Breaking Down Total Tire Cost - Tire Review Magazine

Breaking Down Total Tire Cost

Commercial fleets measure the success of their tire program primarily through the cost/mile metric. One might think that the cost/mile metric would be a simple calculation, but it is quite a complex process that requires a thorough understanding of all the pieces and parts.

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Replacing tires on the road poses different costs issues including the price of the tire, the cost of the road-side service, and the cost of downtime.

The process begins with the purchase of a new tire. The tire cost will be different if the tires are replacement tires or come as OE on new vehicles, and will vary further depending on steer, drive, trailer and dolly-wheel positions. You will also need to include federal excise tax in your calculations.

Retread tire costs are even more involved. If the fleet supplies its own casing, then there is one cost; other occasions you will need to purchase both the retreading and casing.

Replacing tires on the road pose a different set of costs. Not only does the price of the new replacement tire or retread need to be included in your calculation, but there is also the cost of a tire-related roadside service call. The key here is to distinguish between a roadside service call that is non-tire related versus one involving a tire.

Roadside service calls are a big expense for fleets, and the costs only go up when the calls occur after normal business hours. The cost is based on the total time of the call plus the replacement tire, and sometimes the wheel.

Tire repairs are another expense fleets consider. Sometimes repairs are made in-house; other times, tire dealers or retreaders make the repairs. If the repairs are made in-house, you need to factor in the cost of repair materials and labor.

Tires have a direct effect on vehicle fuel economy, and that is an important metric for many fleets. The cost of spec’ing fuel-efficient tires is higher than the standard, non-fuel efficient version. This goes for both new tires and retreads.

Fleets want to know if spec’ing fuel-efficient tires is really making an impact to their bottom lines. The total number of gallons of fuel purchased per month and the total dollar amount should be included in the overall total tire cost analysis. Vehicle fuel efficiency improvement of even 2% typically outweighs any loss in removal miles associated with using fuel-efficient tires.

Many fuel-efficient drive tire designs have 3/32-inch or 4/32-inch less tread depth compared to a non-fuel efficient version. This results in lowered removal miles, but the fuel-efficient improvement may win out when it comes to the fleet’s bottom line.

An additional piece of the tire cost analysis equation is warranty and adjustments. These reimbursement costs occur for both new tires and retreads and should be included in the credits calculation.

Another possible credit is when a fleet sells used tires, casings and even scrap tires. Tire dealers occasionally offer year-end or quarterly rebates to fleets based on total tires purchased or a dollar amount. Again, those credits must also be part of the tire cost equation.

Cost Per Mile

Once all the data is collected and entered into some database, the real fun begins.

How does one analyze and make the calculations?

A cost/mile calculation involves knowing how many miles the tractor and trailer have generated over the specific time period. This is all easy to say, but it is more complicated when tried. Recording actual odometer and hubometer readings take time and effort. Computing incorrect information can seriously change outcomes.

Many fleets have given up trying to record actual tractor and trailer mileages; they simply use an average monthly mileage based on historical data. That number is not as accurate, but it is often in the same ballpark of what you are looking for. Regardless of how precise the measure, it also helps to identify trends within the data analysis.

The tire cost/mile calculation is going to be different for the various wheel positions, so you’ll need to make the analysis for steer, drive, trailer, and dolly tires separately. Some vehicles may have eight drive tires, others have four tires if they use super wide tires. For every vehicle, the total number of drive and trailer tires may be different. Some tractors may run single-axle vehicles and other tandem-axle configurations, which will create differences in the number of drive and trailer tires.

Knowing Your Costs

Tire performance changes based on the time of year. During the summer, tires tend to have faster wear rates and earlier removal miles due to the higher heat conditions. Vehicles running in line-haul applications will have different tire performance and higher removal miles versus vehicles that see more city and pickup/delivery driving. The routes and loads will also affect the tire performance. Of course, the vehicle make/model will have a significant effect on overall cost/mile.

For these reasons, most fleets break down their tire cost/mile analysis on a monthly basis. Fleets could have one cost/mile analysis for steer tires on Navistar tractors that are fully loaded running coast to coast. There will be a separate analysis for drive tires running on regional line-haul Volvo tractors. Super wide tires on the fuel-efficient Wabash trailers will have a completely separate total tire cost/mile.

This type of analysis clearly shows trends in what tires are delivering the lowest cost/mile in various service vocations by specific wheel positions. The CFO of every fleet is looking at the big picture and will lump all the data into one final number. He wants to know the total tire/fuel cost per mile for his fleet. Are the tires averaging 2 or 3 or 4 cents/mile?

Effective commercial tire dealers need to be fully versed on all the information that goes into the total tire/fuel cost-per-mile calculations. Partnering with your fleets to ensure that they are including all of the pertinent data accurately creates a win-win situation.

Once the data is entered into the system, it becomes very valuable tire management tool.

How else can you look at various scenarios to determine which tire is providing the best overall cost results on specific vehicles running in certain service vocations?

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