Good Intentions, Unforeseen Consequences: The Hidden Risks and Costs of Fleet Programs
Imagine that you just got a call from one of your best employees. She had this past Saturday marked on the family calendar for two months, to get that to-do list of house projects narrowed down significantly. Everybody was pitching in, so when her teenage son volunteered to drive to the corner hardware store, she was thrilled. Ten minutes later, the phone rang. There was a “fender bender” in the parking lot, and the company car will be going into the body shop instead of work on Monday. Yes, it was his fault. Yes, your company is liable.
The good news is that no one was injured, the company is not facing a massive lawsuit and the employee doesn’t have uncovered medical expenses. The bad news is that there will be a “dent” in productivity for that employee, the vehicle’s equity is compromised and there are difficult decisions ahead about what to do next.
Do you fire her for not following the company’s policy that only she drives the car? Losing good people hurts, and recruiting, hiring and training are expensive. Letting her go tells other employees that loyalty isn’t a two-way relationship; not doing so conveys that it’s okay to bend the rules. Is it time to rethink the company car policy, in light of the associated risk?
It’s Tough to Manage Against Uncertainty
Identifying what you can and cannot control is key to managing operational risks and their associated costs. Traditionally, companies that depend on a fleet try to be in control by buying, maintaining and running a fleet management program in-house. The fleet is an asset with declining value. For the car damaged in the accident we described, that value is unpredictably lower than normal. Had the accident been more serious, “vicarious liability” would create potential for large damages. Wouldn’t it be better to invest in assets in which you could be sure of their depreciation or, better yet, realize a positive ROI and eliminate liability?
Odds are good that fleet management is not your enterprise’s core competency. While you may be adept at working with your fleet company and administering your program internally, outsourcing that process entirely could be more cost-effective and allow you to focus resources on what you do best. As we often say, maybe it’s time for you to “get out of the car business.”
Uncertainty is on the horizon as well. Autonomous vehicles are poised to be a next evolution in transportation, and by extension in fleet vehicles. Cybersecurity will inevitably be an issue. Although we are sure every effort will be made to keep vehicles secure, the potential for hackers to disable vehicles or use them as weapons creates a risk that’s impossible to define today. What won’t change is who is responsible for the consequences.
FAVR Can Put You in Control
CarData has vehicle reimbursement options that help you gain control of vehicle expenses and are fair to employees. In particular, our Fixed and Variable Rate (FAVR) program has proved economically and culturally successful.
If you are familiar with FAVR, you know that total cost of owning and operating a vehicle is divided into two “buckets”: fixed expenses that don’t change such as finance, licensing and insurance; and variable expenses such as miles driven, fuel and maintenance. Reimbursement is based on all these factors, plus variable costs like regional fuel prices and insurance rates. Employees can choose the vehicle they prefer, both employee and company typically see tax advantages and employees hold the equity that’s in the vehicle. Companies shift the burden of administration to us, pay only for business use of the vehicle for 5 days of the week vs. 7 days, a 28.6% savings.
Finally, the car can be used by anyone the employee allows. So, when a good deed turns into a minor vehicle headache, the unexpected consequences are isolated.
We’d love to tell you more about how we can help you control costs for vehicle reimbursement and discuss the other options you have. Please reach out with any questions.
About CarData Consultants CarData provides precision vehicle reimbursement programs for the mobile workforce. CarData services save money, reduce risk, and remove administration. CarData programs are compliant with the IRS and the CRA procedures.