Tips for Establishing and Managing Fleet Budgets
As a fleet operator, your budget is the foundation upon which your fleet strategy is built. Developing a fleet budget is a comprehensive process that challenges you to forecast operational expenses and capital expenditures as countless variables, trends, and unforeseen factors influence your daily costs. Establishing a budget – and effectively managing it – is a significant challenge even for the most veteran fleet professional.
With that in mind, Holman’s Kevin Quinn and Ed Powell recently spoke with Work Truck to share their advice for successful fleet budgeting. In the series of articles, Kevin and Ed offered their perspective on budgeting for fleets both big and small, while highlighting tips for optimizing your strategy.
Specifically for small fleet operators, Kevin noted that companies typically operate with limited financial resources, requiring them to balance fleet budgets with other operational needs, such as business growth, hiring, and employee retention. In this article, Kevin discussed why leasing vehicles is an attractive solution for small fleets with tight budgets.
“Leasing vehicles isn’t something many small businesses typically consider, but there are several advantages, particularly for complex vocational units. When you lease your fleet vehicles, you can capitalize the chassis, upfitting, and equipment expenses into one monthly payment. This spreads costs over the life of the term, freeing up capital for other growth-oriented areas.”
At the other end of the spectrum, Ed shared why your vehicle replacement strategy plays a critical role in effective budgeting for large fleets.
“Generally speaking, all fleets should establish and follow optimal replacement parameters, but this is especially important for large fleets with a diverse range of vehicles and applications. Establishing optimal vehicle or asset replacement parameters and adhering to those parameters as closely as possible is critical to controlling expenses and accurately forecasting budgets.”
He then discussed the importance of consistently replacing vehicles. Ed noted that if fleet operators replace an insufficient number of vehicles or do so at inconsistent intervals, they’ll eventually have peaks and valleys in their expenses as a significant number of units age (and incur expenses) simultaneously. In another article, Ed also touched on the budgeting complexities of balancing new vehicle acquisitions while maintaining older assets.
“Effectively balancing the cost of acquiring new vehicles and maintaining older vehicles is rather challenging and often varies greatly from one fleet to another. A variety of factors influence this equation – a business’ long-term capital strategy, internal goals and KPIs, and how each business handles their EBITDA and expense distribution.”
To read the entire series of fleet budgeting articles, visit WorkTruckOnline.com. For the latest information on the trends and macroeconomic factors influencing fleet expenses, subscribe to Holman’s Morning Brake newsletter.
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