended maintenance schedule to avoid penalties. Using CarFleet to track real-time data can help maintain the vehicle in optimal condition.

Conclusion

By monitoring real-time data related to your vehicle fleet, CarFleet helps you control exit costs and optimize your TCO. To learn more about best practices in fleet management, check out our blog or contact us directly for a demonstration of our solutions.