Fleet management is a huge undertaking, and one of the most important aspects of it is TCO, or total cost of ownership. It's important to calculate your TCO accurately so you can better understand your budget and your fleet management costs. Ultimately, this helps to increase your revenue and optimize your business operations.
Several elements go into your TCO, including whether you have a traditional or EV fleet, fixed and hidden costs, and your acquisition method. Buying or leasing a fleet car, for example, is quite expensive up front, while long-term rentals or car subscriptions with SIXT reduce both your upfront expenses and your overall TCO.
In this article, we'll cover:
Total Cost of Ownership: Calculation and Breakdown
The first thing to understand is how to actually calculate your TCO. Use the following formula to calculate your fleet TCO:
- Acquisition costs + Admin/Operating costs (including gas, maintenance, etc.) + Depreciation (if applicable) + Miscellaneous costs (licensing, driver training, downtime, etc.) = TCO.
If you're looking to calculate the TCO per vehicle, you can divide your total TCO that you got above by the number of vehicles in your fleet.
What to Consider in Your TCO Fleet Lifecycle Costs
When considering what numbers to plug into the formula above, you need to consider all the costs of operating the vehicle or fleet over its lifecycle. Consider the following:
- Fixed costs: These are predictable, unchanging costs associated with the vehicle, such as the purchase price or lease payments, registration of the vehicle, and interest accrued.
- Variable costs: These are more unpredictable costs that depend largely on the scale of your operations, like fuel spending, necessary maintenance and repairs, and downtime.
- Hidden costs: These often get overlooked but are still important to plan for in case of an emergency. These include things like lost opportunities and unexpected downtime.
TCO Comparison: Traditional Vehicles vs. EVs
There is a small difference between managing a fleet of traditional internal combustion engine (ICE) cars and managing an EV fleet. Some costs that are necessary for ICE vehicles are eliminated for EVs, while other costs are higher for EVs than ICE cars. The key differences to consider cost-wise are these:
- EVs bring lower fuel and maintenance costs since things like oil changes aren't needed, and you're less likely to need an unexpected repair with fewer moving parts. In addition, electricity prices are typically lower and more stable than gas prices.
- EVs typically come with higher acquisition costs thanks to the new technology being used and because you'll need to invest in charging infrastructure in addition to the vehicle itself.
- Depreciation varies across the two models. EVs typically depreciate slightly faster, but the gap continues to narrow. Of course, the actual rate of depreciation will also depend on your specific car model and on driver behavior.
Benchmark Your Fleet
To examine the efficiency of your fleet management practices, you'll want to compare your fleet cost TCO as well as your CPM (cost per mile) to the industry benchmarks. To calculate your CPM, use this formula:
- Total fleet costs over a set period (usually yearly)/Total miles driven in that same period = CPM.
Once you have your numbers, consider the following industry benchmarks for service fleets:
| Industry Benchmark | Notes | |
|---|---|---|
CPM (average Cost Per Mile 2025) | $0.23–$0.31/mile | Bigger/older vehicles increase costs. |
TCO (average Total Cost of Ownership 2025) | $9,584/vehicle | Consider replacing vehicles 15% above this threshold. |
TCO of EV Fleet
In 2024, a study by RMI found in an EV fleet TCO analysis that the CPM of an EV fleet was 9% cheaper than the CPM of a traditional ICE fleet. This will bring down the TCO of an electric fleet over the vehicle's lifetime.
How SIXT Can Help
With this in mind, it's no wonder that electrifying fleets is becoming a fleet management trend. It's a great way to reduce fleet TCO, and SIXT can help you mitigate costs even further. With long-term car rentals and car subscriptions from SIXT, you can make the transition gradually and get access to the latest EV models so you can test them out before you buy. This also eliminates the cost of depreciation from your TCO and gives you a way to scale your fleet as your business grows.
Top 3 Tips for Reducing Fleet TCO
There are a number of ways for you to optimize your fleet performance and reduce your overall TCO of fleet management.
Prioritize Flexibility and Predictability
Investing in flexible, reliable solutions like those offered by SIXT can significantly reduce your variable costs. When you subscribe or rent a car, you're not responsible for any maintenance, repairs, or insurance — this is all included in your service fee already.
These flexible solutions also ensure you're not paying for more than what you need. A car subscription, for example, can be paused, canceled, or reactivated on a monthly basis according to your needs, and you can swap out your model for a different one when necessary.
Be Proactive
To optimize the performance of your vehicles, you have to be proactive about managing them. Utilize TCO calculators regularly to ensure you're meeting industry benchmarks, and centralize your vehicle use data so you can identify key areas where you can improve. Telematics systems and fleet management software help immensely with this.
Be diligent about following vehicle maintenance schedules and address any issues as soon as possible, as this will help prevent the need for costly and time-consuming repairs, which not only cost you more money but also increase your downtime.
Invest in Driver Training
Educating your drivers on safe and efficient vehicle operation can go a long way in reducing your overall TCO, especially if you're making the switch to EV technology. Driver behavior ultimately affects the wear and tear of the vehicle, therefore affecting its overall lifecycle costs. It's essential for both safety and cost management that your drivers operate your vehicles correctly and with care.
Even if you don't invest in a formal driving course, you can still caution your drivers against the most damaging driving behaviors: fast acceleration, extended time spent idling, and excessive speeding.
FAQs About TCO Fleet Management and Cost Optimization
Businesses should do a review of their fleet TCO at least once a year to ensure their data is up to date. You may want to do it more often in case of any major changes, such as transitioning to an EV fleet.
Yes, investing in a centralized software system can help by putting all your vehicle use and cost data in one place so you can automate calculations.
Yes, driver behavior can influence TCO because it can have an effect on the maintenance needed as well as on the depreciation of the vehicle.
Partner with SIXT to Manage Your Fleet TCO
Calculating TCO and CPM for your fleet is essential for optimal performance. It can help ensure you're meeting industry standards and help you identify key areas in which you can improve, ultimately saving you money. The TCO of an EV fleet versus a traditional fleet should also be considered in your fleet management.
To help manage and reduce your fleet TCO, SIXT business offers reliable, risk-free solutions like long-term car rentals and car subscriptions. In fact, SIXT corporate clients can enjoy up to 15% off car rentals. Let SIXT provide you with innovative ways to control your expenditures, ensuring you can customize and scale your fleet to your needs.
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