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Personal use fees continue to climb this year, increasing to an average monthly charge of $110. This number has inched up from $103 in 2008 and $108 in 2009. In Automotive Fleet's annual personal use survey, several fleets noted recent or upcoming changes in personal use policy, additional surcharges, and a decreased number of employees provided the perk of personal use of a company-provided vehicle.

"Many companies added or increased personal use charges in late 2008/early 2009 as a result of higher fuel prices and their desire to cut costs," said Mark Smith, general manager, strategic consulting for GE Capital Fleet Services. "Since mid-2009, most companies have been holding steady with personal use charges they have already put in place. We have seen a shift toward smaller vehicles over the past 18 months and some adjustments to personal use charges as a result of those changes."

Personal Use Decreases in 2010 While Charges Increase

The overall percentage of fleets allowing personal use in 2010, 86 percent, decreased from the 91 percent figure reported in the 2009 personal use survey, and is more than a full percentage point lower than the 87.1 percent of fleets allowing personal use in 2008.

One communications fleet is moving away from personal use.

"We are in the process of writing a new policy that will no longer allow any personal use of company-provided vehicles," said one fleet manager, who wished to remain anonymous.

Utilized as a perk for hiring and retaining top-level employees, personal use is increasingly coming under scrutiny by fleets.

The Irving, Texas-based laundry service, sales, and equipment company Coinmach Corp. & Appliance Warehouse is another company looking to eliminate personal use.

"Coinmach is moving out of the sedan business to eliminate personal use. We will become a 100-percent service fleet over the next 36 months. All sales, management, and executives are moving to a flat allowance. We monitor fuel consumption through our fuel card reporting program and drivers are aware misuse can result in termination," said Lisa Kneggs, fleet manager, Coinmach.

Most fleets continue to see the benefit of personal use, and attempts to eliminate the program will have far-reaching ramifications.

"If vehicles are interpreted as a perk of a position and you plan to remove 'take-home' vehicles, do your homework on salary averages in your industry and present that data to soften the blow of losing what most will consider a right, versus a perk or privilege," recommended Dan Haase, fleet maintenance manager at the Integrys Energy Group, based in Chicago.

The number of fleets that do not allow anyone other than an employee to drive a company-provided increased in 2010 to 46 percent, up from only 28 percent in 2009. While keeping the program in tact, these fleets feel reducing the number of employees eligible to drive will decrease liability.
Decreasing steadily from 76 percent in 2008 and 2009 to 66 percent in 2010 are fleets that allow personal use at all times, whenever necessary. While the majority of fleets surveyed do not restrict conditions for personal use, the number of fleets only allowing personal use to/from work increased to 17 percent in 2010 (from 14 percent in 2009).

Also decreasing is the number of fleets that allow only an employee's spouse personal use (41 percent), down from 58 percent in 2008 and 57 percent in 2009. Almost all fleets surveyed noted that they allow personal use by an employees' spouse or licensed children over 21 in emergency situations.

"We are currently considering changing policy to only allow the employee to drive a company vehicle, with the exception of emergency situations," said Rosalie Falato, SG & A buyer for Benjamin Moore & Co. "If the IRS rate for reimbursement was considered as the cost, we estimate potential savings to be $660,000 annually."

Job function remains the top factor governing personal use of company-provided vehicles at 77 percent, up 9 percentage points from 2009 and on par with 2008 figures. Annual business miles driven (41 percent) and job title (42 percent) nearly tied for the second most commonly utilized factor.

Fleets Modify and Adjust Personal Use Charges

When determining personal use charges, most fleets (28 percent) utilize industry averages or competitive benchmarks, up from 15 percent in 2009. Additional popular methods include using a pro-rated annual lease value (based on expected average personal use and including a fuel benefit, typically 5.5 cents per personal mile for company-provided fuel).

"These days, many fleets are focusing on a lower capitalized cost vehicle while others are focusing on mpg improvement and emissions reduction," said Chelsea Mathis, Donlen environmental consultant.

Fleets looking to make changes to personal use policy frequently cited adjustments to personal use charges as one area of change.

"We implemented a change where employees that take a more fuel- or cost-efficient vehicle had their personal use fee lowered," said Barb Bonanti, fleet manager for STERIS Corp. "Those taking a less fuel- or cost-efficient vehicle had their fee raised. Those in the middle stayed the same. We have three tiers of vehicle choices."

McDonald's Corp. also utilizes a category-based charge policy.

"We implemented three categories of personal use charges - green representing the most efficient and lowest personal use charge, premium being the next category, and ultra being the most expensive," said Sue Miller, senior fleet manager for the U.S. food service provider. "It was very effective in changing driver behavior toward selecting the most efficient vehicles."

Donlen Corp. also is witnessing the use of personal use fee tiers with its clients.

"To incentivize drivers, many companies are creating personal use fee tiers that focus on rewarding drivers with a vehicle selection choice. For instance, they may place a lower personal use fee on the Ford Fusion as opposed to that of the Escape," said Mathis of Donlen. "Donlen's Strategic Consulting group is finding the tiered approach, coupled with a comprehensive education program that focuses on the individual driver's environmental impact, is creating a win-win for fleet operating costs and employee morale, while helping companies meet carbon emission goals."

inVentiv Health rolled out an additional $10 surcharge for spousal use, paid via payroll deduction every two weeks, noted Warren Dudek, fleet and travel manager for the Somerset, N.J.-based healthcare company.

Charges for personal use are mostly collected via a payroll deduction (88 percent), up from 79 percent in 2009.

Stable compared to 2009 figures, 92 percent of fleets charge a per-mile rate when reimbursed for business use of a personal vehicle. Most fleets (69 percent) perform a personal-use reconciliation, or true-up, every year, down 4 percentage points from 2009 figures, closer to the reported numbers in 2008.

Average monthly personal use charges hit $110 in 2010, the highest charge in the past three years, with 38 percent of fleets charging $100-$149 per month.

Dealing with Personal Use Challenges

One challenge fleet managers face in dealing with personal use issues and assembling policy is the misunderstanding of what personal use actually entails.

"I think the most important part of the personal use issue is explaining what it is and how the IRS defines it in a plain, easy-to-understand manner, so drivers know why they have to [report]," said Donna Bibbo, manager, fleet & travel, facilities for Novo Nordisk, Inc. "We're well aware there are some people who under-report, but as long as they are reporting and attesting to it, we don't have much time to do anything else about it."

The healthcare company believes drivers should be held accountable as far as understanding policy, once a company provides policy explanations.

"As far as I'm concerned, as long as the driver has acknowledged they are telling the truth and we have that acknowledgement, if the IRS comes calling, the driver will have to deal with them," continued Bibbo. "We put out explanations of what personal use is and how it is calculated on our Intranet site. We answer all questions that come back at the end of the year when we do the true-up, but other than that, we don't worry about it too much."

First Pacific Corp., a business support company for dental professionals, shared its practices in dealing with personal use of a company-provided vehicle.

"Employees are asked to cover all personal mileage fuel expenses. Although we do not require strict mileage records, we do require drivers calculate an average based on daily driving," said Rich Bontrager, corporate services manager at First Pacific Corp. "Longer trips and/or vacation mileage must be specific. Also, we recommend they fill up on Friday night with the company fuel card and fill up on Monday morning with their personal card, to cover personal fuel used over the weekend."

Personal use mileage reporting also presents challenges.

"To meet budget objectives, companies are beginning to more strictly enforce accurate personal use reporting," noted Dave Lodding, president of Donlen Fleet Management Services. "In fact, the mandate on drivers for accurate reporting is more prevalent than I have seen in many years. The days of letting drivers slide when they do not report seem to be over, and we are seeing many companies institute a minimum percentage of personal mileage per year and assessing 100-percent personal use for non-reporting drivers."

To accommodate its customers' unique reporting structures, Donlen made many enhancements to its online driver reporting system, including reporting access using an iPhone, BlackBerry, and other smartphone devices via DonlenDriver Mobile.

"Getting drivers to report has long been a problem for fleet managers, but with more reporting options, minimum personal use levels, e-mail reminders, and failure-to-report penalties, compliance is improving dramatically," said Lodding.

Additional Factors Impacting Personal Use

More fleets began charging employees a portion of accident costs if the event occurs in a company vehicle during personal use. At 83 percent in 2010, the number of fleets participating in this practice increased 9 percentage points over 2008 figures.

Another area of contention is employee terminations. When there is a planned termination an employee quits with notice, etc., the effect on personal use reporting is minimal, as time is available to finalize paperwork, etc. However, when an employee is fired, many loose ends must be tied up, including recouping personal use expenses.

"Upon termination, we send a form to be completed by the driver to report their mileage and how it is divided by personal and business mileage up to their termination date," said Bibbo of Novo Nordisk. "If we don't receive the information, we use what our leasing company has on file for mileage and include 50 percent as personal."

Kneggs from Coinmach Corp. feels personal use is a company-by-company situation. "Our fleet is so unique that we had to become very resourceful and creative in developing (or eliminating) a personal use plan.

About the author
Lauren Fletcher

Lauren Fletcher

Executive Editor - Fleet, Trucking & Transportation

Lauren Fletcher is Executive Editor for the Fleet, Trucking & Transportation Group. She has covered the truck fleet industry since 2006. Her bright personality helps lead the teams content strategy and focuses on growth, education, and motivation.

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