3 Steps To Reduce Company Car Costs

Written by mBurse Team Member Jul 25, 2017 7:51:00 AM

Without question, a company car is perceived as a huge perk to an employee. They get to drive a nice new vehicle without all the expense and liability. For a brand-conscious company that wants to attract top talent and top clients, company vehicles can project a uniformly classy, successful, or trustworthy image. But they come at a cost as well.

The Costs of a Company Car

Consider the “24-hour exposure” the company car creates. The employer assumes liability regardless of any agreements or signed documents between the employee and the employer. Even if the employee or employee’s family has an accident during personal use, the business is still likely to be held liable.

Plus, companies pay for fuel, licenses, maintenance, taxes, and depreciation, which can be very costly. And don’t forget, early lease terminations or storage fees can arise in the case of employees leaving the company.

There’s also the question of how much your business auto policy covers in the event of a loss. Business auto policies pay 100% of losses involving company provided vehicles, regardless if the accident occurs during business or personal hours.

Ways to Mitigate the Risks and Costs of a Company Car

With minimal effort and without additional cost, your company can easily reduce operational risk and costs by re-establishing the qualifiers for a company vehicle. Here are three steps to follow: 

  1. Redefinine employees that need a company vehicle either for business use or a perk.
  2. Remove all unnecessary staff from the company vehicle program and provide a vehicle reimbursement or allowance instead.
  3. Re-evaluate how you manage the personal use and the chargeback policy. 

This last step is crucial. You need to properly measure personal use and to charge employees according to how much they use the company vehicle for personal time. Otherwise, your company cars are costing you severely. More often than not, employees grossly understate the amount of personal use to minimize their chargeback at the expense of the company. A lot of times personal use is a manual process and self-reported on the honor system.

It may sound daunting to get this problem under control, but there are many tools on the market that will help accurately measure personal use. Take a look at some of our tools that will control costs and reduce redundant administrative time here. Please contact us for a demo of our products or tools that will save your organization.

The ultimate guide to paying a car allowance or mileage reimbursement

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