Company-provided vehicles require considerable management and capital. In recent posts we’ve covered the expenses of fleet vehicle maintenance, fleet accident management and when to replace fleet vehicles. We even did a post on the prices associated with fleet programs, including the impact of the chip shortage on new vehicle sales. But, of all of these expenses, one of the most persistent is fleet fuel spend. In fact, fuel accounted for 23% of vehicle program costs in 2019. So what’s a company vehicle fuel policy? And what can businesses do with one?
A business uses a company vehicle fuel policy to control their gasoline spend. Companies can establish these policies in a number of different ways: without a policy, with a minimal policy or with a maximum policy. Each option has different benefits and downsides to the company. Let’s check out the options with a few different scenarios.
A mid-market pharmaceutical company provides its sales reps with high end sedans. Enabled with these vehicles, reps meet with customers and prospects in any number of locations. The company offers the added perk that employees can drive these vehicles for personal reasons, outside of business hours. Along with these sedans, reps are provided with gas cards.
The company faces issues with excessive fuel spend because they have no policies around the gas cards. Employees will gas up their fleet vehicle, their personal vehicle or family member’s vehicles knowing they won’t be picking up the bill. The company can see how much is spent, but they cannot determine whether that spend is for personal or business travel. That also leaves them exposed to potential IRS audit. While the administrative burden is at a minimum, this business will have to rethink its company vehicle fuel policy.
A mid-market retail company offers fleet vehicles to regional store managers. Traveling from store to store, the company also allows personal use and provides them with a fuel card. They do however limit fuel card spend. Friday through Sunday, employees cannot use their fuel cards to gas up. They also require a personal-use chargeback. Personal-use chargebacks (PUC) are an amount employees pay companies to account for the company fuel spent on personal trips, etc.
This option is an improvement from the last. At the cost of additional administration, they’ve set regulations around when an employee can refuel their vehicle, and they’ve established a PUC. However, even with a more robust company vehicle fuel policy, employees can still use fuel cards multiple times a week, gassing up late Thursday and first thing Monday morning to make up for the weekend.
Personal-use chargebacks might be a solution in theory, but without a record of business and personal mileage on a fleet vehicle, the amount is guaranteed to be inaccurate. Without mileage accurate logs, employee and employer remain exposed to audit risk.
A mid-market medical device company has a fleet program for its sales reps. With trips to hospitals, clinics and other prospects and customers, the company also provides these reps with a fuel card. Unlike the other two businesses mentioned, this company pairs the fuel card with a fleet mileage tracking app.
Here we have an option that provides both insight and cost control, again with minimal administrative burden. With an app-based personal-use chargeback, employees capture and submit business trips to their company. This information ensures the company has insight into the amount of business miles driven and contains fuel spend. Unlike previous examples of company vehicle fuel policy, the app-based personal-use chargeback keeps driving employees accountable. This means improved IRS compliance and cost control.
An enterprise beverage company had a fleet program for their driving employees. With 235 vehicles across their sales team, the company realized they had little control or visibility into the driving habits of their employees. Tired of paying for 100% of vehicle costs, including personal use, they decided to go a different way.
The company chose to implement a fixed and variable rate (FAVR) program. This program got rid of fleet vehicles, instead reimbursing employees for the business use of their personal vehicles. In doing so, they saw an annual savings of over $5,000 per employee and a total savings each year of about $215,500.
Companies with fleet vehicles that are concerned about cost control can shrink fuel spend by implementing a proper company vehicle fuel policy. But the other prices of fleet—vehicle maintenance, accidents and liability, etc—remain. On the other hand, companies like Amoskeag Beverages will control these costs, remove liability and improve flexibility.
Your business may be looking to control the costs of your company vehicle fuel policy. Transitioning to a different program may be the most cost-effective option. But it also may be a step too far, too fast for your company. Many companies with fleet vehicles looking to control costs are adopting fleet mileage tracking apps. With a fleet mileage tracking app, companies not only ensure IRS compliance and fair personal use chargebacks, they also gain insight into how much fleet vehicles are used for business driving versus personal driving. Interested in learning more about our fleet mileage tracking app? Reach out to start a conversation on how your company can benefit.