By Motus
February 9, 2023
Your company has a fleet of vehicles your team has made regular use of. You might even go as far as to say these company cars, vans or trucks are an essential part of your business. But, as with anything, they have a lifecycle. Having trouble determining when to replace fleet vehicles? Or what to replace them with? Here are some questions to consider when going through the process.
Whether your company has purchased the vehicles outright or simply leases them is a big determinant. Leased company cars can be returned to the dealership at the end of the contract, hopefully without a serious loss in investment. If your company owns the vehicles though, that’s a different scenario.
Looking to replace your current fleet with new vehicles? That might be a tall order in today’s market. During the pandemic, the auto manufacturing industry experienced a chip shortage. Both the government and companies are taking steps to correct this with semi-conductor plants, but the shortage remains an issue. As a result, buying new vehicles even on a consumer level has proven a challenge. To fulfill the request of a single company car order may take months, but to replace an entire fleet? That will take considerably longer and traditional discounts are unlikely to arise.
The first thing to consider when thinking of replacing any vehicle, let alone a company car, is value. Consider the mileage. When were the tires last replaced? Does it need any minor repairs, like the serpentine belt or the air filter? Any major repairs or replacements, like the battery or the engine? Try not to consider all the repair and replacement costs put into the fleet vehicle, only the costs that might be required to prepare it for sale.
Consider the exterior. Whether it’s a model from a decade ago or only a few years, is it a vehicle that you’re comfortable seeing representing your company? It’s served its function in your company’s fleet. Could it continue to do so?
Value is one thing to a previous owner. Will that value translate to a new owner? Is the vehicle in a state that another buyer will consider it a worthwhile investment? Will the potential funds from selling the vehicle make a significant dent in the payment of a new vehicle?
As mentioned earlier, the production of new vehicles was slowed significantly by the chip shortage. This resulted in the rate of depreciation dropping considerably. That was a big benefit to companies looking to sell their company cars. Businesses trying to sell their vehicles in 2023 won’t have it as easy. They definitely won’t be making all the money back, the depreciation rate isn’t that crazy. Still, if your company is looking to offload fleet vehicles, the sooner the better.
The type of fleet vehicles your company owns also plays a role in determining replacement. Is there a market for the type of previously owned vehicles your company uses? How wide are you willing to extend your search to find a potential buyer for your company cars?
Not every company puts branding on their fleet vehicles. If your vehicles do have company branding, you’ll want to have that removed before attempting to sell. This detailing process may only be in the hundreds, but multiplied by the number of vehicles in need of replacement? Those numbers add up.
If you’re looking to replace the vehicles in your fleet, maybe now is the time to consider getting out of fleet. According to the 2020 Mobile Workforce Benchmark Report, while Fleet and FAVR programs have similar mileage, FAVR programs cost 27% less. How’s that possible? Think of the costs associated with company-provided vehicles. There’s the initial payment. Then there’s the cost of fuel. Add to that the maintenance costs and repair costs.
Now say an employee leaves the company. The vehicle they were driving is now sitting idle in the parking lot. How long is the hiring process in your company? During that time, the company car will still require routine maintenance. Additionally, fleet vehicles expose companies to negligent entrustment lawsuits that could cost millions in settlement and litigation fees.
Fleet vehicles are seen as a benefit. They allow your company control over your image. But unless they are specialty vehicles essential to the job, their cost far exceeds their function. What’s more, there are other options available that benefit employees and guarantee your company risk mitigation and cost control. Interested in learning more about getting out of the fleet business? Check out our guide, Fleeting Costs: Transitioning Your Idle Fleet to FAVR.
Fleet is an expensive program, without question. But that doesn’t mean it’s easy to transition out of. In fact, change management is one of the biggest hurdles that companies have to overcome when considering alternatives. Businesses fear employees won’t want to give up their company car, and may leave over switching to a new program. A good first step to a lower cost program is a fleet mileage tracking app.
There are a number of benefits to implementing a fleet mileage tracking app. First, there’s the compliance factor. The IRS considers fleet vehicles a taxable benefit. Companies may use personal-use chargebacks (PUC) to account for this, but without an accurate record of personal mileage, both the employee and the company are exposed to IRS audit. A fleet mileage tracking app diminishes that liability considerably.
Second, a fleet mileage tracking app guarantees employees are charged accurately. Companies typically settle on an average to charge employees at the end of the year. Some employees drive well over that average, while some are well below. That means some are being punished while others are being rewarded. With a fleet mileage tracking app, employees are only charged for the personal miles they drive on the vehicle, nothing more.
Finally, employers gain insight into their mobile workforce with a fleet mileage tracking app. How much are employees driving company cars for work versus personal use? Does their business driving correlate with their fuel card use? Knowing how your mobile workforce operates is important information to have. That data can inform assignment improvements or, if it makes sense, a decision to transition to a new vehicle program.
Interested in learning more about the benefits of a fleet mileage tracking app? Learn more today.
With Motus, accurately capturing business mileage has never been faster or easier.
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