When you’re searching for the right business vehicle program, there is no one size fits all. They all have benefits, they all have shortcomings, and all too often companies continue implementing one because they don’t realize the others might provide a better fit.
In many industries, from pharmaceuticals to construction, company car programs have been seen as the traditional choice. Certain businesses, like construction companies, require specialized vehicles their workers generally wouldn’t own for personal use. In other industries, there are benefits over other vehicle reimbursement options: the company gets to control its image by choosing the car its representatives drive and those representatives have access to the company car for some personal use. Win win, right? Well, not always. These are five reasons a fleet of company cars might not be the best policy for your company.
1. Expense: Company cars are often presented as a cheaper alternative to other vehicle reimbursement methods like car allowance, cents-per-mile, and fixed and variable rate programs. If you only consider the lease costs and fuel costs, that might be true. But other costs exist: insurance, tax, title and license, repairs outside of maintenance, administrative fees and holding costs for idle vehicles. These direct expenses all add up, often making fleet management more costly than other vehicle reimbursement options. And they are far from the only fleet associated expenses.
2. Liability: Accidents happen, and they are costly. On-the-job distracted driving crashes annually cost employers an estimated $4.3 billion. Whether on the clock or after work hours, when a driver is found at fault in an accident while driving a company car, the company is generally held responsible. This liability is not present in vehicle reimbursement programs where participants own their means of transportation. As if that weren’t enough, there are other fleet management associated expenses to worry about.
3. Fuel Cards: Just as accidents happen, fuel card abuse happens. A common issue with company car programs, participants may not be permitted to gas up on the weekends, but will do so Friday and Monday, to make up for the gas used in personal travel. Additionally, Fuel cards require close attention to accurate substantiation of personal fuel consumption and often leaves companies exposed in the event of an audit.
With other vehicle reimbursement programs, participants track their business miles with hand written logs or on automated mileage tracking apps so companies know exactly what each participant will be reimbursed for business travel. Fleet participants will generally only report an estimated mileage, a number far from guaranteed to be as accurate as an automated mileage log. Another costly piece of fleet management, but there’s more!
4. Productivity: Time is money. Fleet management requires the administrative management of vehicle selection, Vender RFP and management, insurance, registration, fuel card reports, ongoing maintenance, resale, and much more. Vehicle reimbursement programs with automated mileage tracking apps remove those administrative tasks, ensuring more time on the road and less on shuffling paperwork.
5. Opportunity: Vehicle reimbursement programs with mileage capture apps have a unique position in the marketplace. Using data collected from participant’s trips, companies gain actionable insights like time spent in meetings vs. time spent on the road, identification of potential clients nearby, and more. While Fleet management may offer greater control over image and provide for specialized vehicle needs, employees lose flexibility in vehicle choice and personal use that often boosts satisfaction and field productivity.
There are clear benefits to a company car program. For industries like delivery and construction, it may be necessary. But most of the other vehicle reimbursement options don’t suffer the costs associated with fleet management. The fixed and variable rate (FAVR) program is one of these options. Reimbursing for the fixed costs of vehicle ownership (insurance, taxes, depreciation, and registration) and the variable costs of vehicle usage (fuel, maintenance, and tires), FAVR programs offer accurate reimbursement plans that are much more accurate than simple mileage allowances, and technology that delivers further visibility into mobile workforce performance efficiencies.
For more information on the cost of fleet management and the benefits of FAVR, check out “What’s Your Fleet Really Costing You?”
About the Author
Mike has 20+ years of experience consulting, implementing and supporting professional solutions for Business vehicle reimbursement plans, Mobile Applications, and employee relocations. His long tenure at Runzheimer has made him a trusted expert both externally and internally.More Content by Mike Bassi