(Glossary of terms used to calculate lifecycle costs).
This is the cost of holding a vehicle, including operating expenses, from its acquisition to its disposal.
Net Acquisition Cost
This is a vehicle Manufacturers Recommended Retail Price (MRRP), minus any manufacturer incentives or lease agreement adjustments.
These costs include all expenses directly related to running a vehicle, namely fuel, oil, tires, repairs, and maintenance.
These are expenses that have little or no direct relationship to the distance a vehicle is driven. These include vehicle registration/insurance, RACV membership, insurance costs, and management fees and we include Fringe Benefits Tax (FBT) in this section.
The cost of physical ownership calculated as the difference between the purchase price and the expected sale or auction value of the vehicle on disposal.
Step 6: Special Considerations and Non-Financial Evaluation
These are structural and soft issues requiring consideration.
(Where the residual value responsibility rests with the lessee)
eet Managers, whose fleets are operated on open-ended leases, where they retain the residual value responsibility, must ensure that their monthly lease payment utilises a realistic residual value.
A rate that is too high will reduce the monthly lease payment but will most likely result in a end of lease liability (balloon payment) that is greater than the actual disposal return (residual value) from the vehicle.
Where this occurs the fleet manager will have to pay the difference between the contract residual value and the actual residual (sale) value.
(Where the residual value responsibility rests with the lessor)
If you are using a closed-end lease, the lease cost consists of a fixed monthly payment determined at the initiation of the lease by the lessor. This payment includes charges for maintenance, depreciation, interest and administrative overhead.
Because the lessor assumes the residual value risk, resale value is not a principal consideration for the lessee, nor is net acquisition cost, except to the extent that it influences the amount of the monthly lease payment.
Seek out the results of the NCAP crash tests and be aware of your legal responsibility for the provision of a safe working place.
Availability of Unit
Not all vehicles are readily available from manufacturers. Some vehicles are very popular with the public, or produced in very limited quantities. There are often incremental expenses incurred in providing transportation while awaiting the delivery of new vehicles.
This can take the form of having to reimburse a driver for the use of their personal vehicle, vehicle rental, or paying higher maintenance costs on a vehicle past its optimum replacement point, or you may run over existing contract time and distance agreements.
A build-time delay is a method to penalise those options with longer delivery times by assigning a monetary value to this incremental expense. All options must first be normalised to the shortest delivery time, and the incremental expense charged to those with longer delivery times.
Always be open to seeking alternative models if there is short supply for your first choice of vehicle.
Is there an adequate dealer network or other source of reliable warranty service? Is the vehicle designed for ease of repair?
Company Image and Prestige
Many employers recognise that their vehicles are highly visible signs of the company’s image or prestige. This importance is obvious when the employer’s name is displayed on the vehicle; however, such factors also are important when customers will see or be transported in vehicles used by executives, sales personnel or service technicians.
Whole of Life Costing Calculator
Having gathered all of the required information you can then utilise the AfMA Whole of Life Costing Calculator available via the website at www.afma.net.au. This will identify such costs as the total lifecycle, cents per kilom