Price Modelling on Heavy-Duty Assistance Contracts

Assistance contracts of heavy-duty vehicles can be described as integrated maintenance and repair packages that allows companies to have a complete cost control through a fixed monthly fee. Almost all the regular maintenance or repairing costs are considered in these contracts, and their expected value is associated with a margin determined by the product manager, resulting in the final price of the contract. This paper presents a methodology that accounts for several factors arising from an analysis of existing data to estimate the prices of assistance contracts negotiated at NORS group. The developed methodology is based on probabilistic modelling of accumulated repair and maintenance costs. The probability density functions are chosen from a given set of known distributions or using kernel density estimators based on the minimization of the global error criteria. The total cost of the contract can be a function of the execution period (time or kilometres) and the quantiles of interest of the adjusted distributions. To define the final value of the contract the margin defined by the business manager can be added to the estimated cost. The proposed methodology has been implemented in the group allowing the business manager to simulate contract prices considering different risk levels.