For so many organizations, vehicles are a necessary evil. They take up a large cut of the budget, are a headache when anything goes wrong, and it almost seems like they’re the responsibility of everybody and nobody at the same time.
Over the past few years, they’ve gotten even more complicated. Maintenance and repair costs are continuously increasing and inventory fluctuates rapidly. We’ve all felt the pinch as tariffs and general uncertainty have driven up vehicle prices. With global trade policies constantly shifting, it’s crucial that you have a plan (any plan!) and stick to it!
I wanted to take the time to dive into how the upcoming tariffs are affecting vehicle prices, and why taking a proactive approach to managing your fleet can make all the difference.
Impact of Tariffs on Vehicle Prices
Tariffs on imported vehicles and vehicle parts can lead to substantial price increases. For instance, the recent 25% tariffs on imports from Canada and Mexico are expected to drive up vehicle costs by $4,000 to $12,500, depending on the vehicle type and origin[1]. These tariffs cause inflation, increasing the replacement cost of vehicles by up to 16.5%[2]. As manufacturers face higher costs, they often pass these increases onto consumers, resulting in higher prices for new and used vehicles[3].
There are a couple options to avoid the hikes:
- Make sure you are getting the best buy on vehicles- are you factory ordering your vehicles today? This can save you thousands per vehicle: you can avoid extra features that you don’t need and order only the basics, and you can avoid increased markups from dealerships.
Additionally, as non-profit organizations, you should be getting access to additional discounts in the form of incentives. This model year we saw a massive resurgence of manufacturers taking thousands of dollars off invoice pricing for non-profits and government agencies.
- Have a plan to track maintenance and hold people accountable for getting it done– a maintained vehicle is one that prevents larger repairs for happening. Do you have a solid system in place today to track when a vehicle needs an oil change, as well as make sure it gets done?
- Weigh the cost of replacement versus repair- can you pinpoint how much you’re spending on maintenance? Are you buying large ticket items like transmissions and engines, to keep your vehicle running? The more you spend on these items, the more money you sink into a depreciating asset- that will need to be replaced at some point. What metrics to you use to make sure you’re deciding correctly?
Proactive Fleet Management: A Financial Strategy
One thing I always tell my clients is: your vehicles are a tool you use to drive your business. As with any tool, you cannot risk a lapse in efficiency. By proactively managing your entire fleet, you ensure your organizations have the means to continue to run without delay.
So, what goes into proactive fleet management?
Scheduling Vehicle Replacements Appropriately: Maximizing on vehicle resale is one way organizations are getting money to come back intoto their programs. By running a vehicle the appropriate amount of time (while it still is worth a decent amount on resale and doesn’t cost an arm and a leg in maintenance & fuel) you can plan to have a new vehicle at the right time, and have the resale of that first vehicle fund the next one.
Regular Maintenance and Inspections: By scheduling (and enforcing!) regular maintenance and inspections, you can extend the lifespan of their vehicles and prevent minor issues from escalating into major problems. This approach reduces repair costs and ensures vehicles operate at peak efficiency, saving on fuel consumption and emissions.
Data-Driven Decision Making: Leveraging data analytics allows you to make informed decisions about vehicle replacement, route optimization, and resource allocation. Analyzing the mileage trends of one vehicle might allow you to extend its usage by switching it between programs; analyzing how much maintenance is costing you on another could mean the difference between replacing it now or dumping more money into it and replacing it in a year. If you aren’t tracking these things diligently, you’ll never know!
Safety and Compliance: Staying ahead of safety inspections, driver training, and industry regulations protects employees, assets, and reputation. A large part of that is doing your best to have vehicles as new and within federal safety standards as possible. The NHTSA reports that over 600,000 lives were saved between 1960 and 2012 from the improvements in vehicle safety. Since then, advancements in safety features such as electronic stability control (2011), back up cameras (2018), and blind spot warning systems are saving even more lives[4].
Conclusion
Tariffs on vehicles and parts can significantly impact prices, posing challenges for organizations reliant on fleet operations. However, when you have a plan (any plan!) and stick to it, you can mitigate these effects and maintain stability. Regular maintenance, data-driven decision-making, fleet optimization, and compliance are key elements that contribute to an efficient and cost-effective fleet, that can help offset the burn of market changes.
By getting ahead of potential price hikes and operational challenges, you can ensure your fleets remain an asset, driving success in an ever-evolving world.
[1] Car buyers’ window for dodging tariff price hikes is about to close, experts warn
[2] Tariffs are Going to Hurt All Car Owners
[3] Tariffs are likely to push auto prices higher. Should you buy a new car now? – CBS News
[4] How Vehicle Safety Has Improved Over the Decades | NHTSA
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