Calculating the true present value of the vehicles making up your company’s fleet is not as simple as taking the book value and subtracting an amount for depreciation. And yet this how most companies reflect the value of their fleet on their balance sheets. It’s a guestimate at best, which could prove to have significant financial and accounting implications when it comes to selling, replacing or insuring.

Current international standards for asset accounting stipulate that companies need to reflect the actual, or “fair” market value of the vehicles in their fleet when reporting their value on the balance sheet. Remember that different makes and models of vehicles depreciate at different rates, so you can’t just apply a one-size-fits-all calculation across your entire fleet.

The Importance of a Regular Fleet Valuation

Using a professional valuer to gain a comprehensive valuation of your fleet is the only accurate way to obtain a true sense of the value of your vehicles. The valuer will take numerous factors into account when calculating the value, including:

  • The ages of the vehicles
  • The mileage, or, in the case of warehouse machinery (forklift trucks, for example) the number of hours they’ve been used.
  • The overall condition of the vehicles
  • How often the vehicles have been serviced

All this information is crucial when comes to making decisions on whether or not to replace vehicles, and how best to dispose of the older ones in order to ensure the best price is realised.

Regularly updating your fleet’s market value also helps to keep your company’s books up to date, and gives you an accurate idea of how much value you have tied up in your vehicles that could be used as collateral for a loan for your business.

What Are The Financial Implications Of Replacing Fleet Vehicles?

A professional valuer can also help you decide whether it makes financial sense to replace some, none or all of the vehicles in your fleet. He can advise you based on the following considerations:

  • How does the age of the vehicle impact on its residual or resale value?
  • What is the impact of inflation on the replacement price?
  • What impact has technology had on the fuel efficiency of newer models compared to the current consumption of the older ones?
  • What are the current maintenance costs, and how will they increase with inflation?
  • What is the potential for there being major repairs as the vehicle reaches a higher and higher mileage?
  • Will there be significant cost implications resulting from any downtime while vehicles are in for major repairs?

There are also the “softer” issues to consider as well, such as:

  • Will the age and condition of the company’s fleet have a negative effect on the public image and perception of the business?
  • Do employees see it as an aspirational benefit to receive a new company vehicle more often?

At Property Partnership, we understand that vehicle fleets are a valuable component of the total asset value of your business. There is an increasing need for companies to ensure that these assets are correctly purchased and priced in their asset register; both from a market value and insurance value point of view. Chat to us today to see how you can obtain the maximum value from your fleet.