Company Vehicles versus Employee Vehicles

Kyra Deprez

There have been more than a few discussions over the last year or so on the topic of company vehicles versus having an employee drive their own vehicles.

I’m going to lay out the pros and cons, the advantages and disadvantages.  So let’s start with some numbers and what the cost might be for each option.

The Employee Vehicle

In terms of cost, the primary expense for an employee-owned vehicle is going to be mileage reimbursement. The current rate from the IRS is 57.5¢ per mile for business miles driven. That being said you are not required to pay this rate, it is the rate the can be used as a tax deduction. As far as I am aware, there is no law stating that you have to have reimburse your employees to use their vehicle at all. (I am not an accountant, nor an agent of the IRS, so please check your local laws as well).

That being said, it is nice to have an incentive for an employee that is willing to drive their own vehicle, keep it well maintained and so on.  So let us consider the cost based on the IRS standard deduction. I am going to use our average miles per day driven to give us an idea of the cost.  On average, our teams drive 50 miles per day, and the rate is 57.5¢ per mile.

Single Driver Reimbursement (5-Day Work Week)
50 miles per day x 57.5¢ per mile = $28.75
5-day work week = $143.75
23-working days in a month = $661.25

Our teams work on Saturday as well, but we don’t run a full staff. So lets look at the numbers based on a 6-day work week as well.

Single Driver Reimbursement (6-Day Work Week)
50 miles per day x 57.5¢ per mile = $28.75
6-day work week = $172.50
27-working days in a month = $776.25

While we’re at it, let’s put together a quarterly and yearly cost as well since we will need those a little later to make a comparison.

Single Driver Reimbursement (Quarterly Cost)
5-day work week = $1,983.75
6-day work week = $2,328.75

Single Driver Reimbursement (Yearly  Cost)
5-day work week = $7,935.00
6-day work week = $9,315.00

The Company-Owned Vehicle

I am going to break down the basic cost of the company vehicle before going over some of the finer details, such as cost to acquire, tax write-offs, etc. Let’s begin by outlining some of the common expenses of using a company-owned vehicle…

Typical Monthly Expenses
Insurance: $120
Vehicle Payment: $250
Oil Change Quarterly: $50 ($17 monthly)
Other Maintenance Monthly: $75
Registration and other fees (yearly): $80 ($7 monthly)
_________________________________________________
Total Monthly Expense: $469 a month (before fuel)

Now, let’s add some fuel to this car and let’s pretend that the vehicle gets 18 miles/gallon…

Fuel Costs
50 miles per day @ $3.00/gallon* of fuel = $8.31
5-day work week = $41.55
6-day work week = $49.86
23-working days in a month = $191.13
27-working days in a month = $224.37

The estimated total costs of this vehicle looks like this…

5-Day Work Week
5-day work week monthly: $660.13
5-day work week quarterly: $1,980.39
5-day work week yearly: $7,921.56

6-Day Work Week
6-day work week monthly:$693.37
6-day work week quarterly: $2,080.11
6-day work week yearly: $9,820.44

The Results

To be completely honest, I was NOT expecting these numbers to be SO close!

Company-Owned Vehicle Employee Vehicle Reimbursement
5-day work week yearly: $7,921.56 5-day work week yearly: $7,935.00
6-day work week yearly: $9,820.44 6-day work week yearly: $9,315.00

Some Things To Keep in Mind…

  • Once the vehicle is paid off, the only expense you’ll have moving forward is fuel and maintenance.
  • You will see substantial savings when you insure multiple vehicles on one commercial fleet policy.

That being said, let’s take a look at some other things to consider when debating company-owned fleet vehicles versus employee vehicles.

Possible Issue

An employee who has been with your for more than a year calls in to say that her car has broken down, or it has been in an accident, she is fine but either way her car is out of commission. In the meantime, the repairs are going to take more than a week. She is the driver of the team, and the other team members do not have their driver’s licenses.

If you have a company owned fleet, your employee will find a way to get to work, whether she takes the bus or finds a ride…We have even picked up employees before when a situation like this has happened.

If she was using her own vehicle, then well, what do you do? Are out of a team until the vehicle is fixed or replaced? Do you give her the week off? Reschedule all her jobs? Perhaps borrow her your vehicle in the mean time?

So you can see in this case that having a fleet vehicle might be an advantage. At the same time, you have to consider that if one of your fleet vehicles is out of service for the same reasons, you should be prepared with a backup.

Vehicle as a Billboard

Think of Stanley Steemer as an example. Their vehicles are very recognizable. As they zip through the city from house to house they are advertising. When they are parked at a home, they are advertising to every neighbor in the area. The vehicle is promoting the brand and creating awareness. This can be accomplished in a couple of ways.

The simplest way would be to use magnets to attach to the vehicle. While they are not as flashy and noticeable as a whole car wrap they are certainly cost effective. VistaPrint.com, for example, has magnets from $12 to $24 and almost always has a sale or a discount code available. The magnets can be used on employee vehicles as well as fleet vehicles.

The car wrap. When done right, these 3M wraps not only look great, but they really do draw in business as well as brand recognition. You can get your name, logo, phone number and web address plastered on every side of the vehicle. In the design process remember that you want this to be easy-to-read not only while in park, but also while zipping down the highway at 65+ miles per hour. Average cost varies, but you can expect to pay between $3,000-$5,000 for design, printing, and installation. Once the design is done you can, of course, use it over and over again, so future vehicles will only need printing and installation. We use 3M wraps with UV coating, I highly recommend the investment and it’ll last you longer than the cheaper vinyl wraps.

Other Considerations

So, I could go on and on about various other pros and cons to the debate about fleet vehicles, but I think you get the idea. There are advantages and disadvantages to each scenario. So to end I will remind you that there are two main possible ways to take advantage of fleet vehicles for tax write-offs (during the vehicles’ first year in service):

  1. Deductions for Sport Utility and Certain Other Vehicles IRS Code Section 179 covers true fleet vehicles, ones that are specifically for a fleet and are not meant to be a passenger car. Such as a Ford Transit.
  2. Depreciation – this is more common and would apply to passenger vehicles that are used as fleet vehicles.

So that about wraps it up! I am curious, what’s your stance on company-owned versus employee supplied vehicles?

*At the time of this writing, the average price of regular unleaded was $3.00/gallon

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