Personal use: free or fringe?
At some point, business vs. personal mileage has got to be a no-brainer in fleet management. Fleet managers are under constant pressure to find savings in their fleet. And personal use is a commonly untapped area.
Why? Because business miles and personal miles are not created equal. And, as a result, company car fringe benefits have become free benefits.
The last no-brainer I witnessed was a universally accepted fuel management card in the 1990s. It took years for the network of fuel marketers to roll out and years of education for commercial fleets to catch on. If I remember correctly, fuel cards were initially only accepted at 35 percent of all U.S. gas stations. Now, its acceptance exceeds 95 percent. That’s transformation.
More industry transformation
I believe the next era of fleet transformation should focus on one of the most basic ingredients in transportation that can be a major cost-saving win for a fleet manager. This data point has been sitting right in front of our eyes this whole time – the odometer.
Weights and measures are incredibly important to everything we do. The odometer helps us understand a vehicle’s optimal cycling pattern and determines costs and cents per mile to operate that vehicle.
We all understand that the burden of a trip log is the responsibility of the company car driver. And that a company needs to inform the driver of that responsibility. However, this is basically where everything stops and the driver starts guesstimating.
Let’s look at a non-business-hours scenario that’s all too common. A family and a couple of teammates need to get to a soccer tournament three hours away. You can bet the vehicle they are taking is the company car vs. the 10-year-old family minivan. What happens at the end of the month on business vs. personal mileage reporting? Mileage amounts are guessed, right? There are no logs anywhere and this is never questioned.
Can you imagine guessing on your expense report? Hi payroll, this is my best guess, please reimburse me about $2,500 for last month’s expenses. Take a guess at which side of accuracy your employee is going to side with when reporting business vs. personal mileage?
Germany has it right
If you look at Germany, for example, they have it down to a science. An employee who is given a vehicle as part of their compensation package is taxed at 1 percent of the value of that vehicle per month if they use it for personal trips. The employee must be strictly forbidden from using the car for personal matters to be exempt from the 1 percent rule.
I envision a $50,000 BMW and that driver being taxed $500 per month. That figure is close to a lease payment in the United States. Germany can tax the driver the full amount unless the driver can accurately substantiate, with mileage logs reviewed by the authorities, the business use of that vehicle. So, if you prove 50 percent business miles, your tax is now only $250.
I think companies need to look at personal use the same way they are addressing rising health care costs. Premiums are going up for everyone and employees are paying more and more of it and paying the associated costs such as co-pays, deductibles, out-of-pockets, etc. The costs have shifted, there is no doubt about that.
Now, what if company car drivers were accurately assessed and charged for their contribution on personal use? The costs would be reduced for the company, making it an overall better program.
Making it easy
So, how do we make it easy? How can we put a driver trip log right into our driver’s hands? If it were made easier for the driver to record business mileage, say like booking business travel or completing expense reports and the drivers retain their trip logs and the company’s costs go down and this can all be done on a mobile device, wouldn’t it be a win/win?
Now I know reporting mileage on a mobile phone is not a new concept, but have you adopted this practice for your fleet? That’s the first step.
Go mobile or go home
So, here’s my shameless plug. LeasePlan drivers can report mileage through the MyLeasePlan app today with reminders to do so. And fleet managers can also score their drivers on this compliance through OneScore, a mobile feedback management tool that monitors a driver’s safety, efficiency and compliance (PMR being one of the data points).
Here is my point. It’s about time that the accurate capture of all company car trips is collected and presented in an easy, IRS-compliant trip log where the driver can organize all trips with a swipe of their phone.
Accurate logs for the driver (driver’s burden)
Accurate reporting to fleet managers (a fleet manager’s dream)
= Accurate costs for both drivers and the company
Lower costs for the company results in increased value that the fleet manager is bringing to the bottom line, and an easier way for the driver and company to stay compliant.