Today’s pandemic has forced all of us to re-evaluate our schedules, our priorities and our decisions. That includes the business decisions we’ve made to adapt to current circumstances: cutting costs, halting business travel and, in some cases, furloughing and laying off employees.
Every company has needed to adapt. Most companies have focused on uncovering cost savings to avoid measures like reducing headcount. In fact, we’ve talked with many business leaders now reconsidering their fleet vehicle programs for this exact reason. Why their fleet program? Because every day a company-owned vehicles sits idle it’s costing them.
Business driving activity has ramped down significantly since March. In a recent mileage trends report, we reported that many states have paused or rolled back reopening plans, having a serious impact on business mileage activity. With fewer drivers on the road, now is an opportune time to re-evaluate fleet programs.
Learn more about 2020 Mileage and Fuel Trends by Industry and Region.
Another factor influencing fleet programs right now is the rental car market. It’s no surprise that companies like Hertz and Avis are hurting with few people traveling since March. In fact, Hertz and Advantage Rent a Car filed for bankruptcy in part due to the pandemic.
This doesn’t bode well for fleet programs. The risk of major rental car companies going out of business threatens the used car market. And most company-owned or leased cars are based off the re-sale value of those vehicles. If the used car market erodes, then companies with fleet vehicles could be stuck, unable to sell those vehicles off.
Company-owned cars are sitting idle, but the fixed costs to own those cars haven’t gone away. Companies are still paying for things like leases, insurance and maintenance. For companies with 100 idle fleet vehicles, that’s costing them $60,000 each month. Add in the fact that companies lose $13,000 per year to idle vehicles from employee turnover alone. Not to mention, Motus research finds that most employees prefer driving their own vehicle.
Downsizing a fleet program also requires finding a place to store idle vehicles and a way to transport them there. That’s another expense added to the fixed costs of a fleet program. Imagine if you could save that $70k+ and reinvest it back into the initiatives that matter most right now, whether that’s saving jobs or improving your bottom line? That could make a serious impact.
And the drawbacks of fleet programs don’t stop there. The risk and liability the company takes on can result in costly lawsuits. There’s also the administrative burden of managing a fleet program, think about how that employee’s time could be focused on more strategic initiatives.
Watch the video, The Costs of an Idle Fleet and the Impact on Businesses
As a result of the pandemic (and the reasons listed above), companies are moving to a Fixed and Variable Rate (FAVR) reimbursement program. FAVR programs offer the ability to adapt to any economic situation, and they can be scaled up or down to adjust for volatile costs like fuel prices.
FAVR programs reimburse each employee fairly and accurately based on their actual costs. Each employee gets reimbursed for their fixed and variable costs, things like fuel and insurance in their specific geographic area. This type of program also offers more flexibility to employees, allowing them to drive whatever vehicle they want. Motus user Iain Morris put it best, “I’ve got a bike rack for my car, you can’t put a rack on a company vehicle, you feel more at home in your own car.”
Learn more in this video clip, Fixed and Variable Rate (FAVR) Reimbursement Breakdown
On average, fleet vehicles are 35% more expensive than a mileage reimbursement program. FAVR delivers hard cost savings when it’s needed most. For example, this was the experience for Motus customer Coca-Cola, “We had several million dollars wrapped up in passenger vehicles and decided we had an opportunity to unleash those dollars elsewhere in the organization, while also reducing our auto-liability exposure.”
Experts from Motus and the fleet industry discussed more on this topic in a recent webinar. The live event was in June, but you can watch the recording anytime.