Introducing a comprehensive Total Cost of Ownership (TCO) is essential for a fleet to operate an effective and efficient fleet – as well as to access manufacturer rebates.

Speaking at the Designing End-to-End Holistic Fleet Policy seminar at Fleet & Mobility Live, James Rooney, Head of Road Fleet at Network Rail, highlighted the importance of the need for a tailored approach based on the company’s objectives.

This also includes the type of vehicle needed, the image an organization wishes to convey and how it is financed.

Vehicle type

“Cars and vans are very different, so you’ll find yourself treating them differently and a lot of that is because cars are very emotional: they’re someone’s pride and joy, they’re on the someone’s way, they are an asset to their home.

“Vans are workhorses. They are designed to perform. They must be functional, fit for purpose, and equipped with the necessary tools, shelving, and conversions to be able to do their job.

“For this reason, building the vans is often a lot more work, but once there it is a copy and paste exercise, provided you don’t have too many different fit-out specifications.

Rooney said how a car is used should also influence what employees can choose. “Is this a convenience car that isn’t really used for company business? If so, let them roam around in whatever they want, as long as they can afford it,” he said.

“But will it be used to go to a customer? If you’re a social housing company, for example, it’s probably best not to put your agents in high-end Audis, because the image you convey when you tour that person’s house is not maybe not the one you want. You have to think about optics.

Rooney said it’s also important to talk to drivers about the vehicles they will be driving. “Get people into the vehicles you’re looking at, talk to the people who will be using them, and understand how and why they use their vehicles.

“In general, you won’t tend to order your cars in bulk. You can have one or two at a time, so keep it repeatable, keep it scalable. If you go for a bucket list, try to narrow it down to a certain number of manufacturers, styles or types.

Total Cost of Ownership

“Cheap doesn’t always mean cheerful, expensive doesn’t always mean better – that’s where the total cost of ownership (TCO) model comes in,” Rooney said.

This is made up of two aspects: finances and living costs.

Financing covers the cost and method of financing the vehicles. “How much does the vehicle cost to purchase? If you buy it outright it will be the purchase price, if you rent it will be the rental cost,” Rooney said.

“If you’re awash with money, buying will always be cheaper than renting because you’re not paying interest rates, but you’re getting your money out of CapEx or OpEx in some cases.

“Should this money be invested elsewhere in the company? Your financial team will be the ones to guide you here. Think about how long you will use this vehicle and what its residual value will be once you sell it.

“If the motorhomes tank on this vehicle, you will be the one to take the hit. When you rent a vehicle, usually under most rental agreements, you will be absolved of any association with the campervan.

The lifetime costs include the costs of running this vehicle, such as fuel, insurance, service, maintenance and repair costs, as well as any costs related to the low emission zones it can incur.

Rooney said a TCO model is also useful in meetings with internal stakeholders, especially financial ones, because it helps justify why the company selects one vehicle over another.

“Very often you will find that the rental cost plus TCO on some vehicles is lower than on other vehicles, and that may be because they break down a little less, they consume a little more less fuel or use a little less tires.

“And a lot of times when you’re building these models at total cost of ownership, it might only be £3 or £4 up and down and that’s your chance to talk to the manufacturers.

“I love bringing total cost of ownership into a conversation with a builder. You put it on the table, you identify the manufacturers, you say “here you are”, and you show them the value chain that explains why their vehicle is not at the top. .

“Chances are at that point you’re going to get a bigger discount, you’re going to get a little more collateral, or you’re going to get something else so they can try and increase that.

“It also helps them, because then they understand how negatively their vehicle behaves in these situations. This is a very good tool to use.

He added: “Build relationships with manufacturers. It doesn’t matter if you have one car, 1,000 or 10,000, have that relationship with the manufacturer. Show them your order plan and try to plan it.

“For example, if I have to install thousands of electric vehicles in my fleet, but if I don’t tell the manufacturers, how do they know that this volume will arrive? What do they need to adjust for what happens to the UK that year?

Rooney said a TCO model is also useful in meetings with internal stakeholders, especially financial ones, because it helps justify why the company selects one vehicle over another.

The full debate can be watched below