The effective life of fleet assets is determined by a combination of age and utilisation and is described as the optimum replacement point.

The optimum replacement timing (point) for a vehicle or an item of plant is calculated to best estimate the optimum timing, in either kilometres or engine hours, and time, to achieve the lowest average annual cost during the life of the machine.

The optimum replacement point in the life of the plant item is when the decreasing line of depreciation intersects with the increasing cost of repairs and maintenance costs.

The objective is to replace a fleet asset at its optimum replacement point which is when the depreciation cost curve intersects the increasing cost curve as depicted in the chart below.

Actual depreciation figures show two distinct steep drops in resale value. The first significant drop is immediately post purchase. The second drop is prior to a major component overhaul, which is when second hand buyers are aware of a large impending maintenance bill.