Fleet programs are the most expensive vehicle program a business can implement. Yet they continue to be popular with companies across industries. Businesses may be happy with their fleet program and might not have any interest in change. Others just don’t know other options exist. Whatever camp you sit in, it’s hard to argue that fleet programs aren’t expensive. So what are typical fleet prices? What makes them so expensive?
Whether it’s a construction company or a pharmaceutical company, there’s a number of costs every fleet incurs. Big contributors to fleet prices include purchasing or leasing costs, maintenance and repairs, legal costs and fuel costs. Let’s dig a little deeper into each of these costs, beginning with purchasing or leasing.
First, there’s the purchase or lease of the vehicles themselves. There are benefits to either side, but in general, leasing is going to cost less upfront with an easier path to replacement in the future. Owning vehicles outright is going to cost more upfront, but that vehicle could be in the field for 10 to 15 years minimum. The price of each vehicle also varies by industry. A sedan might be on the cheaper side, but you won’t see too many oil and gas workers driving out to the field or construction workers showing up to the jobsite in a car.
Those companies are more likely to lease a fleet of F150s, while a pharmaceutical company will opt for a fleet of upscale SUVs. The size of the company and its driver pool will also have an impact on fleet prices. It’s simple math: the number of employees in driving roles determines the number vehicles needed. That will also impact the terms of the lease or purchase. Smaller companies may opt to purchase a number of vehicles while a bigger company may lease 50 or more.
Like any other car, fleet vehicles require regular maintenance. That means an oil change every 3,000 miles or so, tire rotation every 6,000 miles or so. For some companies, this might happen every quarter. For others, for companies with higher mileage drivers, this will be more frequent. Then there are other parts that need replacement less frequently: air filters, brake pads, windshield wipers. Additional maintenance comes into play when an employee leaves. Now the company has an idle asset to maintain and store until the previous employee is replaced.
Finally, if a fleet vehicle gets into an accident, the company must repair it. Replacing air filters and brake pads is one thing. Start replacing fenders and other auto-body parts and fleet prices take a big jump. Part of that is the price of labor. Another, more recent piece, is the recent updates to vehicle safety. With sensors and cameras built into the vehicle, replacing these parts increases the price. And then there’s the issue of fleet vehicle liability.
Let’s say an employee driving a fleet vehicle is found at fault in an accident. The other party in this accident is going to want their vehicle repaired. In any other vehicle program, this would be paid for by the driver’s insurance. However, unlike other vehicle programs, fleet vehicles are owned by the company. According to the CDC, that will cost the company somewhere around $75,000.
Now, let’s say the accident was fatal to the other party involved. Now those pressing charges are likely to go after the company. Unlike the cost of repairs, there are other damages the company may be charged with. The cost here isn’t just the amount they’re being sued for or the potential settlement amount. It’s also the cost of the legal team representing the company through the lawsuit.
One of the biggest contributors to fleet prices is fuel. It’s standard practice among most companies to give fleet vehicle drivers a fuel card. With a fuel card, employees can gas up at their convenience. As many companies offer allow fleet vehicles to be used personally, fuel cards are ripe for overuse. Some companies account for this by setting up a personal-use charge back. The personal-use charge back is intended to cover the costs associated with personal use of the company vehicle. However, without a record of personal mileage, these personal-use chargebacks are inaccurate and may expose the company to audit risk.
Purchasing or leasing costs, maintenance and repairs, legal costs and fuel costs make up what might be considered typical fleet prices. While these costs remain in today’s company-provided vehicle environment, there are additional factors to consider. Namely, the shortage of vehicles.
Whether companies are looking to set up a fleet program or replace their current fleet, vehicles are currently hard to come by. Both the new and used vehicle markets are in similar states to their position in 2020. Depreciation levels falling is great for a company trying to sell their vehicles, but if there aren’t vehicles to replace the old ones, that benefit loses its luster. While automotive production did slow down during the pandemic, the chip shortage is playing a big role in the current lack of vehicles.
Vehicles are scarce owing largely to a lack of semiconductors. The chip shortage has been the result of a handful of factors. Those include natural disasters shutting down factories and mobile workers purchasing supplies to work from home. With the exception of these chips, automakers have everything they need to make vehicles to meet demand. The result? Many automakers have had to cut down on production.
Even companies that have always used a fleet program can agree it’s expensive. Due to the vehicle shortage, fleet prices won’t be getting better any time soon. And there has never been a better time to sell company cars and see a serious return on investment. Interested in transitioning to a vehicle program without the considerable prices of fleet? Motus can help. Check out our guide, Fleeting Costs: Transitioning Your Idle Fleet to a FAVR Program.
The thought of transitioning out of fleet a little scary? Sure, there are benefits to switching programs, but how will employees react? Are they ready to give up their fleet vehicles? How will leadership react to the idea? We get why shifting to a new program might seem like a big jump. But there’s an easier step that sets your company in the right direction.
With a fleet mileage tracking app, your employees record their mileage. This ensures that, come the end of the year, you’re charging them the right amount in PUC’s. Now you’re making sure employees aren’t overcharged. Even better though, you now have insight into how much your employees are using fleet vehicles for personal mileage versus business mileage. With this insight, you may be better equipped to consider other vehicle program options.
Interested in learning more about fleet mileage tracking apps? Check out our one pager on the topic.