An Optimal Replacement Analysis (ORA) is a fleet management tool used to determine the best time to replace an asset based on its lowest cost of ownership. ORA helps you determine the right balance between a vehicle's replacement value and operating costs, so you can maximize vehicle usage without running it into the ground.
The ORA tool in Fleetio uses the expected costs for a group of similar vehicles to suggest a replacement policy for vehicles in that group. You can use the output of this tool to validate already existing replacement policies or develop new replacement plans if they don't currently exist in your organization.
To access the ORA tool, click Vehicles in the Sidebar Navigation, then select Replacement Analysis.
You can input the following assumptions to receive this insight:
| Assumption Type | Notes |
|---|---|
| Estimated Vehicle Life | How many months is this vehicle expected to be in active fleet service? Note: if the "Optimal Replacement" line is on the final year of the graph, consider adding an additional 12 months to this assumption to see if the cost per utilization trend will increase or decrease based on cost assumptions for an additional year. |
| Estimated Annual Mileage | How much do you expect the vehicle to be utilized per year, on average, over its lifetime? |
| Purchase Price | How much do vehicles like this usually cost? |
| Estimated Disposal Cost | What are the estimated costs associated with selling/disposing of this asset? |
| Estimated Salvage Value | How much money do you expect to receive for this vehicle, as a percentage of the original cost? |
| Depreciation | Estimates the loss in the residual value of an asset over time. Note: The Double-Declining Balance method is the default because it more accurately estimates the residual value of a vehicle throughout its life. The depreciation method used here does not have to be the same your accounting department uses. Depreciation in accounting is used for tax purposes and may not accurately reflect the residual value of an asset. |
| Service Cost Estimates | How much do you expect to spend on maintenance and repairs in each year of this vehicle's life? |
| Fuel Efficiency Estimate | What is the average efficiency you expect to see in this type of vehicle? |
| Fuel Cost Estimates | What are your expectations on how the cost of fuel will change over time? |
How to read the graph:
- Cumulative depreciation costs per unit of utilization (miles/kilometers/hours)
- Cumulative service costs per unit of utilization (miles/kilometers/hours)
- Cumulative fuel costs per unit of utilization (miles/kilometers/hours)
A, B, and C all add up to the total cost per unit of utilization. Costs per unit of utilization are calculated using a running average. Cost per unit of utilization = Cumulative cost at the end of year / cumulative utilization at end of year.
- Optimal replacement range
It is recommended that assets are replaced when they reach the minimum cost of ownership. The year at which the minimum cost occurs is the center of the optimal replacement range. Since no asset will perfectly follow the estimated total cost curve, this information is given as a range to acknowledge that the model is not perfect.
NOTE: Units in the Optimal Replacement Analysis will reflect your Account Settings (currency, usage, and fuel volume units) and User Settings (fuel economy units).
