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The Pros and Cons of Company-Provided Vehicles

By Motus April 8, 2016

Categories: Vehicle Reimbursement

Does your organization have mobile employees? Are you trying to make sure they can get where they need to go? Chances are, you’ve considered providing company cars to help them do their jobs.

Company-provided cars (fleets) can be a great option for your mobile workforce, but they also come with unique challenges. To help you determine whether the “risks are worth the reward,” we’ve provided a rundown of the top pros and cons associated with fleet programs.

Benefits of Company-Provided Vehicles

Provide specialized vehicles that most employees wouldn’t choose to buy on their own  

This is an important consideration if your employees are transporting equipment or need access to a specialty vehicle like a service truck, van, or delivery vehicle. The more specific the type of vehicle needed, the stronger the case for providing that employee with a company car.

Control your corporate image

For some companies, employees’ vehicles play a large role in how their brand is perceived. Showing up to a meeting in a vehicle that’s old and rundown may make the company look unsuccessful, while rolling up in a luxury car may come off too showy or may raise eyebrows about company prices and spending. The only way to completely control the make, model and year of the car that your employees drive is to provide them with a corporate vehicle.

Include corporate branding on the car

If you want to showcase your brand on employees’ cars, then providing a fleet vehicle is the best option. As much as you may love your product, it’s unlikely your employees will be willing to add your corporate logo to their personally-owned cars.

Full control and oversight

With fleet vehicles, you not only choose the car, you also manage employees’ insurance and upkeep of vehicles.  You’re able to choose any safety features that you find important, and you can also install telematics to track vehicles and gain 24/7 insight into where your cars are located. With personally-owned cars, you can still achieve a high level of visibility with the right technology, but good luck getting employees to install a device in their personal car that lets you see where they are at all times. 

Challenges of Company-Provided Vehicles

Increased risk & liability

With fleet vehicles, your company is typically liable for accidents 24/7. Considering that approximately 35% of crashes occur on Saturdays and Sundays, your company assumes a substantial amount of risk during non-business hours.

They can require a large, upfront capital expense 

Purchasing an entire fleet of cars requires a large amount of capital. For small businesses, this presents an especially big challenge, since it can mean choosing between funding cars or inventory. To reduce the upfront expense, you can choose to lease vehicles rather than purchase, but be sure to evaluate the advantages of both before making a decision.

Employees don’t get to choose the car they drive daily

While this can be a benefit for companies (i.e. control of corporate image), it also means inflexibility for employees. Employees with families may want a car with specific safety features for their kids. Employees with medical conditions, like back pain, may want a car that’s more comfortable to drive around in all day. These employees will either need an exception to use their own personal vehicle, or they’ll be stuck with a car that doesn’t quite meet their needs.

You need to accurately capture and report personal use

Many companies allow their employees to drive corporate vehicles outside of work, without insight into how often employees are using the vehicles for business vs. personal reasons. This lack of insight exposes organizations to audit risk and increased costs. Companies are required to report personal use of fleet vehicles to the IRS as a fringe benefit, and inaccurate reporting could lead to penalties or back taxes in the event of an audit. Meanwhile, unless your company has a process in place to accurately charge employees for their personal use, your organization could be losing money each month in foregone personal use chargebacks.

Weighing Your Options

Company-provided vehicles clearly have a unique set of advantages and challenges to consider. In general, the more specific the car your employees need or the more control your organization wants over the vehicles, the more reason to provide company cars. On the other hand, if your company wants to mitigate risk or provide more flexibility to employees, reimbursement for personal vehicles may provide a better option.

Regardless of which works best for you, to maximize the benefits of your vehicle program while minimizing the drawbacks, it’s important to have a company policy in place that promotes driving safety, provides visibility into driving behaviors, and ensures a fair and cost-effective program for your employees and your company.

Thinking of transitioning from company-owned to personally owned vehicles? We’ve got a checklist that addresses everything you’ll need to know in the process.

Download the Checklist

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