Mileage Reimbursement Model to a Company-Owned Fleet- Advantages

When it comes to managing your organization's vehicles, choosing between a mileage reimbursement model and a company-owned or leased fleet is a crucial decision. While the reimbursement model may appear cost-effective and simpler on the surface, it can pose challenges for both drivers and fleet managers.

This article explores the reasons why transitioning to a company-owned fleet can be advantageous and provides insights on making a successful shift.

No One-Size-Fits-All Solution:

Every organization is unique, and there is no universal solution to fleet management. Initially, adopting a hybrid model that combines reimbursement and company-owned vehicles may be a practical approach during the implementation phase. Seeking guidance from an experienced fleet management company (FMC) can help tailor the transition based on your budget, requirements, and objectives.

Five Reasons to Move Away from a Reimbursement Model for Your Fleet:

1. Administrative Oversight: The reimbursement model places the burden of record-keeping on employees, leading to inconsistencies and potential abuse. Managing and verifying mileage reports becomes time-consuming for fleet managers, who must address discrepancies or policy violations.
2. Shifting IRS Reimbursement Guidelines: IRS regulations governing vehicle expense reimbursement often change annually, making it challenging to budget accurately. Recent modifications may also introduce tax implications for employees who are not fully reimbursed or who utilize their vehicles for personal purposes.
3. Customer Impressions: Using employees' personal vehicles for business purposes lacks consistency in branding, as vehicles may vary in appearance and maintenance standards. Older or poorly maintained vehicles could convey an unfavorable message to customers, potentially impacting their perception of your business.
4. Maintenance and Safety: Neglecting preventive maintenance schedules can result in extended vehicle downtime and costly repairs. Without proper insight into maintenance histories, your organization may be liable for substantial repair expenses. Moreover, in the event of an accident or breakdown, you may face significant losses and liability.
5. Insurance and Risk: Under the reimbursement model, employees are responsible for insuring their vehicles, raising concerns about adequate coverage. Opting for lower coverage levels to reduce costs exposes your company to potential risks. This self-insured model may not provide an acceptable level of protection.

Five Reasons Why a Company-Owned Fleet is Preferable:

1. Fleet Safety: Employee safety is a paramount concern, and a company-owned fleet allows you to prioritize it effectively. With newer, well-maintained vehicles equipped with advanced safety technologies, such as blind spot warning systems and backup cameras, you can enhance driver safety.
2. Fleet Size and Vehicle Type: Managing a company-owned fleet provides greater control over vehicle types, enabling you to select the most suitable options. Partnering with an experienced FMC empowers you to secure volume incentives and purchase programs, optimizing value. Customizing vehicles with branding elements allows consistent messaging to customers, reinforcing your services.
3. Vehicle Maintenance: A company-owned fleet streamlines vehicle maintenance by holding drivers accountable for adhering to recommended schedules. Even with a dispersed fleet, routine maintenance can be ensured, reducing breakdowns and downtime. Teaming up with an FMC offers access to a network of service providers, enabling cost-effective maintenance tracking and monitoring.
4. Vehicle Tracking: While not obligatory, a company-owned fleet allows you to leverage technology for optimizing routes, real-time alerts, and driver performance monitoring. Telematics devices installed in each vehicle facilitate idle time tracking, mileage monitoring for maintenance scheduling, and reporting capabilities, including automated fuel expense reports.
5. Bottom-Line Savings: Unlike the reimbursement model where employees retain equity in their vehicles, owning the fleet allows you to reinvest value into the company or replace older vehicles. Collaborating with an FMC also grants access to fuel and maintenance programs, generating additional savings.

Engaging Employees in the Transition to a Company-Owned Fleet:

To ensure a successful shift in your operating model, it is crucial to involve your drivers gradually. Starting with a pilot group enables you to address potential issues, test policies, procedures, and technologies. Clear and open communication throughout the transition, emphasizing the cost and safety benefits, can increase employee retention and enthusiasm. Leveraging the expertise of a trusted FMC partner, such as Enterprise Fleet Management, will support you, your drivers, and your company's leadership throughout the process, ensuring a seamless transition.

Transitioning from a mileage reimbursement model to a company-owned fleet offers numerous advantages, including improved administrative oversight, enhanced safety measures, better control over fleet size and vehicle types, streamlined maintenance processes, advanced tracking capabilities, and cost savings. By carefully planning the transition and engaging employees effectively, organizations can optimize their fleet management strategies for long-term success.