It’s simple math. Want to scale up your fleet? You need to purchase more vehicles at record high prices. But running the other way and selling off your company cars also means obtaining a considerable ROI on your initial investments. This post will cover the top 5 reasons to transition out of fleet and into individualized mileage reimbursement.

1. Decreasing Risk & Liability

Personal use of company vehicles increases risk and liability. Employees use company cars used 24/7 for different purposes (not necessarily generating revenue to the business). Additionally, nothing guarantees the employee is the only one behind the wheel. ​The latest Motus Safety report found US employers spent $5.5B in 2019 on insurance. ​If serious injury or worse occurs and a company provided vehicle is found at fault, no matter who’s driving, the business faces litigation. 

2. Reducing Costs

If cost savings is your priority, there has never been a better time to switch from fleet to FAVR. Not only would you be making a profit with the current high demand for used cars, but you’d also eliminate the maintenance costs that come with a company-provided vehicle program. If an employee leaves or an unexpected situation requires your entire mobile workforce to stay off the road indefinitely, your business will continue to make lease payments for those vehicles.​

By offering a personalized reimbursement based on how much employees drive and where they drive, the company can offload the costs of idle vehicle expenses, maintenance, insurance and liability.

3. Less Administrative Burden

Companies should focus their time and efforts on their core business, not on managing a fleet of vehicles. Unfortunately, many decision makers only consider alternatives like mileage tracking. These alternatives can be both time consuming and hard to execute accurately every single time. An individualized mileage reimbursement program like FAVR that calculates accurate rates no matter where your workforce is can be fully automated. This ensures your employees can dedicate their time to activities that generate revenue for your business, while fairly reimbursing them.

4. Ensuring Compliance with IRS Regulations

Mistakes with fleet vehicle mileage reporting can land companies in hot water with the IRS. This can be avoided with a personalized reimbursement rate program such as FAVR, is the only IRS-recommended methodology to reimburse mobile employees tax-free for the different costs associated with driving for business.​ This is possible thanks to our scalable platform that accounts in real-time for both fixed and variable expenses and updates the personalized reimbursement rates based on costs specific to where your workforce is located and how many miles they drive.

Fleet Mileage Tracking App

Transitioning immediately out of fleet? Even in a market where companies have budget concerns, that plan will move a lot of questions. Decision makers will have questions: What about the recruiting perk? How will employees react? Not sure you’re ready to go through with a new vehicle program? Consider making a smaller step.

By rolling out a fleet mileage tracking app, employees track their personal driving mileage. This makes fleet personal-use chargeback’s more accurate. There may be some money saving there, but, more importantly, the company now gains insight into how much employees are driving for business use versus personal use. If the personal use outweighs the business use, then your case for replacing fleet vehicles just got stronger.

5. Freedom of Choice for Employees 

Truth is, no one enjoys driving a vehicle they’re not comfortable with. Your employees are using their company car for both business and pleasure. Providing them the flexibility to select a model they actually like can make a complete difference in their productivity and engagement levels.

Now is the Time to Switch From Fleet to FAVR

Used car prices keep rising, so why not make that work to your advantage?  

There has never been a better time to achieve a considerable ROI on your company cars… Or a worse time to keep them.  A partner like Motus can help make the transition from fleet to mileage reimbursement as seamless and painless as possible. With our platform, every mile is tracked, and every expense is accounted for, eliminating tax waste and keeping more money in your employees’ pockets.  

As one customer said, “FAVR is the future. You’ll wonder why you didn’t change earlier.” But don’t take our word for it. Watch this virtual panel where three business leaders discuss their main tipping point to get out of fleet, what made their transition successful and the many benefits they have experienced since.   

Transitioning from Fleet to FAVR: What it Looks Like

Switching vehicle programs is always a process. Transitions around business aspects that can have a serious impact on your business require time, education and thought. We get that. We also get we can only do so much to help prepare you for the process.

The post 5 Reasons to Transition From Fleet to FAVR Reimbursements    appeared first on Motus.

If your vehicle program does not adjust to keep pace with increasing, volatile costs, your drivers are likely having to pay business expenses out of their own pockets. And for those not willing to do so, they may have decided to drive less, or not at all. That’s certainly not the behavior you want from your driving workforce.  

So, while inflation is unavoidable, how can you proactively protect your bottom line while retaining top employees amidst the Great Resignation? How can you hedge against inflation using your vehicle program? First, let’s go over why certain vehicle programs, like car allowances, are more heavily impacted by inflation.  

Rising Costs 

2022 has seen a historic inflation rate of 8.5% as of March. That’s the highest rate since 1982, with the two largest contributors being homes and motor vehicles. When it comes to business vehicle programs, this trend has impacted most costs of owning and operating a car. Since January 2021, used car prices have increased 45.2%, with some used cars selling for way more than their owners paid when they were brand new. And new car prices have increased by 12.2%.  

We can blame supply chain shortages caused by COVID-19 for these fluctuations. The short supply of computer chips has caused auto manufacturers to focus on production of their most profitable models, which reduces vehicle supply and increases their costs. This has had a direct impact on the used vehicle market. People are turning in fewer vehicles, and more motorists keep their rented cars because they simply cannot afford an upgrade. Simply put, the cost of owning and operating a vehicle has jumped. 

Tax Waste

A business car allowance is also heavily impacted by losses to tax waste. The IRS considers a flat stipend additional income because it isn’t attributed specifically to business mileage. For example, if you provide a $600 allowance to your employees, you are spending $645.90 after FICA tax. However, after taxes, your employees only take home $419.10. For every $100 flat allowance, $38 is lost to taxes. This isn’t helping the business or the employee hedge against inflation.

Non-compliance

When it comes to vehicle programs, hedging against inflation isn’t the only concern. If the vehicle program you provide is not accounting for rising costs, you could be at risk of non-compliance. Some states like California, Illinois, Massachusetts and others require that companies pay all business expenses employees require in their work. An arbitrary flat stipend has no substantiation and no way to prove an accurate reimbursement.  

Lack of Fairness

Geography matters. All driving employees drive different distances and the costs of owning and operating their vehicles is not the same. States like California have seen gas prices increase to over $6 a gallon, versus St. Louis barely reaching $3. When you offer the same reimbursement to all your employees, regardless of their location, you could be forcing them to drive less because it simply won’t cover all the expenses required to do their job.   

Building a Tax-Free Car Allowance

For a business car allowance to be tax-free, it must follow IRS guidelines for substantiation to prove it is a true business expense. Requirements include employees driving and substantiating a minimum of 5,000 business miles per year, having the right insurance for their vehicle level, specific vehicle ages and others.  

How Does a FAVR Program with Motus Hedge Against Inflation?

Fixed and Variable Rate (FAVR) reimbursements are the only IRS-recommended methodology to reimburse your employees tax-free for the business use of their personal vehicle. With a Motus tax-free vehicle program, fluctuating costs of owning and operating a vehicle are accounted for and updated every single month. That means your employees’ pockets and driving behavior are not impacted by inflation. 

If you’d like to learn more about how to make positive adjustments to your vehicle program and reveal areas where your business could be more profitable, check out this on-demand webinar on inflation-proof vehicle solutions.  

Check Out The Webinar

The post Hedge Against Inflation: Inflation Proof Your Vehicle Program appeared first on Motus.