Mileage Breakeven Points Instructions for Fleet Plan Preparations
Mileage breakeven points are developed to determine at what point it is financially more advantageous to provide a state motor vehicle (usually an automobile) to an employee instead of paying the employee a mileage reimbursement for the employee’s use of a privately owned motor vehicle and vice versa. Fleet managers will use mileage breakeven point analysis as a tool in analyzing vehicle assignments and usage in their departments. Mileage breakeven point analysis cannot be used in reviewing all vehicle assignments, as mitigating factors may exist. Factors such as type of use of the vehicle and add on equipment may make it impractical to utilize mileage breakeven point analysis in determining vehicle assignments.
Note: While it may be impractical to utilize mileage breakeven point analysis, the fleet manager should consider other options, i.e. the use of motor pools instead of assignments to employees or units.
Methodology
Mileage breakeven points are developed by comparing motor vehicle depreciation and operating costs to the cost of the mileage reimbursement. An example of how a specific breakeven point was developed will be shown in the Calculation section, but it is important to understand each component of the calculation. Listed below are descriptions of each component.
Acquisition Cost: The cost of the motor vehicle, including options.
Resale Value: The projected value, less selling fees, of the vehicle when ready for resale.
Depreciable Cost: Acquisition cost less the resale value.
Depreciation Years: The projected number of years that the motor vehicle is expected to be utilized before resale.
Annual Depreciation: The projected depreciation charge per year. The charge is calculated by subtracting the resale value from the depreciable cost and dividing by the depreciation years.
Lifetime Operating Cost: The projected operating cost of the motor vehicle over its lifetime. Operating cost should include all fuel, maintenance and repairs (including non-reimbursed accident damage) and vehicle liability insurance. Projected lifetime operating cost will likely have to be based upon available historical data and an inflation factor. Operating Cost Per Mile: The projected operating cost per mile over the lifetime of the motor vehicle. Operating cost per mile calculated by dividing the lifetime operating cost by the actual or projected mileage.
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