What is meant by car replacement cycle?
Whether the company outright purchase their fleet vehicles or have a leasing agreement, there will be a replacement cycle in effect to indicate when the vehicles will need to be replaced.
Car replacement cycles are commonly measured by the number of years the vehicle is in ownership and the amount of miles the car or van travels. As the age of a vehicle increases so do maintenance costs and depreciation. Some companies could find their vehicles out of warranty also, if an extended replacement cycle is used.
Car and van replacement cycles
Typically car replacement cycles last three to four years, mileage will vary between companies depending on the nature of the business and can be anything from 30,000 miles to 120,000 miles over a four year period.
With advancements in technology, fuel consumption improving and co2 emissions constantly in decline, replacing fleets with new vehicles can become more cost effective for fleets.
However extending vehicle replacement cycles has become a trend in the economic downturn, but in many cases it could prove to be a false economy, according to Jaama. As the age of a vehicle increases so do maintenance costs, particularly as company cars and vans emerge out of comprehensive manufacturer warranty cover.
Therefore, it makes economic sense to ensure that service, maintenance and repair (SMR) costs are not rocketing out of control and overtaking a used vehicle’s residual value as company cars and vans move into their fourth and perhaps fifth year of operation when three years was often the pre-recession norm.