Company-provided vehicles require considerable management and capital. In recent posts we’ve covered the expenses of fleet vehicle maintenance, fleet 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, in 2019 fuel accounted for 23% of vehicle program costs. What can businesses do with their company vehicle fuel policy? Let’s explore a few scenarios.
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 whether that spend is for personal or business travel isn’t clear. This business will have to rethink its 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 are an amount employees pay companies to account for the company fuel spent on personal trips, etc.
Despite having 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 seem to 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.
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. Different from the other two companies, this company uses an app-based personal-use chargeback.
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.
A mid-market beverage company had a fleet program for their driving employees. With 35 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 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 maintenance, accidents and liability, etc—will remain. On the other hand, companies like Amoskeag Beverages will control these costs, remove liability and improve flexibility. Interested in learning more about transitioning from fleet to FAVR?