By Ben Reiland
April 4, 2024
Have concerns about reducing fleet costs? Making a plan that confronts those costs, one that solves for inflation, reduces costs, manages risks and everything else? That’s a challenge. Now add providing flexibility for your next generation of fleet and non-fleet drivers that value freedom of choice. That might just tip things over the top. There are a lot of factors impacting companies with fleets: personal use taxes, consolidation with fleet management companies, inflation, interest rates, fleet vehicle mileage reporting and more. Let’s dig into these trends and take a look at how a fleet mileage tracking app might be of use.
Companies with fleet vehicles have a lot on their plates. From end of year issues and fleet market consolidation to inflation and sky-high interest rates, it’s been a tough year. Fortunately, a fleet mileage tracking app can provide significant benefits to companies in need. But first, let’s dig into these notable trends.
Companies with fleet vehicles face some big hurdles at the end of the year. On the employee side, they’re just getting hit with taxation on personal use mileage for the entire year. Whether they’ve been on top of tracking their personal use or not, they’re probably not liking the number they’re looking at. On the company side, things look a little different.
Businesses are doing internal audits for personal use chargeback amounts, tracking down logs that might not be completely accurate. That’s not to necessarily a cost-savings measure. More than anything, it’s an effort to protect company. During this time of year, maintaining IRS compliance and avoiding a costly audit become top priorities. And its easier to manage fleet vehicle mileage reporting with a fleet mileage tracking app.
LeasePlan USA and Wheels Donlen, two of the biggest fleet management companies in the business, announced they’ve completed their merger. What does that mean for companies in fleet today? On the one hand, it means Wheels Donlen LeasePlan will have a broader reach, providing fleet solutions not only in more areas of the United States, but globally. On the other hand, with this merger, the field of competitors in the fleet management space has gotten thinner. That consolidation means fewer options helping solve fundamental fleet issues. With fewer fleet management companies, the competition fails to approach these fundamental issues in new ways. At a time when fleet managers need different solutions to combat the challenge of rising fleet costs, fewer providers encourage them to look elsewhere.
Buying a new car isn’t the only thing that has become more expensive. Paying for one has become more costly as well. The culprit here is interest rate. The U.S. Federal Reserve has raised this rate multiple times in an effort to combat inflation. Increased interest rates make big purchases less desirable. By decreasing big purchases they hope to slow price growth. Let’s look at how high interest rates affect purchasing a new vehicle with an example.
Greg just bought a $50,000 car. Like so many people, Greg can’t afford to pay for this vehicle in cash. A $50,000 vehicle at a normal interest rate of 3.5% will result in the buyer paying an additional $4,500 over four years. With the high interest rate of 6.5%, Greg will be paying $8,500 over those four years. That’s an additional $4,000, and that’s not great for Greg. Now multiply that additional expense by the number of fleet vehicles a company is buying or leasing, and you’ll see they have a much larger expense to swallow.
We no longer work the same way we used to. Technology has enabled us to meet virtually through a number of video communication software. The change has reduced mileage in the service business by 20% and in sales business 40%. You can pose questions about face-to-face efficacy and online efficiency, but when it comes down to it, the questions to ask are these: did you invest in fleet vehicles as a tool your employees leverage? Or a perk your company continues to pay for? Is it a necessary tool if employees drive the same number of business miles as they do personal miles? How much would a fleet mileage tracking app benefit your company?
A fleet mileage tracking app is an app that employees driving fleet vehicles use to track their mileage. Manual mileage tracking, simply recording miles at the beginning and end of each trip, can lead to mistakes and may not hold up in the event of an audit.
Fleet vehicle mileage reporting is a common area of confusion. Especially with the growth of employees performing work off-site. Mistakes with fleet vehicle mileage reporting can often land companies in hot water with the IRS. Protecting your company from a potential audit requires knowing the best way to report personal miles and business miles.
Differentiating between personal and business fleet usage sounds simple enough. Just track the mileage of each trip and report that to the IRS at year’s end, right? If only it were that easy. The IRS requires a wide range of information beyond miles driven. Drivers must accurately record the date, time, destination, business purpose and all related expenses. The IRS requires substantiating materials, like receipts, as well.
This is complicated enough, but employees also use their company cars for personal reasons. A quick trip to the grocery store, a ride to grab lunch with a friend, picking up clothes from the dry cleaners—these can all be misclassified as “business” usage when performed during the work day. Because these benefits have been so often abused in the past, the IRS focuses on under-reported personal miles very closely. If you mislabel your mileage, you might not find out until you are on the wrong side of an audit.
Do you consider your driving employees’ commute miles as business or personal use? The IRS considers the miles driven to and from the office personal miles. Employees choose where they live, so their employers should not pay them more or less based on that decision. This can be confusing for employees using fleet vehicles, who may consider any time they are driving as “on the clock” hours. To complicate matters further, mobile employees follow different rules. The IRS considers an employee’s “work location” the place where they conduct 50% or more of their business. Mobile workers may leave directly from their homes for meetings, make multiple trips through the day or work out of a field office.
The IRS considers the distance mobile employees drive to their first work location of the day and the distance they drive from the last work location to their home commute miles. The IRS allows for exceptions if the first visit is outside the worker’s “metropolitan area” (a radius of 10-20 miles from their home). Many employers misclassify these commute miles as business miles. This results in overpayment and exposure to potential audits.
Whether you’re in the market for new fleet vehicles or still searching for the best way to manage fleet vehicle mileage reporting, a fleet mileage tracking app might be your short-term answer. The impact can be immediate and provides your company with actionable insights in as little as one month. So what all does a fleet mileage tracing app accomplish? Let’s take a look.
Any company that allows employees to drive fleet vehicles for personal use is providing them with a taxable benefit. That means that the personal miles driven must be accounted and paid for. Employees don’t often keep a record of these miles, exposing both themselves and the company to audit risk. With a fleet mileage tracking app, employees can easily capture their business and personal mileage. For companies facing challenges with fleet vehicle mileage reporting, that’s a plus.
When employees don’t record mileage, employers often charge a monthly rate, or wait until the end of the year. But, without the accuracy of exact mileage, this rate is a guessing game. Adopting a fleet mileage tracking app means mitigating audit risk and keeping the chargebacks simple. Employees log their personal miles, and employers charge for them. Another win for companies struggling with fleet vehicle mileage reporting.
Without personal use mileage logs, employers are either charging too much or too little. There’s no in between. Employees that don’t drive their fleet vehicle outside of work will be overcharged. Employees who drive their fleet vehicle more for personal than business use will be undercharged. With a fleet mileage tracking app, personal use charge backs become fair and accurate. Employees will only have to pay for their personal miles. This is also fairer to the company, who will now receive the proper amount.
In addition to the compliance, simplicity and fairness benefits, a fleet mileage tracking app can also provide something all companies with fleet vehicles want, but few have. Insight into their driving workforce’s behavior. It’s not as complicated as “they took a left on this route when taking a right would’ve saved them 0.2 miles in gas!” In fact, it’s as simple as “is your fleet being used more for personal or business driving?” The answer to that question may help you decide the future of your fleet.
Head into the new year with the immediate benefits a fleet mileage tracking app can provide your company. Motus Fleet Solutions ensure miles are accurately captured and charges are accurately calculated with our best-in-class platform. Interested in learning more? Check out our article, The Benefits Of Fleet Mileage Tracking, to start controlling your personal use chargebacks today!
With Motus, accurately capturing business mileage has never been faster or easier.
Contact us today or take a virtual tour of the Motus Platform.
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