When calculating patrol vehicle costs, many private security companies focus on individual repairs and fuel. But there’s much more that goes into calculating the cost of a vehicle.
Things like the sale price of the car, insurance, and depreciation (to name a few), all matter just as much as repairs and fuel when calculating the life-cycle cost of a security patrol vehicle.
Not to mention, production matters a ton when calculating the cost of patrol vehicles. That’s why you should calculate the cost of your vehicles using a method called “life-cycle costing.”
What is Vehicle Life Cycle Costing?
To better understand vehicle life-cycle costing, you first need to understand that the cost of a mobile patrol vehicle is different from the price you pay for it. Vehicle costs can be broken down into two main categories: fixed and variable costs.
Fixed costs include depreciation (the price you bought it for minus the whatever you make reselling the vehicle), lease or finance costs (interest, fees, etc.), and insurance.
Variable costs include fuel, maintenance/repair, tires, oil, and miscellaneous (washing, tolls, parking, etc.).
Every security company should be capturing and tracking these vehicle costs on a monthly basis. Once you track the costs, use this free mobile patrol cost calculator to keep a record of them until you decommission or sell the vehicle.
Many security companies with small and mid-sized vehicle fleets focus on the price of tires and oil changes when thinking about how much a vehicle costs the business. But just adding up every transaction associated with a vehicle doesn’t tell a manager much about the vehicle’s true cost.
The key to calculating the true cost of a security vehicle is factoring in the productivity of the vehicle.
Security vehicle life-cycle costs that are expressed in total dollars is useless. Knowing that a vehicle cost your company $20,000 over its lifespan just tells you that you’re out the money. When you factor in the productivity of a security vehicle, it tells you whether or not that $20,000 cost was well-spent.
A good analogy is fuel efficiency. When you drive a car around, what do you care more about? How much money it takes to fill up the tank, or how much you can drive it before it’s time to fill up again?
There’s a reason people look at miles per gallon on vehicles. It’s a cost/use ratio that tells you how much production you get for the money you spend.
The same thing goes for total vehicle costs. Life-cycle costs must be expressed in a cost/use ratio in order for productivity to be determined. So what is that ratio?
An effective way to measure security vehicle life-cycle costs is in “cent-per-mile.” This gives an operator a clear picture of how efficiently a security patrol vehicle performed during its time in service. When a vehicle is taken out of service and sold, you can complete the total life-cycle cost.
Some vehicles are more productive than others. Purchase price, fuel efficiency, maintenance cost, and depreciation all change a lot between manufacturers and vehicle classes, which is why Thinkcurity put together this comprehensive buyer’s guide for security vehicles.
Calculating the Life-Cycle Cost of a Security Patrol Vehicle
Now that we have a better understanding of why life-cycle costing and productivity are important, let’s look at an example of how to calculate it. (If you want to use your own numbers, use our security vehicle productivity calculator below).
Example: a security patrol vehicle is sold after 60 months with 125,000 miles on the odometer. First, you need to calculate the total expenses of the vehicle using the categories from above (we’ll use a 2021 Ford Ranger XL for this example):
- Original Purchase Cost: $27,908
- Vehicle Depreciation: $17,542 ($18,000 – $7,500)
- Total Finance Expense: $2,707
- Total Fees and Taxes: $2,415
- Total Insurance Expense: $4,844
- Total Fuel Expense: $13,535
- Total Maintenance/Repair Expense (including tires, oil, etc.): $10,569
- Resale Value Proceeds: ($10,366)
Grand Total: $51,612
Now you can use the vehicle’s total cost to calculate the cost/use ratio of cent-per-mile to see how productive the vehicle is.
First get the total expense in cents: $51,612 X 100 = 5,161,200 cents
Then divide by mileage (125,000) = 41.29 cents-per-mile
Vehicle life-cycle costing is even more valuable when comparing security vehicles side-by-side. When you look at only one vehicle it is hard to take away any value from the process. Using the cost-per-mile equation will make comparisons legitimate because it takes into consideration the different mileage requirements different routes have.
For example, a different security vehicle with the same dollar cost as this one that’s only driven 100,000 miles would be far less productive at 51.61 cents-per-mile. That’s a difference of 10 cents.
10 cents might not seem like a lot, but over 100,000 miles that can save a security business $10,000, just on one car.
It’s important to keep in mind that to get an exact vehicle life-cycle cost, you have to wait until the vehicle is retired. But if you develop a use history of your patrol vehicles over time, you can use estimated depreciation in order to get an estimated cost per mile throughout the life of the vehicle. That’s why it’s important to keep detailed records of your patrol vehicles.
Security vehicle life-cycle costing isn’t complex. Here is a quick summary:
- Know all fixed and variable costs associated with the security vehicle and add them up (have security officers use Silvertrac to record the variable costs in the field.)
- Express the costs in a cost/use ratio – cents per mile
- Turn your mobile patrol into a profit machine
This type of analysis is the start to making real money on your mobile patrols. The data you get will reveal true vehicle productivity and allow you to measure whether or not your initiatives to increase efficiency in your security vehicles are working.
Want more help effectively managing your security vehicles? Check out this webinar on the fundamentals of private security fleet management.