Annual Rate Adjustment FAQ
What are the different rate components for a permanently assigned vehicle?
The rate structure for permanently assigned vehicles is listed below. Rate adjustments are effective 1 July of each year and are specific to the vehicle cost component only.
| Permanently Assigned Rate Structure |
|---|
| Base Fee (includes) |
| Administrative Fee |
| Interest Expense |
| Vehicle Cost (Depreciation) |
| Per Mile (includes) |
| Maintenance |
| Fuel |
Why are rates being adjusted?
The acquisition cost of vehicles may fluctuate from time to time due to changes in cost of living. As a result, rates must be adjusted to cover the actual cost of vehicles.
When will the new rates be effective?
- Rates are adjusted annually each July to ensure the vehicle component of the rate aligns with the average purchase price of vehicles.
- Rates could increase or decrease depending on the cost of vehicles.
How is the vehicle cost component of the rate calculated?
The rate is set based on the average purchase price of each vehicle class over the last seven years. The average change over the seven-year period is then used as an index to estimate the purchase price of vehicles for the following year.
| Year | Avg. price | 80% of cost to be recovered by vehicle rate |
Annual avg. rate |
|---|---|---|---|
| 7 | $ 20,000 | $ 16,000 | $ 2,286 |
| 6 | $ 22,000 | $ 17,600 | $ 2,514 |
| 5 | $ 24,000 | $ 19,200 | $ 2,743 |
| 4 | $ 26,000 | $ 20,800 | $ 2,971 |
| 3 | $ 27,000 | $ 21,600 | $ 3,086 |
| 2 | $ 28,000 | $ 22,400 | $ 3,200 |
| 1 | $ 29,000 | $ 23,200 | $ 3,314 |
|
Current |
$ 30,864 | $ 24,695 | $ 3,528 |
| Rate for current year (8 year average) | $2,955 | ||
How is the purchase price of the vehicle calculated?
Vehicle purchase price less 20% divided by seven years.
- The 20% represents the average salvage value of vehicles when they are sold at surplus.
- Seven years represents the typical number of years in which the vehicle is depreciated over.
What will the impact be to my agency?
View the estimated impact by agency. The forecasted financial impact is only an estimate based on your agency’s vehicle assignments in June of each year.
Can I make changes to the number of permanently assigned vehicles my agency has?
- Yes, agencies can return vehicles that are no longer needed to DES at any time during the year.
What other changes can I make to control my fleet costs?
- Reduce mileage- the mileage component of the rate is based on usage
- Purchase vehicles that provide greater fuel efficiency
- Evaluate fleet vehicle types and make adjustments to increase efficiency
- Return vehicles that are underutilized and no longer needed
- Utilize DES Daily Rental vehicles where available
- Utilize pool vehicles when applicable
- Encourage shared use of vehicles under agency’s control