Fleet News

Why fleets need to factor in the hidden Total Cost of Disposal

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By Jonathan Holland, managing director, ADESA UK

Leasing companies and fleets could save a significant amount of value on every car they de-fleet by simply taking a digital-first approach.

Value is lost throughout the traditional de-fleeting process from the moment a car reaches the end of contract to its eventual appearance on a dealer’s forecourt.

It’s analogue thinking in a digital world.

While vendors and operators diligently use Total Cost of Ownership (TCO) data to inform and underpin decision making, it is easy to overlook what happens at the end of a vehicle’s fleet life where added costs have been allowed to creep in.

Factoring in unplanned costs

To counter this we advocate the use of Total Cost of Disposal (TCD) considerations factoring in the various unplanned, often unquestioned, costs which typically amass between end of contract and a car being sold.

In the traditional auction space a vehicle can face a bewildering array of hidden charges not budgeted under TCO. These will typically include: multiple vehicle movements; third party storage; inspection and refurbishment; daily accrued interest; book drop; and interest charges

It’s not unusual for a vehicle to attract many, if not all, of these charges, so consider the implications of multiplying these costs across dozens, or hundreds, of vehicles.

Identifying when depreciation starts

The TCD clock starts ticking the moment cars are de-fleeted with all these costs seriously downgrading an asset’s value.

When it comes to disposal most vendors and fleets are focused on achieving a sale as close to its book value as possible. And there’s nothing wrong with that. But what they often fail to consider is between disposal and physical auction, vehicles accrue many of these costs and they are depreciating.

Book values are a good benchmark but it is time for them to be approached differently. The emphasis needs to be on achieving a book value upon the point of de-fleet, not the point of re-sale. Achieving a close to book value weeks after de-fleet and amassing charges in the meantime is no cause for celebration.

Eliminating the de-fleet time lag

The technology to alleviate this age old problem exists. The 24/7 immediacy of online remarketing, which can start before a vehicle is de-fleeted, eliminates the time lag associated with fleet disposals.

It also drives cost efficiencies throughout the de-fleeting process and empowers vendors to take control of their TCD by achieving the best possible returns on their assets.

It’s digital thinking in a digital world.

Click here for remarketing best practice and procurement insight

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