AN ANALYSIS OF COSTS FOR 10 YEARS OF FLEET OPERATION ¹ 240027

Operating costs and their relation to the age of the vehicle have been a subject of controversy for some time. One faction maintains that after a certain indefinite period it is economy to salvage or junk the equipment and replace the vehicles with later uptodate designs. The opposing faction believes that the costs depending on maintenance and operating efficiency can be kept fairly constant. Comparing a motor truck with a locomotive they cite the opinion of railroad officials that when proper running repairs are made locomotives can be maintained continuously in the same service and retain their original earning capacity for many years. When new locomotives are built it is usually for the purpose of replacing types that have become obsolete and the old ones are then relegated to some other branch of the service.

Those who maintain that costs rise with age assert that the motor vehicle is not designed never to wear out; that its maintenance facilities are not comparable with those of a railroad; that each successive overhaul increases in cost because parts either increase in cost or cannot be bought at all and have to be made to order. The question, in the opinion of the author, resolves itself into the case of the vehicle itself: whether it has reached the point where basic improvements are no longer probable and whether first costs will become lower because of greater production.

The most notable development within the last 10 years has been in the price, which is now about the same as it was 10 years ago, notwithstanding the increase in the cost of parts; the weight is about the same and changes in construction have been slight; performance and fuel consumption are also about the same. Maintenance, on the other hand, aided by better inspection, better adjustment and better overhauling, has improved greatly. Based on an accounting system adapted from railroad practice, the cost-keeping methods of the motorbus companies give them a great advantage.

The three factors that may lead to the replacement or the renewal of a complete vehicle are (a) physical depreciation, (b) obsolescence and (c) inadequacy, each of which is discussed. Adequacy is, important in order that the type of equipment demanded by the public may be provided. In general, methods of valuation adopted by the regulatory bodies with regard to railroads are applied to motor common-carriers. As an illustration, the course pursued for determining the proper rate of fare-increase to be allowed a motorbus company in Albany is cited.

Graphical charts are given showing the results of double-deck motorbus operation by the Fifth Avenue Coach Co.; but these are slightly modified by including taxes. Other charts show the variation of operating costs of 2 and 5-ton gasoline trucks, heavy-duty trucks and 2-ton electric trucks. The yearly variations since 1914 in the costs of gasoline and tires as compared with the wholesale commodity-price index, and those of finished steel as compared with the ratio of the average list price of 5-ton truck parts, are also illustrated by graphs.