Setting up a perfect fleet policy is one of the fundamental activities of corporate organizations. Company cars will definitely be required for delivery, service and utilities. But when the employee requires customer visit, will it be feasible with reimbursement or company owned cars? The interests of the companies are to be kept in mind while taking this decision. The fleet manager may assign a strict policy of vehicle assignment by considering both the economic and non-economic factors.
Prepare Assignment: There can be various reasons where the employees will require personal transportation for performing their jobs. Their jobs may include site visits, product servicing, entertaining customers etc. Fleet managers are required to consider two main factors while assigning automobiles:
- Economics: The travel must be cost effective for providing a vehicle to the employee instead of the reimbursement of using his personal vehicles.
- Job Function: The fleet managers must be aware of the job functions of the employees where he is required to assign vehicle. Mainly, the delivery, sales service or livery type of functions require vehicle for the operations.
Collect Information About Vehicle: You must go through the TCO (Total cost of ownership) of the vehicles, which can be an important economic decision maker for assigning the vehicle. This analysis will help in including all the fixed and variable costs which were incurred throughout the service life of the vehicle. Sometimes the TCO components are expressed in a different manner, where the repair and maintenance costs are calculated as cents per mile and the depreciation costs are calculated as dollars per month. Some companies may possess reimbursement policy where the employees can be reimbursed for using their personal vehicle occasionally for the business purpose. As soon as the data of total cost of ownership is being collected, the reimbursing cost and the monthly cost of company vehicle can be compared. Depending on the total mileage driven, it may sometimes be cost effective to provide a car instead of reimbursing the employees.
Calculate: After collecting the information, you are required to do some maths. Depending on the basic arithmetic, the economic decision can be taken for determining the acquisition of company vehicle.
For example, an employee is required to drive 1400 miles per month. The reimbursement rate is 56.6 cents per mile. Therefore, the cost to the company will be $ 793
Let us assume, that it would cost $750 per month to provide vehicle for an employee.
So the fleet managers will calculate the breakeven point to know which option will be better for the company. In the above case, it is more cost effective to provide vehicle instead of reimbursement.
Evaluate Job Functions In Detail: The job functions of the companies are required to be evaluated in details so that the vehicle assignment can be done smoothly.
- Sales: Salespersons mainly represent the company by displaying services or products, contracts or proposals. They generally carry samples, brochures and other materials required for sales visits.
- Livery: These vehicles are generally used to carry people and may carry van pools, other shuttles and similar other vehicles.
- Service: Providing service to the existing clients, reviewing accounts of the clients, occasionally entertaining the clients by resolving their issues are generally included in the service category of the job functions.
- Compensatory: Not only for the job functions, the company provides vehicles as compensation packages to their executive employees also.
By simple break even analysis, you can determine whether reimbursement is more cost effective than providing vehicles. In every case while deciding, you are required to keep the company’s interests at the top most priority.
Author Bio: Mark Stephen is a well known sales executive in Ideal Auto USA. In this article, he is providing tips for determining whether vehicle or reimbursement can be cost effective for companies.