Q We were very interested in the article appearing in CM
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July 13, concerning the mounting costs of transport and would congratulate you for a worthwhile contribution to economic thinking.
We would very much value your advice concerning the period during which vehicles should be written off. Our fleet consists of 2500gal petrol tankers, which cost approximately £6000 new, and we have been much exercised within the company to know what is the economic period in which to write them off.
What are your views on this matter?
A It is difficult to advise you on an efficient economic life for your vehicles without going more deeply into the matter and obtaining further details. Certainly, as in your case, special purpose vehicles would tend to have a rather longer life than those engaged on general haulage because they have been built specially to do the job they undertake. A sensible replacement life is, however, very much an individual matter for the company concerned.
Factors which influence replacement are the quality of the vehicles, the care which is devoted to their maintenance and the use to which they are put (a vehicle running on rough terrain as in tipping work would probably not last as long as a vehicle working mainly on the Motorway, for instance).
A rough and ready guide might be obtained by comparing the relationship between the depreciation cost budgeted for each year with the actual cost of maintenance, In general, if the maintenance cost is considerably in excess of the planned depreciation, it could be said that the vehicle is costing more than it is worth.
You might be interested to learn that a guide to vehicle replacement is to be published in the autumn which will contain a formula for establishing a least cost life for a number of vehicles. An announcement will appear in CM when it is available.