Company Cars: A Dwindling Fringe Benefit

"One of the most significant changes taking place in Ameri­can Business today is the rise in frequency and amounts of charges being assessed to employees who use company automobiles."

Survey Findings - Runzheimer and Company, a Wisconsin based automotive cost consultant agency, recently publish­ed their first Survey and Analysis of Business Car Policies & Costs. The survey revealed that 93-percent of the respond­ing organizations permit personal use of business cars. The survey statistics for company-owned and leased fleets show mileage as the most popular method used to charge employ­ees for their personal use of the company car . . . with the amounts most heavily clustered in the 4 to 7 cent area.

This finding is startling in view of the fact the abuse of travel and entertainment expenses is one of the areas that the Internal Revenue Service asks its Audit Division person­nel to give special attention. However, as Runzheimer and Company notes, their recent work with corporations indi­cates that employers are rapidly changing their policies to more fully recover the fringe benefit value of the company car.

"Fringe Benefit" Value? - The typical business car of to­day is an intermediate-size vehicle such as a Chevelle Malibu Classic, Ford Gran Torino or the Plymouth Fury. The fol­lowing table illustrates typical running and fixed costs for an intermediate-size car in a representative cost city of the midwest. The car is driven a total of 25,000 miles yearly . . . 5,000 of these miles are for personal use. Therefore, the running cost fringe benefit is premised upon 20-percent of the total annual car miles driven while the fixed cost fringe benefit is based on dividing the year into 240 working days and 125 non-business days (during which the vehicle is available for personal use).

You will note that the fringe benefit worth of this auto­mobile works out to slightly over 26-percent of the annual, combined fixed and operating costs for the vehicle.

Other Survey Findings - These statistics are just a sampling from the 400 page Survey and Analysis of Business Car Policies & Costs compiled by Runzheimer. Their survey contains an entire section on Personal Use Chargebacks.

The survey report is available at a cost of $87.00, with 15 days free examination. For more information, write to Runzheimer and Company, Inc., Runzheimer Park, Rochester, Wisconsin 53167.

Latest findings reported by Runzheimer and Company, Inc., show that car ownership and operating costs have risen almost seven percent in the past year. In conducting their latest car cost study, Runzheimer compared the 1974 inter­mediate-size cars (typified by the Chevelle Malibu Classic, Ford Gran Torino and Plymouth Fury) purchased new in the fall of 1973, with the 1975 comparable intermediate-size cars, purchased new in the fall of 1974. Figures shown in the comparative cost table below reflect retail car pur­chases and vehicle retention cycle of four years or 60,000 total miles.

ANNUAL OWNERSHIP & OPERATING COSTS

(20,000 miles per year)