Company Vehicle Fuel Policy: How Is Your Business Managing Fuel Spend? 
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Company Vehicle Fuel Policy: How Is Your Business Managing Fuel Spend? 

Headshot of a man with a blurred background By Ben Reiland February 13, 2024

Categories: Mobile Workforce Vehicle Reimbursement

Company-provided vehicles require considerable management and capital. In recent posts we’ve covered the expenses of fleet vehicle maintenancefleet 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?

Tracking the Untraceable

At the end of the day, it all comes down to fuel management. Fuel management is a challenge for many fleets, for a number of reasons. The two main ones are fuel cards and personal-use chargeback. These are tied at the hip, but we’ll break them down separately, starting with fuel cards.

Fuel Cards

For starters, most companies with fleet vehicles also provide employees with a fuel card. Employees can use this card whenever they need to gas up. But businesses have no insight into how that gas is used. Most companies offer fleet vehicles with the perk of personal use. Employees can use the vehicle for non-business purposes. To cap “excessive use” of fuel cards, some companies restrict employees to using fuel cards on weekdays. However, that doesn’t stop employees from gassing up late on Friday and early on Monday, or gassing up multiple vehicles. Which leads to the issue of personal use.

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Personal Use

Companies have personal-use chargebacks for two reasons. First, it allows employers to recoup some of the expenses of not only gas spend, but all the other costs like lease payments and maintenance. The problem with this solution is that many companies charge a flat amount to every employee, but that average charge has increased steadily every year—even when driving costs have not.

Second, charging flat amounts for personal use isn’t exactly fair. Not every employee will drive their company-provided vehicle 50% for business, 50% for personal use. Some employees may only drive 10% personal use. Unfortunately, without some mileage tracking element, there’s no way of knowing. Finally, and most importantly, the IRS considers personal use of fleet vehicles a taxable benefit. Companies that don’t have some established reporting for personal-use chargebacks expose themselves to audit risk.

What is a company vehicle fuel policy?

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.

No Company Vehicle Fuel Policy

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.

Minimal 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.

Maximum Company Vehicle Fuel Policy

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.

Switching from Company Vehicle to a Different Program

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 maintenanceaccidents and liability, etc—remain. On the other hand, companies like Amoskeag Beverages will control these costs, remove liability and improve flexibility.

A graphic stating: the complete guide to FAVR. Learn everything you need to know about a fixed and variable rate vehicle program with a prompt to download the guide.

Taking Next Steps with Motus

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.

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