COMMUNITY TRANSPORT

Vehicle Replacement and Kilometre Operating Costs Tool

Users Guide

Approved by the A/Director - Local & Community Transport [DATE]

Vehicle Replacement and Kilometre Operating Costs Tool Users Guide 1

Table of Contents
PURPOSE ............................................................................................................................................... 3

AIMS ....................................................................................................................................................... 3

DEFINITIONS ........................................................................................................................................ 3
GIVEN PERIOD ...................................................................................................................................... 3
CAPITAL COSTS .................................................................................................................................... 3
AMORTISATION .................................................................................................................................... 3
CONSTANT DOLLARS ............................................................................................................................ 3
OPERATING COST ................................................................................................................................. 3
FIXED COSTS ........................................................................................................................................ 4
VARIABLE COSTS ................................................................................................................................. 4
USER GUIDE EXPLANITORY NOTES ............................................................................................ 4
ENTERING DATA YELLOW CELLS ......................................................................................................... 4
WHITE CELLS AND GRAPHS.................................................................................................................. 4
ERROR MESSAGES VEHICLE KILOMETRE COST CALCULATOR ............................................................. 4
VEHICLE REPLACEMENT COST CALCULATOR ...................................................................................... 4
ENTERING DATA VEHICLE - REPLACEMENT COST CALCULATOR ......................................................... 5
VEHICLE KILOMETRE COST CALCULATOR ........................................................................................... 6
EXPENDITURE CATEGORIES .................................................................................................................. 6
ENTERING DATA VEHICLE KILOMETRE COST CALCULATOR ................................................................ 6
FLEET TOTALS ...................................................................................................................................... 7
FLEET TOTAL COST CATEGORY GRAPH ............................................................................................... 8
VEHICLE REPLACEMENT COST CALCULATOR EXAMPLE .................................................. 8
EXAMPLE ASSUMPTIONS ...................................................................................................................... 8
RESULTS ............................................................................................................................................... 8
KILOMETRE COST CALCULATOR EXAMPLE ........................................................................... 9
EXAMPLE ASSUMPTIONS ...................................................................................................................... 9
RESULTS ............................................................................................................................................... 9

Vehicle Replacement and Kilometre Operating Costs Tool Users Guide 2

PURPOSE
The Vehicle Replacement and Operating Costs Tool (VROC) has been prepared by the Ministry
of Transport for the purpose of assisting Community Transport Operators to determine the per
kilometre cost of operating their vehicles.

The VROC is not intended to replace established methods for determining costs. The Ministry of
Transport recommends that professional advice be sought from an accountant or similar financial
specialists to support any assumptions you arrive at by using the VROC.

AIMS
The aim of the VROC is to aid in planning for vehicle replacement and to ensure consistency and
accuracy in the way that the costs of using vehicles are calculated.

The treatment of capital assets such as vehicles need to be evaluated on an ongoing basis to
ensure that timely and accurate information is available on the actual costs of operating vehicles.

For the VROC to be an effective planning tool it should be reviewed regularly. Actual costs and
figures used in the calculations will vary according to economic factors and changing markets.

DEFINITIONS

Given Period
For the purposes of this guide the definition of a given period varies according to context in which
the phrase is used. For example the given period may be used to express the entire serviceable
life of the vehicle or it may be used to describe monthly or annual operating costs.

Capital Costs
Capital Costs are the appropriate costs of using and replacing a vehicle to be charged against the
operations of the organisation in a given period.

Capital Cost Recovery informs the operator what the cash value of using and replacing their
vehicle is in installments over a given period.

Amortisation
Amortisation is an accounting term used to describe the writing down of the book value of an
asset over time, through the payment of regular instalments.

In other words the gradual deduction of capital expenses over a specific period of time. Similar to
depreciation, it is a method of deducting in periodic instalments the cost of using long-term assets
such as vehicles.

Constant Dollars
To ensure capital is not being eroded over the life of an asset the capital costs need to be
converted to constant dollars. This is done by calculating the compound rate of inflation and
adjusting the costs to maintain relative values in each future year of the vehicles serviceable life.

Operating Cost
The operating cost is the total cost of operating the vehicle in a given period.

Operating costs do not include the cost of staffing or administering the vehicle. These costs are
not primarily associated with the cost of the vehicle and need to be considered separately.

Vehicle Replacement and Kilometre Operating Costs Tool Users Guide 3

Fixed Costs
Fixed Costs are costs that do not vary according to the level of service the vehicle delivers. For
example the cost of registration and third party insurance remain constant regardless of the
number of kilometres a vehicle does and are fixed for the given period.

Variable Costs
Variable costs are costs such as fuel, maintenance and repairs which are dependant on the
usage of the vehicle. The more the vehicle is used the higher variable costs will be.

USER GUIDE EXPLANITORY NOTES

For examples used throughout the VROC refer to the supplied spreadsheet -Vehicle operating
Costs EXAMPLE.xls

Entering Data Yellow cells

You will need to enter data in the yellow cells. The default direction when you hit the enter key will
be to the next cell that requires information.

The VROC worksheets have been protected to ensure you only enter data in the yellow cells.
Removing the protection is not recommended as formulas contained may be altered and there by
returning unreliable results.

White Cells and Graphs

All white cells and graphs will be calculated and updated automatically.

Error Messages Vehicle Kilometre Cost Calculator

All efforts have been taken to ensure incorrect or incomplete data can not be entered. There are
error messages built into the work sheets.

For example if you enter expenditure data before the KM This Month cell is calculated the Total
cells will display “Km Required” and the Average Cost per Km in the Cost to Date Table will
display “Data Error”. As the calculations are based on the vehicles kilometers you should enter
data in the Actual Km Traveled first.

For additional explanatory notes and/or prompts refer to the examples provided below.

Note: The values expressed in the calculated cells are dependant on the accuracy of the data
that has been entered.

Vehicle Replacement Cost Calculator

The Vehicle Replacement Cost calculator is designed to aid you in calculating the approximate
capital cost of vehicles you intend keep longer than 1 year.

It automatically calculates the amounts that should theoretically be set aside to ensure adequate
funds are available to replace the vehicle at the end of its operational life.

Note: The Vehicle replacement cost calculator is not intended to calculate the cost of lease
vehicles or vehicles that will be replaced more frequently than every 12 months. If this is the case
you will need to calculate the costs manually and enter the data in the Cap Recovery cells of the
Kilometre Cost Calculator.

The following table should be used as a guide when filling out the Vehicle Kilometre Cost
Calculators.

Vehicle Replacement and Kilometre Operating Costs Tool Users Guide 4

Entering Data Vehicle - Replacement Cost Calculator

Cell Data required Notes

C3 Interest Rate For example you receive interest on funds
Enter the actual interest rate you normally receive on your deposit account. deposited in a back account.
C5 Service Life Use whole numbers between 1 and 15.
Enter the number of years you intend to keep the vehicle.
C7 Inflation Rate (CPI) The current rate of inflation can be obtained at
Enter the current or average inflation rate over the past 12 months. Reserve Bank of Australia website. www.rba.gov.au
C9 Purchase Cost This figure should include the cost of vehicle
Enter the total capital cost of purchasing the vehicle. conversions and any taxes or levies that apply to
the purchase. It should not include items such as
registration and insurance which are operating
costs.
C 11 Sale Price Due to a number of economic factors this figure may
Estimate the amount you expect to receive for the vehicle when trading it in or vary considerably. As information becomes
selling it at the end of it useful life. available the VROC should be reviewed. There are
several websites that provide vehicle valuations
such as www.nrma.com.au
C 13 Capital Loss This dollar amount has not been adjusted to take
This is the difference between the purchase and sale price of the vehicle. into account inflation.
C 16-30 Annual Cost The amounts are adjusted to constant dollars for
These cells represent the annual amounts that should be set aside to ensure each subsequent year of the vehicles operation
there are adequate fund set aside for replacement of the vehicle.
D 16-30 Per Month Cost The amounts are adjusted to constant dollars and
These cells calculate the annual cost divided by 12 representing the monthly increase as the dollar is devalued by the compound
amount that should to be set aside in each of the vehicles operational years inflation rate.
C 31 Total amount set aside The amounts are also adjusted to constant dollars
This is the cumulative amount of funds set aside for vehicle replacement
G 25 Amortisation Factor This figure is automatically calculated according to
This factor is used to calculate installments and adjust the amounts to the data entered in the yellow cells
constant dollars according to the capital recovery formula
G 30 Capital Recovered Taking into account standard vehicle replacement
This is the sum of the funds set aside and the sale price of the vehicle. principles this amount should be sufficient to replace
the vehicle at the end of its life.

Vehicle Replacement and Kilometre Operating Costs Tool Users Guide 5

Vehicle Kilometre Cost Calculator
Five work sheets have been provided for calculating the per kilometre cost of operating your vehicles. For example you can use the sheet for one
vehicle over five years or five vehicles over one year. For additional vehicles and/or years complete separate spreadsheets.

To demonstrate variances in per kilometre operating costs the data should be entered on a monthly basis over the twelve month period. There will
be considerable variance according to the actual number of kilometres traveled in any given period. Vehicle and fleet cost averages are given in
the cost to date analysis and fleet totals spreadsheet.

Expenditure Categories
Vehicle related expenditures have been categorized into 6 basic types. They are:
1. Fuel
2. Registration and Compulsory Third Party Insurance
3. Insurance (other than CTP)
4. Maintenance
5. Capital Recovery
6. Other

The table below should be used as a guide when filling out the Vehicle Kilometre Cost Calculators.

Entering Data Vehicle Kilometre Cost Calculator

Cell Data Required Notes

B1 Start Kilometres This is the staring point used as for calculating the kilometres
Enter the odometer reading when the vehicle is delivered or transfer the final traveled each month.
odometer reading from the previous year into this cell
B to M Actual Kilometres This cell will be used to calculate the amount of kilometres
Row 3 Enter the odometer reading at the end of each calendar month. traveled each month
B to M Kilometres this month All Year To Date totals are calculated in Column N.
Row 4 Calculates the kilometres traveled per month

B to M Fuel Include actual figures only. Do not use estimates for fuel
Row 6 Enter the amount spent on fuel each month. Do not include any other costs i.e. used if vehicle is half full.
oil an lubricants in these amounts
B to M Registration & CTP To give a more consistent per kilometre running cost this
Row 7 Enter the average monthly cost of for Registration and Compulsory Third Party amount is better entered as a monthly average.
Insurance for the vehicle.

Vehicle Replacement and Kilometre Operating Costs Tool Users Guide 6

B to M Insurance To give a more consistent per kilometre running cost this
Row 8 Enter the average monthly cost of insurance for the total amount you spend on amount is better entered as a monthly average when it
comprehensive cover insurance for the vehicle. becomes due.

B to M Maintenance This should include all labour and material costs associated
Row 9 Enter the total amount spent on vehicle maintenance each month. with the maintenance of the vehicle. i.e. any labor for
servicing, oils, tires repairs etc.
B to M Capital Cost Recovery You can use the Vehicle Replacement Calculator to guide
Row 10 Enter the monthly vehicle capital recovery costs. Alternately if the vehicle is you on Capital Related Costs included in this VROC.
leased enter the total monthly lease fee.
B to M Other Costs Items that could be included are the cost of, roadside
Row 11 Enter any other operating amounts spent on the vehicle each month that have assistance, cleaning the vehicle and/or any accessories that
not previously been recorded. may be purchased from time to time, i.e. seat covers.

B to M Total Costs The sum of all expenditure categories for each month.
Row 13 This is the operating cost of the vehicle each month.
B to M Cost per Kilometre This figure will vary considerably from month to month
Row 14 This is the per kilometre cost of operating the vehicle each month. The total depending on the actual kilometres traveled.
cost divided by the kilometres traveled.
A to D Cost to date table All figures in this table are all averaged. Therefore giving a
Rows This table displays the total amounts spent to date, calculates the percentage more consistent cost per category for operating the vehicle
18 to 25 of costs attributable to and the running cost in cents per km for each of the cost over the given period.
categories.
B 27 Average cost per kilometre This figure will vary according to the ongoing expenditure on
This is the average cost of operating the vehicle in the given period defined by the vehicle and the number of kilometres traveled.
data entered.
G 16 Pie Chart The chart will be automatically updated as data is entered
The pie chart provides a categorized graphic representation of the vehicle into the VROC.
operating costs by percentages.

Fleet Totals
This spreadsheet shows a summary of amounts spent to date for a fleet of up to four vehicles. It calculates the percentage of costs attributable to
and the running cost in cents per km for each of the cost categories.

Vehicle Replacement and Kilometre Operating Costs Tool Users Guide 7

Fleet Total Cost Category Graph
This spreadsheet provides a visual representation (bar chart) of the total operating cost in dollars of a fleet of up four vehicles. The data can be
sorted to display costs in ascending order.

VEHICLE REPLACEMENT COST CALCULATOR EXAMPLE

To familiarize you with the principles of the Vehicle Replacement Cost calculator we have inserted the example data below to look at a
hypothetical situation.

Example Assumptions

Item Example Data

Interest rate 4%
Operational life of vehicle 2 years
Inflation rate 2.8%
Vehicle purchase price $35,000
Vehicle trade in or sale price $20,000

Results

The Capital Cost recovery spreadsheet indicates that a service should plan to set aside a total of $16,128.56 to ensure there are adequate vehicle
replacement funds available at the end of the operational life of the vehicle.

Note: The capital cost that should to be charged against the operations of the vehicle are adjusted each year of it operational life according to the
capital recovery formula.

Capital costs are:

• in the first year of operations $7953 or $663 per month
• in the second year of operations $8176 or $681 per month

The total amount set aside (adjusted to take inflation and the interest rate into account) plus the trade in value of the vehicle means the service
should have a total of $36,129 to spend on a replacement vehicle.

Vehicle Replacement and Kilometre Operating Costs Tool Users Guide 8

KILOMETRE COST CALCULATOR EXAMPLE

Example Assumptions
To familiarize you with the principles Kilometre Cost Calculator we have inserted the example data (below) to demonstrate at a hypothetical
situation.

Example Item Annual Monthly

Annual Kilometres 25,000km Data that has been entered varies from month to month to highlight
effect of km on monthly running costs.
Fuel = 2875 litres Data that has been entered varies from month to month according to
Calculated AT 11.5 L/100km = $3794.90 kilometres traveled
and @ $1.32 per Lt

Rego & CTP $768.96 $64.08

Insurance $558.00 $46.50

Maintenance $800.00 Data that has been entered varies from month to month, $66.66
average
Capital Recovery $7,952.94 $662.75
Other $186.00 Data that has been entered varies from month to month, average
$15.50

Results
The cost to date table demonstrates that the total cost of operating the vehicle for the 12 months was $14,060.86.
The average per kilometre operating cost of the vehicle is $0.56. The monthly figure varies from $0.38 cents in January to $4.05 per kilometre in
April when the car travelled very few kilometres.

The pie chart demonstrates that 57% (averaged) of the cost in operating the vehicle is associated with the replacement of the vehicle.

Vehicle Replacement and Kilometre Operating Costs Tool Users Guide 9