The cost of raw materials is up across the board. If it goes in the vehicle, it’s almost certainly more expensive than in years past.Getty Images
Preventive maintenance (PM) costs have increased in calendar-year 2021 primarily due to constrained new-vehicle inventory caused by a microchip shortage leading to extended service lives for those units unable to be replaced, the widespread OEM adoption of more expensive synthetic motor oils, and rising labor rates in a tight labor market. All of these combined factors have caused PM costs to trend upward in 2021. While there are regional differences in prices, when averaged out on a national basis, PM costs in 2021 have increased.
“Consistent with recent years, PM average cost increases across most vehicle classes will likely continue in the 3-5% range annually, we’ve continued to see the PM trend of average cost increases across most vehicle classes annually in the 3-5% range, which is what we also expect for 2022,” said Chad Christensen, senior strategic consultant for Element Fleet Management.
The cost of raw materials – crude oil, rubber, etc. – is up virtually across the board. The ongoing labor shortage is also influencing costs since many manufacturers cannot sustain production levels to keep pace with demand. Add to that the number of repair facilities still struggling with their own parts and/or labor shortages, the general lack of new vehicle inventory, and vehicles remaining in service longer than originally anticipated and you can quickly see the perfect storm this creates,” said Chris Foster, manager, fleet management services for ARI.
However, the biggest factor for increased PM expenses is the widespread transition of fleet vehicles to the use of synthetic oils required by OEMs. For the past decade, more OEMs are recommending the use of more expensive synthetic motor oils, which is increasing the cost of each PM service. But the higher quality motor oil also allows the interval between these services to lengthen, which is offsetting some of the additional transaction costs.
“Factors impacting the cost of PM to fleets in 2021 include the continued use of synthetic oils, increasing percentage of overall vehicles require some blend of,” said Tim Brockschmidt, maintenance client partner for Element Fleet Management. “This is costlier per transaction, but longer lasting synthetics extends the oil change cycle.”
Compounding all of these issues are widespread supply chain constraints, which are causing fleet vehicles to be kept in service beyond their optimal recommended service lives due to the difficulty in sourcing replacement vehicles.
“The automotive industry as a whole is grappling with cost increases and a wide range of supply constraints and that certainly extends to the fleet sector as well. These disruptions are driving operating costs higher and in many cases, leading to extended downtime for fleets,” said Foster of ARI.
Lifecycle extensions of fleet vehicles due to the difficulty in sourcing replacement units is a relatively new phenomenon that is increase in PM costs at many fleets for these older, higher-mileage fleet units.
“PM costs increased due to extended vehicle replacement times as new vehicle production decreased limiting availability of replacement vehicles. This has led to more emphasis on maintaining vehicles for a longer period of time and a longer vehicle life,” said John Wuich, CAFM, vice president, consulting services for Donlen.
Another factor is longer stays at a repair facilities due to part shortages and an increase in expenses for short-term rental replacements.
“Vehicle supply constraints have also affected the rental segment, further inflating operating budgets. During the pandemic, many rental car providers liquidating a number of vehicles and relocated units to areas with sustained demand. Now, with a much smaller pool of rental units available and rental volume up significantly due to the general lack of new-vehicle inventory, fleet operators find themselves having to allocate more of their operating budget to rental costs,” said Foster of ARI.
Longer service lives for vehicles is adding additional preventive maintenance expenses for wear items that are operated beyond their recommended mileage thresholds.
“Preventive maintenance costs across all vehicle segments have increased in 2021 compared to last year. 2020 was characterized by vehicle lifecycle extensions due to fleet budget constraints. This year, fleets have continued to adjust interval schedules to account for vehicle lifecycle extensions in response to vehicle shortages and ordering delays. We expect to see higher mileage vehicles on the road in 2022, as new-vehicle inventory supply continues to struggle to meet demand,” said Joe Shinn, manager, fleet maintenance for Merchants Fleet.
One consequence to the extended service intervals is that it has increased the importance of regular oil level checks by drivers. It is also important to remind drivers, especially those operating vehicles in the commercial and vocational markets, that tires need to be rotated more often than every oil change when longer lasting synthetic motor oils are used, which could have 10,000-mile drain intervals.
“It is also important to acknowledge that as vehicles remain on the road longer, you’ll likely experience a higher percentage of downtime as your fleet ages. This is something you’ll need to account for and ensure you have the proper number of spare units available to effectively mitigate the impact of this increased downtime, especially for units that are especially critical to business operations,” said Foster of ARI.
One unintended consequence is that the pandemic contributed to higher PM costs due to a decrease in year-over-year PM compliance because fleet vehicles were driven fewer miles.
“Coming out of the pandemic and as travel, overall, picked up this spring, we continued to see PM compliance that was down year-over-year,” said Wuich of Donlen. “We attribute this to fleet vehicles in industries sitting idle. Upon return, there were upticks in spend categories associated with vehicle inactivity; specifically dead batteries, low fluids, bad and leaking fluids, low or flat tires, fuel ‘gum,’ and even deteriorating oil.”
Reduced vehicle utilization was a key factor impacting PM costs in 2020 following the idling of non-essential fleets by economic lockdowns designed to slow the spread of the COVID-19 virus.
“Many fleets had reduced usage in 2020, which equated to less frequent or skipped service intervals. Some fleets have seen the increase and ‘catch-up’ in services as they increase usage,” said Dale Jewell, senior director – fleet service operations for Emkay.
This accelerated with the first rollout of the mass vaccinations in January and February 2021. “The cost of PMs increased throughout 2021 as demand picked up following vaccine roll outs and the opening of state economies in the U.S. and provincial economies in Canada,” said Brockschmidt of Element Fleet Management