For a business with a company-provided vehicle program, a fleet of functioning vehicles is essential. Keeping fleet vehicles in working order requires a fair amount of maintenance. Some of that is routine, while some can be unexpected. Let’s dig into the process and costs associated with fleet vehicle maintenance, repairs and accidents.
As with a personal vehicle, part of the fleet value of any car is it should last a long time. A long time varies by perspective. To some, that could mean five years. To others, it might mean 20. But there’s more to a vehicle than its lifespan. Let’s drill into what typical fleet repair and maintenance looks like.
American drivers average 14,263 miles each year. It’s safe to say that those who drive for work are well above that average. It’s also likely that employees with fleet vehicles are taking full advantage of the perk, driving it for both business and personal use. That comes out to just over 1,000 miles each month. This will come into play as we figure out just how frequent each upkeep measure is recommended.
An oil change for this vehicle is recommended every 3,000 – 5,000 miles. So let’s say an oil change occurs about every three months. Prices vary depending on location, but they can be anywhere from $35 to $75 for conventional and $65 to $125 for synthetic. Multiply that by four and you’re looking at $140 to $500. The last step here would be to multiply that number by the number of vehicles in your fleet.
Tire rotations for this vehicle are recommended every 5,000 to 7,000 miles. Again, depending on location, that might cost anywhere from $24 to $50. Multiplied by two and that’s an additional $48 to $100, per vehicle. The expenses of fleet vehicle maintenance continue to add up.
Engine air filters and cabin air filters have an average replacement of 15,000 to 30,000 miles under typical conditions. Depending on location, that can cost anywhere from $40 to $65, on a yearly basis (again, multiplied by the number of fleet vehicles).
After considering those expenses, typical maintenance on each fleet vehicle will cost anywhere from $228 to $665 each year. While these costs are to be expected, there are additional sources of expense.
Mobile workers come and go. Whether they’ve transitioned to elsewhere in or outside the company, their vehicle remains. The hiring process generally takes about three months. So what do you do with the vehicle during that time? Fleet vehicle maintenance is required, regardless of whether the vehicle is in use.
Seasons will play a role in whether it requires storage or not. Depending on the location and storage requirements, that could be $45 to $450 a month for a car not being used. Depending on how long it’s been idle, the vehicle may require additional costs to get it ready for use again.
Some companies have a position like a fleet manager that handles vehicles in house. Others use fleet management companies to handle most of the process for them. Inheritors of a fleet will begin their process by gathering data on the vehicles, including: ownership history, accident history, mileage, general condition and repair and maintenance history. Then they’ll implement a preventative fleet vehicle maintenance schedule based on mileage and previous service check history. From there, it’s a process of determining when to replace fleet vehicles.
To recap, fleet vehicles require a lot of maintenance. There’s preventative maintenance, accident repair (or replacement) and idle asset maintenance. This further requires either a company or salaried positions to manage. That doesn’t account for the cost of fuel either. For a fleet of any size, those expenses are big. The bigger the fleet is, the more those costs balloon.
Even companies that have had fleet vehicles since their inception, there are alternatives. Vehicle programs that reimburse employees for the business use of personal vehicles always spend less than fleet programs. They also mitigate the risk of negligent entrustment lawsuits. But we’ll get into that later. Outside of general fleet vehicle maintenance are fleet repairs.
The costs of regular maintenance for the entire company fleet will add up, but the cost of vehicle repairs in general has also been on the rise. And fleet vehicles have a higher rate of accident involvement because they’re often on the roads for both business and personal use. The extent of the accident’s damage could be as little as a fender bender or as much as a totaled vehicle. On the low end, that’s a $500-$700 in fleet repair. On the high end, replacing the vehicle will cost anywhere from $18,000 to $30,000. But that isn’t even accounting for the costliest possibility: potential lawsuit costs. Let’s take a look at fleet accident management.
Vehicle accidents happen. And there’s no shortage of causes. While there are prevention measures people can take, these often come far too late. Vehicle accidents are particularly common among companies with fleets. What can a company do once the accident has occurred?
There’s been an accident. Part of the benefit of fleet vehicles is that in many cases, employees can use them for both business and personal use. This means an accident could happen at any time. When it does, your company will have to submit a claim to the insurance company. Depending on which party is found at fault, this may also result in a lawsuit. We’ll get into that more later.
Depending on the damage, the company is looking at repairs or outright replacing the vehicle. At minimum, that’s going to be a couple thousand dollars. That doesn’t factor in the impact on your employee’s work output. Some roles may be able to perform some parts of their function without a vehicle. Others might as well be on vacation if they can’t drive their fleet vehicle. All you can do is hope the repair costs and time in the shop are minimal. Unfortunately, these are not factors you can account for.
The above are common aspects of fleet accident management. Unfortunately, so are lawsuits. When a fleet vehicle is involved in an accident, the company is often the target of a lawsuit aiming to prove the driver should not have been trusted with a corporate-liable vehicle. This is known as negligent entrustment.
This risk should be enough encouragement for any company not using Motor Vehicle Record checks (MVRs) to implement them. Some companies use MVRs during the hiring process to validate people’s driving records. Other companies run checks annually or even continuously. A company that doesn’t use MVRs may have a harder time proving they consistently employ appropriate measures designed to ensure safe vehicle operators.
Many fleet accidents that result in lawsuits end in arbitration. Depending on the severity of the accident, this could be hundreds of thousands or more. That number does not include legal fees.
The company has repaired the vehicle, or replaced it. The lawsuit and resulting arbitration has been settled. This is generally when a company decides to take steps toward risk mitigation. Before the accident, it might be they figured it wouldn’t happen. The world following the accident and everything else is a little different. When companies reach this point, they look to implement MVR’s and safety training.
Training can have a serious impact on employees road safety, increasing awareness and decreasing bad behaviors like distracted driving. Not every offering is going to have a considerable impact, but the best can lower accident rates by as much as 20%. That being said, accidents can still happen. So what comes next?
Some companies dig their heels in when it comes to their fleet. An accident will happen, they’ll repair or replace the vehicle, face the lawsuit and look into risk mitigation options. They’ll put every driver through additional driver safety training and pull MVR’s regularly. Then another accident occurs. What went wrong?
The company pulled MVR’s and put employees through training. Risk mitigated, right? Well, with fleet vehicles, risk is ever present. Accidents happen, even after safety training and MVR’s. And, with a company-provided vehicle program, the business often pays for that. Which is why more and more companies are looking to other options.
Offering company-provided vehicles is a popular program, but as we’ve seen, the cost of this program adds up quicker than you may realize. The first step in finding the right alternative is learning more. You should know the vehicle program options you can choose from like fixed and variable rate (FAVR), cents-per-mile, or car allowance. Check out our post on selecting the right vehicle program for your company. You may be surprised there are more benefits to fleet alternatives than cost savings and risk mitigation.
Transitioning out of a vehicle program, let alone a fleet, is a big undertaking. With concerns over change management and efficacy, companies can have a hard time making the switch. One way companies are gaining a better understanding of how their vehicles are being used by driving employees is with a fleet mileage tracking app.
Fleet vehicles are a taxable benefit. If employees aren’t keeping track of their personal travel and paying employers for that usage, they expose themselves and the company to audit. To ensure employees are paying the appropriate amount for, companies can institute a fleet mileage tracking app. This ensures employees are charged appropriately for personal use. And it has the additional benefit of sharing how much employees drive fleet vehicles for business or personal reasons.
More and more, companies are making decisions with long-term impact in mind. This is true of the way businesses approach sustainability, diversity and so much more. As trends in the automotive world change the way we buy and use vehicles, companies have to ask if the benefits of fleet vehicles outweigh the costs of maintenance, repair and accident repercussions. Interested in learning more about what transitioning out of a fleet vehicle program might look like? Find out in our guide, Transitioning Out of a Company-Provided vehicle Program.