How does the TCO method work?
There are plenty of ways to save money on your fleet of vehicles, such as sale and leaseback options, but there is one simple method you can use to examine and cut costs effectively; the Total Cost of Ownership framework, or TCO.
Already used in many industries to evaluate the cost of a purchase over a product’s life cycle, TCO is now being adopted by businesses running fleets, to compare the direct and indirect expenses of their vehicles.
It's standard for many businesses to use the purchase or lease costs to decide fleet vehicle models, but this doesn't incorporate costs like taxes, National Insurance, depreciation, fuel, insurance and repairs.
TCO can therefore give you a more accurate cost for a vehicle over time, by taking into account the true running costs.
Using the TCO framework when choosing your fleet allows you to compare vehicle options more easily, to see which is projected to be the most cost-effective over the lifetime of the vehicle - even if they have similar on-the-road prices or lease rental costs. TCO often illuminates the potential to make significant savings over time, giving a clear guideline as to the costs to your business for each vehicle.