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Vehicle Management Capital Costs

Vehicle capital costs are the highest of all vehicle costs. This is the cost that reflects what you buy your vehicles for against what you finally sell them for. And so in order to measure this cost you will need only to collect four pieces of information over the life of the vehicle- the date and cost of purchase and the date and value of sale.

As all organizations collect this information the challenge is in the reporting. Regardless of your accounting system you should keep a manual vehicle ledger or inventory and in this should be recorded the purchase and sale dates and values.

Depreciation is normally measured as a percentage but most staff in developing countries will best understand it as a fixed amount per year. And so this is given as (purchase price - sale price)/years of ownership.

Depreciation costs are often high for one of three reasons:

  1. Hanging on to vehicles beyond their economically viable life

  2. Insufficient investment in maintenance over a vehicles life

  3. Insufficient control or transparency in the process of selling vehicles at time of disposal

The first of these is really the high end of vehicle management and impractical for organizations that are working on funding cycles determined by donors.

Maintenance is an investment whose return is shown in the depreciation cost. Better maintenance leads to lower depreciation costs. Have a maintenance plan, follow it and procure your maintenance properly.

When you dispose of a vehicle enter the depreciation cost in your inventory. It is an easy once off cost to record, it is the highest cost and well worth tracking against the efficiency and transparency of the way you dispose of your assets.   

 

"Simple to the point advice and support.  I have seen and used other packages but this is the best so far"

-Mark Bates Director Pierlite Mozambique

 

MSSB Consulting, Ireland 2007