To analyze the operating costs of a corporate fleet, managers use an indicator called TCO, namely Total Cost of Ownership. It regroups elements that make up the cost price of each vehicle and is used to optimize car fleet management.
What is the TCO?
The TCO, or Total Cost of Ownership, indicates the cost of a vehicle. It is composed of all the expenses related to the use of the vehicles, including, for example, elements such as the vehicle’s purchase and resale price, its repair or leasing cost, fuel consumption, toll charges, insurance and maintenance fees, as well as taxes.
The fleet manager aims to optimize each item to reduce the TCO. By closely monitoring the TCO, the company will be able, in turn, to control costs generated by its fleet as accurately as possible. Consequently, it becomes possible to detect anomalies on a case-by-case basis, such as uneconomical driving by an employee, which would significantly increase the vehicle’s TCO.
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How to optimize the TCO in daily operations?
To reduce the TCO, it is necessary to constantly optimize the fleet’s management through renegotiating insurance contracts or closely evaluating vehicle-renewal costs, for example. As a result, the manager needs to analyze each vehicle along every item to obtain the best equation between purchase cost, usage cost, and taxes related to the use of the vehicles.
It is also necessary to review the tires’ purchase price and the cost of maintenance contracts that depend on the mileage achieved by each vehicle. At this stage, the manager must be able to determine whether it is better to buy a vehicle to keep for a more extended period or opt for a long-term lease and consider the financial costs tied to each hypothesis.
Setting up training sessions for the individuals to whom a company vehicle was assigned may prove crucial. Whether it is on road safety or eco-driving, the training must lead to noticeable savings in the long run. These could stem from reducing the vehicle’s fuel consumption or its wear and tear, particularly on the tires and the brakes.
All these elements must be taken into account by the fleet manager when calculating the TCO. Monitoring them helps reduce the real cost of using the company’s fleet. However, to estimate the overall traveling cost for the company’s employees, there are other indicators to consider, such as the TCM.
What is the TCM and what does it bring to the table?
As part of an ongoing effort to optimize employee travel costs, companies are increasingly using a new indicator partly based on the TCO. Called TCM, for Total Cost of Mobility, it takes into account TCO metrics as well as elements related to the employee during the business trip.
The TCM adds expenses related to employee travel, such as hotel nights, restaurant meals, or train or plane travel, and allows for a finely tuned optimization of the company’s travel costs.
A corporate car is not always the most appropriate solution for team mobility. Given the time spent on the road, the vehicle cost, and the risks inherently tied to driver fatigue, it is often more efficient to opt for other mobility solutions such as the train or the plane. Rather than a round trip, a night at a hotel can also be justified depending on the distances.
To optimize day-to-day operations in a corporate fleet, accurate knowledge of the employee mobility costs is a must to make the best decisions. The combination of efficiency and cost-saving are the hallmarks of a company successfully controlling its expenses.
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