Fleet management can be expensive, and in today's market, it's essential to cut costs where possible. The fleet management cost per vehicle can be unpredictable, as it depends on things like your acquisition method, gas, insurance, and more.
To reduce your fleet management cost, analyze acquisition methods like ownership against solutions like long-term rental and car subscriptions, which can provide more cost-efficient operation. Rentals and subscriptions can eliminate some of the hidden costs like depreciation and downtime over the car's life span, so it's important to take the lifecycle cost management approach up front.
In this article, you'll discover:
- The primary and hidden costs that affect your TCO
- Industry benchmarks and how to calculate your TCO and CPM per vehicle
- How to combat common issues that increase your TCO
Fleet Management Costs to Consider
To calculate the total fleet cost per vehicle, you need to consider both primary expenses and hidden expenses. Primary costs when it comes to fleet cost management are the ones that first come to mind when you think of operating a vehicle, while hidden costs are often overlooked. Consider this list:
Primary Costs | Hidden Costs |
Acquisition costs, such as purchase cost or lease payments | Depreciation |
Fuel (or electricity) consumption | Administrative and safety processes |
Maintenance and repairs | Legal and compliance gaps |
Insurance and registration | Downtime |
Driver costs, if applicable | Administrative and safety costs |
Primary Costs
Let's dive deeper into what each of the primary costs entails:
Acquisition costs
These depend on your acquisition method. Buying a fleet car, for example, will incur much higher costs than leasing, renting, or getting a car subscription. This will include loan repayments, down payments, and any lease fees.
Cost of fuel or electricity consumption
This, of course, varies based on the type of car(s) you have, how fuel-efficient it is, how many miles you drive, and whether you decide to invest in an electric vehicle (EV) fleet.
Maintenance and repair
These costs will largely depend on your car's maintenance schedule as well as any issues that may pop up. While this may be an unpredictable cost, a great tip for how to reduce fleet management costs in this area is to be attentive to the state of your vehicle and address issues as early as possible.
Vehicle insurance and registrations:
These are necessary costs, especially if you own the car. Insurance and registration are typically covered if you lease, rent, or have a car subscription, resulting in fleet management cost savings.
Driver costs:
These are only applicable if you're hiring drivers specifically to operate the vehicle, such as truck or bus drivers.
Hidden Costs
The hidden costs must also be considered in detail:
Depreciation
This may not be an immediate expense, but it's essential to consider, especially if you're purchasing a fleet vehicle. This accounts for the decrease in the car's value over time. Some depreciation is tax-deductible, but it's best to consult a tax professional about what you can and can't claim as a tax deduction. The cost of depreciation can also be reduced by leasing, renting, or getting a car subscription.
Administrative costs
These are related to the actual management of your fleet. This includes, for example, software purchased to track your fleet, any recordkeeping or paperwork expenses, and necessary reporting.
Legal and compliance gaps
These costs are typically related to the safety of your vehicle. If you own the car, you have to pass tire inspections to legally drive it, for example, and neglecting these legal matters can result in fines or higher insurance premiums in the long run.
Downtime
This is perhaps the hidden cost most often missed. If your vehicle is in the shop for repairs or otherwise unfit for use, the cost of downtime will equal the revenue lost during the time you couldn't use the car.
Evaluating your Fleet: Benchmark Costs
To benchmark your costs, you need to consider your TCO (total cost of ownership) and CPM (cost per mile):
- To calculate TCO, first add up all costs related to your vehicle over the year, including fuel, repairs, and compliance for each vehicle. Then, use this formula: Total annual fleet cost/Total number of vehicles = TCO per vehicle. For example, if your fleet costs are $100,000 and you have 5 vehicles, your TCO per vehicle is $20,000.
- To measure your fleet's efficiency and compare performance, calculate your CPM: Total fleet costs over a set period (usually yearly)/Total miles driven in that same period = CPM. For example, if your total costs were $10,000 and you drove 1000 miles, your CPM is $10.
Once you've calculated these values, you can compare them to industry benchmarks to measure your overall efficiency and figure out how to reduce costs in fleet management:
- Average CPM benchmarks for 2025 are between $0.23 and $0.31 per mile, with costs increasing the older the vehicle gets or the bigger the vehicle is.
- For a service fleet, the average TCO per vehicle was $9,584. It's generally recommended that if your TCO per vehicle exceeds this number by 15%, you should consider replacing it.
Of course, your costs will vary depending on how many fleet cars you have, what type of cars they are, and how you're using them. It will also depend on whether you're using basic or comprehensive fleet management services. Based on industry benchmarks, consider the following average costs:
| Fleet size | Average monthly cost | Average annual cost |
|---|---|---|
Small (2-5 vehicles) | $550 - $1,375 | $45,000 - $150,000 |
Medium (around 25 vehicles) | $20,000 - $25,000 | $250,000 - $300,000 |
Large (100 vehicles) | $115,000 - $120,000 | Over $1 million |
Causes of a High TCO and How to Improve
Maintenance
One of the main culprits when it comes to expensive TCOs is maintenance. If your fleet is mismanaged and your recordkeeping isn't as detailed as it should be, maintenance and repairs can be neglected, resulting in longer, more complex work being necessary. This maintenance and repair work is more costly, and it also increases your losses due to vehicle downtime. To combat this issue, keep a detailed record of maintenance schedules and don't ignore issues until they become urgent. Instead, address them as soon as possible.
Insurance Gaps
Insurance gaps refer to the difference between what you still owe on a vehicle's loan or lease and the vehicle's actual cash value thanks to depreciation. If the car is totaled or gets stolen, for example, the insurance payout you receive could be significantly less than what you still owe on the car. To mitigate this risk, you can invest in Guaranteed Asset Protection (GAP) insurance.
Poor Fuel Tracking and Underutilization of Telematics
If you aren't tracking your fuel use properly or you're not using a telematics system, this can be a huge contributor to high TCOs. Telematics systems combine in-vehicle hardware and trackers with external software to track things like fuel use, erratic driving, routes, idling time, and other important metrics. Using data from telematics systems can point you to issues you may not have been aware of so you can immediately increase that vehicle's efficiency.
Manage Your Lifecycle Costs with SIXT+
To reduce fleet lifecycle cost management, consider a long-term rental or car subscription over purchasing or leasing a vehicle.
| Buying | Leasing | Long-term rental | Car subscription | |
|---|---|---|---|---|
Maintenance and repairs | ❌ | ✅ | ✅ | ✅ |
Depreciation | ❌ | ❌ | ✅ | ✅ |
Vehicle replacement | ❌ | ✅ | ✅ | ✅ |
Scalable? | ❌ | ❌ | ✅ | ✅ |
Optimizing Fleet Management Costs with SIXT
There are a lot of both primary and hidden costs that go into fleet management, and it's important to consider all aspects in order to find ways to reduce your overall TCO. If you're looking to simplify your fleet and make it as cost-effective as possible, consider the innovative solutions offered by SIXT, such as long-term rentals and car subscriptions. These programs eliminate several key expenses that typically go into TCOs and afford you flexibility you wouldn't get with a lease.
FAQs About Fleet Management Costs
Small companies with just a few vehicles typically have insurance costs of about $1,500 to $3,000 per year per vehicle, depending on the type of vehicles they're operating. Companies with larger fleets may see costs of $3,000 to $7,000 per vehicle per year.
If you're looking to purchase or lease five or more vehicles for your business, you can typically take advantage of fleet pricing for cars. This refers to special discounts afforded to you by lenders. These discounts can include bulk pricing or reduced maintenance costs.
Yes, a fleet typically contains two or more vehicles.
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