By Ben Reiland
November 13, 2023
Companies today are constantly seeking more efficient and cost-effective solutions to manage their workforce’s transportation needs in an ever-evolving business landscape. One transition gaining significant traction is the shift from a traditional company fleet program to a Fixed and Variable Rate (FAVR) reimbursement. This transition brings about a wave of change for employees, along with mixed feelings of excitement and apprehension.
While transitioning to FAVR makes perfect sense from a business perspective, it’s understandable for some employees to be initially reluctant to give up their company vehicle. This article explores some common concerns and objectives you may hear and how Motus simplifies this transition.
Several common concerns and objectives arise when employees transition from a company fleet to a mileage reimbursement system like FAVR. Understanding these concerns is crucial for employees and employers, as addressing these challenges paves the way for a seamless transition.
A significant change employees face when moving from a company fleet to a FAVR reimbursement system is paying for their own auto insurance. Many employees are accustomed to having their insurance covered by their employer’s fleet program, so it can be a shock to do their own insurance shopping for a provider and coverage.
In addition to the time commitment of insurance shopping, this shift can create financial concerns, especially for those who might see a substantial increase in their monthly expenses. Considering the rising cost of insurance, it’s completely understandable that some employees may object to covering the cost themselves.
That said, employees should already have auto insurance for their other personal vehicle(s), so unless someone is dissatisfied with their provider, there shouldn’t be a need to shop around. If they need to purchase a personal vehicle to replace their company-provided vehicle, they can easily expand their existing policy to cover the new vehicle.
As for the added costs of insurance, a good vehicle reimbursement program should provide more than enough compensation to cover their premium costs. In fact, if the employee shops around for a good value, they may be able to pocket the difference between the company-provided insurance reimbursement and their actual cost of insurance.
Finding auto insurance can feel complicated, but it doesn’t have to be. With Motus Perks, drivers can get quotes from multiple providers and find an insurance plan that meets their company’s reimbursement requirements. Employees can easily compare rates, seamlessly sign up for coverage, and potentially find a plan more affordable than their current coverage.
Another concern is the wear and tear that personal vehicles will incur as they drive more miles for work. More annual miles means more frequent vehicle maintenance and a notable impact on the vehicle’s longevity and lifespan.
Fortunately, a FAVR reimbursement system already takes this into account. Employees aren’t just given gas money to use their personal vehicle – they’re compensated for the depreciation and wear and tear, so they can afford maintenance costs and ultimately be in a great position to sell and replace their vehicle down the road.
In a company fleet, maintenance is covered by the employer. The fleet manager will schedule routine maintenance, pay for auto shop visits, and ensure the employee has a replacement vehicle while their fleet vehicle is in the shop. In other words, the company covers the headache and the financial burden.
In a vehicle reimbursement system, the employee is responsible for scheduling maintenance, paying for repair bills, and lining up a rental car while their vehicle is in the shop. Coming from a system where the fleet manager handles all of this, it’s understandable why some employees would find this new responsibility frustrating.
While a FAVR reimbursement system covers the cost of maintenance, it doesn’t explicitly compensate for the hassle of taking your vehicle to and from the auto shop and lining up a rental car when repairs take multiple days. Some insurance plans may cover the cost of a rental car, but that’s often limited to accident-related repairs.
This is an area where companies can step in to ensure their vehicle program takes contingencies into account. To resolve the objection, your program can either arrange the rental car and pay the cost directly, thus saving the employee the hassle and cost; or you can let the employee handle the reservation and simply ensure they’re adequately reimbursed.
Another advantage of the Motus Perks program is the vehicle-specific discounts and promotions available for employees. These discounts can make vehicle ownership and maintenance more affordable for drivers, offsetting the cost of handling their own vehicle services.
Adapting to a new mileage tracking and reimbursement system can be a daunting task for many employees. The complexity and learning curve associated with new systems, apps, and software can cause anxiety and apprehension.
Fortunately, the Motus app is the most user-friendly app on the market. It’s easy and intuitive, so the learning period is significantly decreased and less stressful.
The Motus app simplifies mileage tracking for employees. With user-friendly features and a mobile app, employees can effortlessly keep tabs on their mileage, eliminating the need for manual mileage tracking and record-keeping. Employees can easily log their trips, capture receipts, and generate reports within seconds. This streamlines the entire process and reduces the burden on them.
Fuel costs are another area of concern for employees. Most fleet systems provide a company credit card and merely ask for receipts, and it’s hard to top something that simple.
While a FAVR reimbursement system initially feels more complex than a simple company credit card, it’s ultimately a win for employee flexibility. The Motus app makes it easy to record business mileage so employees don’t have to manually break out fuel costs for personal vs. business use, and it’s more accurate at reporting this mileage. This ensures personal-use charges don’t creep into your vehicle system, which can land your business in trouble during an IRS audit.
Employees don’t need to keep gas receipts anymore, and fleet managers won’t have to worry about convenience store add-ons finding their way onto the company car. Employees can fill up, grab a drink and snacks for the road, and the Motus app automatically ensures they’re fairly compensated for the gas – not the Doritos and fountain drink.
Some employees worry about the transparency and privacy of trip tracking. They may wonder which trips are being monitored and how their data is used. These are both valid data privacy concerns that are quite relevant in today’s track-everything digital world.
The Motus app only tracks location data while you’re traveling for business, and the app makes it easy to designate when you’re working vs when you’re not. When employees are off the clock, the app will not collect any data.
If drivers forget to turn off automated mileage capture while traveling personally, employees can easily mark the trip as non-business to remove it. Motus employs industry-leading standards to safeguard user data and does not share personal data with any third parties.
While many employees who use a fleet vehicle still have their own personal vehicle, some do not. They will need to purchase a new vehicle if/when they lose their fleet vehicle. Or perhaps they have a personal car but don’t want to put business-related miles and wear and tear on that vehicle. In either case, purchasing or leasing a new vehicle can be time-consuming and expensive.
Companies employing a FAVR reimbursement system can easily overcome this obstacle by providing a one-time bonus to help employees cover the down payment needed to buy a new vehicle. Regular reimbursement checks can also be used to cover the business-related portion of monthly payments. This means that, in theory, an employee will only have to pay out-of-pocket if they want a vehicle outside of the budget that the company sets.
This is another area that feels like a hassle but can actually be a huge win for employees. If the new vehicle program provides a $5,000 bonus to be used towards a down payment and $600/month to cover the monthly car payment, but the employee only needs $4,000 for the down payment and $500/month for the car payment, they’re able to pocket the difference.
On the flip side, employees who want a higher-end vehicle can opt to pay a little extra for their monthly payment and only have to pay a small portion out of pocket – making their luxury car more affordable.
Recognizing the significance of making this transition easier for employees, employers play a role in facilitating the process. Here are some ways they can support their employees when switching to FAVR.
Employers can support employees by reselling fleet vehicles to employees at fair market value. This seems like a simple concept, but considering many car dealerships aim to sell their vehicles above market value to increase profits, it’s actually a big deal for employees.
In addition to making the car-buying process easier for employees, this also ensures they’ll get the best possible ROI on the vehicle in the long run. Paying less for the vehicle today means the long-term cost of owning the vehicle will be less when they ultimately sell that vehicle down the road.
Another option is offering equity to employees who choose to use their own vehicles for work purposes. This can be a significant financial relief, helping offset the costs of using personal vehicles for work.
To further encourage employees to make the transition comfortably, employers can provide stipends to cover vehicle expenses. This financial support not only eases the financial burden but also motivates employees to embrace the new system confidently.
Companies can take the money they were spending on vehicle costs and fleet maintenance and pass that on to their employees. This helps employees take care of their personal vehicles while using them for work-related purposes.
Most employees are more than happy to give up their fleet vehicle in exchange for a fair, tax-free reimbursement system like FAVR, but not everyone will always be a fan. Fortunately, Motus makes it easy to overcome these objections while delivering key benefits such as simplified mileage tracking, a user-friendly app, and tax-free reimbursements.
This transition can be a win-win for all parties, with Motus facilitating an efficient, cost-effective, and promising future for transportation management. Take a product tour of the FAVR system today!
With Motus, accurately capturing business mileage has never been faster or easier.
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