Average Monthly Personal Use Charges Increase to $118 in 2011
The annual study of personal use fees finds increased charges and changes to the conditions and factors governing vehicle assignment.
Personal Use Challenges
According to the 2011 study, more fleets are allowing personal use of company-provided vehicles at all times, whenever necessary (76 percent) compared to 2010 (66 percent).
Some fleets have found creative ways to compromise with drivers regarding personal use, such as on vacation.
"We recommend (not require) that if an employee is taking a vehicle for an extended vacation, they pay for the fuel while on vacation," said Barb Bonanti, fleet manager, STERIS Corp. "We pay for the fuel when they leave for vacation and when they come back, but they pay for it in between."
Bonanti cautions fleet managers. "Many drivers will indicate they never use a vehicle for personal use. You can't get into that. It's an all-or-nothing program."
One challenge fleet managers face in managing a company-provided vehicle fleet is determining what factors govern the assignment of the vehicles.
Year-over-year, the No. 1 determining factor for company-provided vehicle assignment is job function; however, this has dropped to 71 percent (from 77 percent in 2010), with more fleet managers looking at total business miles driven (up from 41 percent in 2010 to 47 percent in 2011) and job title (up from 42 percent in 2010 to 44 percent in 2011).
More fleets are also performing motor vehicle record (MVR) checks on non-employees driving company-provided vehicles than in the past, compared to only 56 percent in 2010 (which was down from 63 percent in 2011). Performing MVR checks helps reduce potential risks and helps fleets understand who is operating its vehicles.
Accidents are also part and parcel of a fleet and may occur while the vehicle is being operated for personal use. In 2011, 78 percent of fleets reported that they do not charge employees for any portion of repair costs for accidents occurring in a vehicle during personal use, down from 83 percent in 2010 and up from 74 percent in 2009.
For fleets that do institute a charge, one fleet manager who wished to remain anonymous noted, "We charge up to $400 for all preventable accidents, whether on business or personal use."
No 'One-Size-Fits-All' Solution
In general, no fleet is the same. According to Tom Armstrong, director of fleet for ThyssenKrupp Elevator, "Each fleet operates differently, for some [personal use] is a perk and these would be treated differently than other fleets that look at it strictly as business. In either fleet, you must manage and track those who abuse it."
One fleet manager reported that unfortunately, the personal use program was cancelled at his company when a vehicle was stolen from an employee's home.
Another fleet manager cautioned, "When this privilege isn't regulated or prohibited, it becomes an entitlement. The only way to monitor and regulate it is through automatic vehicle location (AVL) or GPS."
Reviewing and Charging for Personal Use
The most common way to determine personal use charges is using an industry average or benchmarks (28 percent of respondents). One fleet manager's brief, but succinct advice: "Don't make it too complicated." Second to benchmarking, 20 percent of fleets determine charges by calculating the cost to the company.
Most fleets (87 percent) collect personal use charges via a payroll deduction, on par from 88 percent in 2010, followed by expense account deductions (10 percent). Of fleets that allow personal use of company-provided vehicles, 61 percent charge employees directly for vehicle use.
Also, the majority of fleets reported using a per-mile rate when reimbursing employees for business use of a personal vehicle (90 percent). Fleets are also increasing use of Fixed & Variable Rate Allowances (FAVR) for reimbursing employees, up to 7 percent in 2011 over 1 percent in 2010.
Another good piece of advice: "Make sure you have a good method for collecting mileage at least monthly and a method for auditing the collection of mileage," recommended one fleet manager who wished to remain anonymous.
The majority of fleets perform a personal-use reconciliation, or "true-up," annually (68 percent, up from 66 percent in 2010). A "true-up" is the process of bringing personal use costs into alignment with predetermined criteria or processes. An astounding 18 percent never perform a personal-use reconciliation.
Finally, and perhaps most importantly, is a fleet's average personal use charge. As monthly charges have increased to an average of $118 per month, AF's survey shows that 38 percent of fleets charge between $100-$149 per month, the same percentage reported in 2010. However, fleets that charge $150-plus per month increased to 14 percent in 2011 (versus 10 percent in 2010).
Ensure your company has a personal use policy and procedures in place, and make it a living, breathing document.