ROI Calculator for Telematics and Fleet Management Systems (UPDATED JUNE 2020)
BY MATTHEW PEARSON - TECH WRITER, TELEMATICS SYSTEMS ADVOCATE AND ROI EXPERT
LAST UPDATED 17 JUNE 2020
Telematics and Fleet Management System ROI
The top priorities of Australian fleet managers include cost control, risk management, and revenue growth.
Telematics systems and fleet management systems can help with all these, but it’s difficult to preview the financial impact of better risk management, or estimate revenue growth.
Hence, this calculator focuses on the ROI that results from better cost control, especially the costs associated with fuel and labour, and the tax rebates available from the Australian Fuel Tax Credit system.
Let’s consider these one by one –
Fuel Savings ROI Calculator
Telematics and fleet management systems can help reduce fuel costs in the following ways –
1. Reduced Fuel Wastage (Idling)
- A stationary truck idling for more than 10 seconds uses more fuel then turning it off, then restarting when needed. (As a general rule, and except in traffic, drivers should consider killing the engine if they will be stationary for over a minute.)
- Trucks use about 6.7% of their fuel when idling (according to US Dept of Transportation)
- Telematics systems can record vehicles’ idling time. Idling reports can be generated, and driver league tables can be created to foster a sense of competition. This leads to a reduction in idling fuel wastage.
2. Route Optimisation
Route optimisation is useful for commercial vehicles with a large number of stops each day. The total distance driven can often be reduced, thus reducing fuel consumed. More information about Route Optimisation can be found here.
3. Intelligent Access Program
The Australian Intelligent Access Program enables commercial vehicles to access otherwise prohibited roads in exchange for allowing government monitoring of the truck, typically location and total mass information. Fleet owners are thus able to reduce distance driven and fuel required. More information about Intelligent Access Program can be found here.
Geofencing enables vehicle owners to be notified when vehicles enter or leave a specific area. It can be used to control unauthorised fuel consumption for private use. More information about Geofencing can be found here.
How much Fuel Saving can be expected?
Here’s some information that may help you estimate your potential fuel savings –
- The 2019 Australian Telematics Benchmark Report from Teletrac Navman indicates the average fuel reduction from using a vehicle tracking system is 12.7%
- The US Department of Energy states an idling truck consumes around 3 litres of fuel per hour. A long haul truck typically idles for around 1,800 hours per year, consuming around 5,700 litres of diesel, with value A$8,550.
- Frost and Sullivan say implementation of a telematics system can reduce fuel expense by 20-25%, idling time by 20-30%, and overall mileage by 10%
- The British company Berendsen made a 12.7% improvement in fuel efficiency after implementing a telematics system
(If you know of any other examples, please drop us a mail via our contact form and we will be pleased to add them)
Our suggestion is to expect a conservative 10% reduction in total distance driven, and use that in the ROI calculator.
The formulae are as follows –
- (Expected Reduction %) * (Number of Vehicles) * (Average Distance per Vehicle per Month) = Distance Saved
- (Distance Saved) / (Typical Fuel Efficiency) = Fuel Saving
- (Fuel Saving) * (Fuel Price) = Value of Fuel Saving
The handy-dandy calculator below can do these calculations for you.
Use the slider to set the % Expected Reduction first.
If you have more than one type of vehicle, you can separately for each and add them up for total fuel savings.
Labour Savings ROI Calculator
Telematics and fleet management systems can help reduce labour costs in the following ways –
1. Electronic Work Diary
Electronic Work Diary is used to record drivers’ work and rest times and is an alternative to a handwritten version. It helps ensure legal compliance to mandatory rest periods, and serves as an accurate record of the time worked. This accurate record can be cross checked with the drivers’ accounts of their hours worked, and adjustments made as necessary.
2. Route Optimisation
Route optimisation software is primarily applicable to commercial vehicles with a large number of stops each day. By optimising the route, the total distance can be reduced, thus reducing hours driven.
3. Intelligent Access Program
Australia’s Intelligent Access Program enables commercial vehicles to access otherwise prohibited roads in exchange for allowing government monitoring of the truck, typically location and total mass information. By having the options for better routes, fleet owners are able to reduce distance driven and driving hours required.
How much Labour Saving can be expected?
Here’s some information that may help you estimate your potential labour savings –
- Frost and Sullivan say implementation of a telematics system can reduce overtime by 10-15% and that you can expect to save 20-30 minutes per driver per day (Source: “Benefits After Effective Deployment of Fleet Management System” Frost & Sullivan 2015)
- The American company Triple A Fire Protection ended the claiming of unearned overtime when they implemented a telematics system, resulting in some cases by a reduction in hours claimed by over 15%.
(If you have any other sample information, please drop us a mail via our contact form and we will be pleased to add them)
Our suggestion is to expect a conservative 5% reduction in total distance driven, and use that in the ROI calculator.
The formulae are as follows –
- (Expected Labour Saving %) * (Number of Drivers) * (Monthly Hours Per Driver) = Total Hours Saved Per Month
- (Total Hours Saved Per Month) * (Fully Loaded Cost/Driver/Hour) = Value of Labour Savings
The calculator below can do these calculations for you.
Use the slider to set the % Expected Labour Saving first.
Increase in Fuel Tax Credit Claims
Fuel tax credits can be claimed when fuel is used for purposes such as –
- Light vehicles (less than 4.5 tonnes) used off public roads
- Trucks and other heavy vehicles
- Equipment and other machinery
Many companies make conservative estimates when calculating their fuel tax credit claims. This helps avoid challenges from the Australian Tax Office (ATO). Telematics and fleet management systems track both vehicle use and fuel consumption. They help you make accurate calculations that can withstand audits.
Fuel tax credits can be claimed retrospectively for up to four years. This one-time claim may help offset the initial cost of a telematics system.
We suggest a conservative 5% increase in fuel tax credit claims in your ROI calculations, but you can of course adjust this how you like.
Total Savings, Systems Costs and ROI Calculator
To calculate the ROI, first we need the total monthly savings. The formula is –
- (Monthly Fuel Savings) + (Monthly Labour Savings) * (Monthly FTC Savings) = Total Monthly Saving (enter this in the calculator below)
You can get the Initial Cost of Telematics System and the Ongoing Cost of Telematics System per Month directly from the vendor (enter them into the calculator)
Now the calculator can use the following formulae to determine your ROI.
- (Initial Cost of Telematics System) / (Total Monthly Saving) – (Ongoing Cost of Telematics System per Month) = Months to Break Even
- 100 * (Total Monthly Saving) * 12 / ((Initial Cost of Telematics System) + 12 *(Ongoing Cost of Telematics System per Month)) = ROI After One Year in Percent
- 100 * (Total Monthly Saving) * 36 / ((Initial Cost of Telematics System) + 36 *(Ongoing Cost of Telematics System per Month)) = ROI After Three Years in Percent
- 100 * (Total Monthly Saving) * 60 / ((Initial Cost of Telematics System) + 60 *(Ongoing Cost of Telematics System per Month)) = ROI After Five Years in Percent
We hope this ROI calculator has been helpful for you. If you have any suggestions for improvement, please email me.
ATO fuel tax credits are the excise tax that was paid on taxable fuel, then returned to the taxpayer in the form of tax credits when the fuel was used for specific business purposes.
A GPS tracker for cars and trucks is a useful and inexpensive tool that can help protect your vehicle. But buying a GPS tracker for cars and trucks can be a daunting process.
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