ADMINISTRATIVE
UNIT REVIEW
RECOMMENDATION #8
Title: Vehicle
Replacement Cycles - June 13, 2005
Description: Look at current trend for sale vehicles. Does it make sense to
extend depreciation cycles?
Team
Leader: David Franklin
Team: Jenny Gunter, Brad Rutherford, Elma Olguin
and Jay Smith
Identified
Issues:
This
team looked at a 5-year history of sale vehicles and their depreciable life and
the actual life before they were sold.
Fleet
Proposal:
We
recommend the following depreciation cycles:
| Type | Current Depreciation | Proposed Depreciation |
| Sedan | 5 years | 7 years |
| 8/Pass Van | 8 years | 10 years |
| Cargo Van | 8 years | 10 years |
| Mini Pass Van | 8 years | 10 years |
| Mini Van | 8 years | 10 years |
| ½ ton PU | 8 years | 10 years |
| ¾ ton PU | 8 years | 10 years |
| 1 & 2 ton | 10 years | 12 years |
| Class 6 Truck | 10 years | 13 years |
| Bus | 12 years | 13 years |
| Refuse Truck | 10 years | 12 years |
| Police Vehicle | 4 years | no change* |
*(Police Department decides how long they want to
keep vehicles and
depreciation
is determined when purchased.)
Fleet Services will work with
departments who purchase specialized vehicles to determine if they want to
depreciate the vehicles. A joint
decision will be made on the depreciable life of these vehicles using the above
proposed depreciation cycles as guidelines.
It
is recommended that these depreciation cycles be extended in the Fall of 2005 along with the rate changes.
Justification:
Based
on the vehicle life history, extending the depreciation an average of two years
will extend the number of periods used to collect depreciation.
Impact:
Rates
on specialized vehicles may be lower if Fleets' customers choose to extend the
number of periods used to collect depreciation thus lowering the monthly
cost. Fleet will contact these customers
to determine their desired depreciable periods.
Rates
on socialized vehicles will be lower for 8-9 years. The depreciation rate will slowly increase
from the base lower level over this time period until it is at the current
level. Because depreciation on
socialized vehicles currently includes vehicles that are depreciated out, the
depreciation has been spread over vehicles with no remaining depreciation. This schedule has kept depreciation at a
lower rate for socialized vehicles. By
extending depreciation periods, the depreciation rate will be temporarily lower
(8-9 years) because vehicles in mid-depreciation cycles will have their
depreciation balance spread over the extra years. The extra years are noted in the newly
recommended proposed depreciation cycles on the first page of this report.
Attached
to this report is a spreadsheet explaining how the depreciation cost will be
initially lowered, then increases over a period of 8-9
years until the depreciable cost of socialized vehicles returns to the current
level.