Many districts have bus fleets that are over 10 years old. Why is this a growing problem?
Many school districts are having overall budgeting challenges and it’s difficult to come up with a large amount of capital for fleet replacements, which can range from $85,000 to $150,000 for a single bus. As a result, replacements get deferred for years, especially by districts that have great mechanics keeping these older buses running.
The 2008-09 recession compounded this, and districts are faced with very deep replacement backlogs that could cost millions of dollars to address.
What are ways districts can refresh fleets and stay within a budget?
Alternative financing can offer a district a way to spread the cost of the units over time, instead of having to spend millions of dollars of capital expenditures upfront. An ideal way to do this is through a municipal lease. Leasing sometimes comes with bad connotations. People think about abnormal wear and tear and over-mileage penalties, and they don’t feel like it’s a good idea to finance vehicles, but it really is, particularly when it comes to a municipal lease.
District leaders just need to understand how to leverage that. Rather than paying out of pocket, you can amortize those costs for up to 10 years, which is a typical life cycle of a larger bus. This gives the district the ability to match bus expenses with bus uses. New vehicles are more cost-effective, more reliable, safer and more environmentally friendly than older buses. Just as important, future planning and budgeting are easier, because you know exactly what your costs are going to be in the future.
What immediate steps can business offices take to evaluate their fleet and put a refreshed plan in place?
Be open to doing a holistic fleet review. Review everything from acquisition to funding, maintenance, insurance, fuel and disposal. Take a good look at how they are managing their entire fleet, and then start to identify ways to cut costs out of those specific areas. Once we show clients they can use a municipal lease to modernize and make their fleet more cost-effective, we create a 10-year fleet replacement plan to help clients understand and plan their fleet costs for future budgetary periods.
We also look for other ways to subsidize some of those lease payments, by looking at possibilities of insurance subrogation, for example, in which you can make a claim with your insurance company and get loss of use or diminished value reimbursement. Certain things are widely used in commercial fleet management that we can employ in districts to help them refresh their fleets, and do it cost-effectively.
For more information, visit DAmag.me/transpargroup
