personal use charges increased in

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1 average monthly PERSO The annual study of personal use fees finds increased charges and changes to the conditions and factors governing vehicle assignment. BY LAUREN FLETCHER personal use charges increased in 2011 to an average monthly charge of $118. This amount has risen steadily from $103 in 2008; $108 in 2009; and $110 in Automotive Fleet s annual survey of personal use charges and policies found an increase in the percentage of fleets allowing personal use (89 percent in 2011, up from 86 Percentage of fleets that allow personal use of companyprovided vehicles. at a glance Changes in personal use policies and procedures in 2011 resulted in: Increased monthly charges from $110 in 2010 to $118 in Increased percentage of fleets allowing personal use of company-provided vehicles from 86 percent in 2010 to 89 percent in Decreased percentage of fleets using job function to determine vehicle assignment and increased percentage using business miles driven. percent in 2010) and, as noted, an increase in charges/fees as well. This is still down from the high of 91 percent in One conundrum fleet managers face involves charging for personal use when it may have been previously provided for free. This challenge was summed up by one fleet manager who wished to remain anonymous: Our new hires can t believe how good of a deal our personal use charge is for unlimited use of the vehicle by them and their spouse. Our long-term reps, who have had it free for years, are unhappy about the change. Many fleets managers commented that changes are coming soon in their companies, with some changes starting at the executive level. Several fleets are currently in the midst of discussions to consider changes to the personal use program. Dave Meisel, director - transportation services for Pacific Gas & Electric (PG&E) commented, We continue to evaluate our assigned vehicle program, but do not expect any significant changes. However, some fleets are instituting changes in regards to personal vehicles used for business purposes. We have implemented a corporate policy of 20 mpg for anyone that drives a personal vehicle with a company fuel card and vehicle allowance, said one anonymous fleet manager. The majority of fleet managers surveyed (54 percent) still allow an employee s spouse to use a company vehicle. This is up from 41 percent in One fleet manager noted his company instituted a nominal charge for spousal personal use. Warren Dudek, fleet manager for inventiv Commercial Services, noted, We also charge employees an additional $10 fee per paycheck for spousal use, also collected through payroll deduction. Who, Besides the Employee, is Allowed to Use a COmpany Vehicle? Employee s Licensed Children Employee s Spouse No one 1 11 *Other *Other includes: domestic partner, spouse only in emergencies, any household member over 21, and any licensed family member over automotive fleet I JULY 2011

2 NAL USE charges increase to $118 in 2011 More fleets have also apparently loosened their guidelines, as only 35 percent stated that no one other than the employee was allowed personal use of a company vehicle, down from 46 percent in back, but they pay for it in between. Bonanti cautions fleet managers. Many drivers will indicate they never use a vehicle for personal use. You can t get into that. It s an all-or-nothing program. One challenge fleet managers face in managing a company-provided vehicle fleet is determining what factors govern the assignment of the vehicles. Year-over-year, the No. 1 determining Personal Use Challenges 3 According to the 2011 study, more fleets are allowing personal use of 5 companyprovided vehicles at all times, whenever 8 necessary (76 percent) compared to 2010 (66 percent) Some 54 fleets have found creative 76 ways to compromise with drivers regarding personal use, such as on vacation. We recommend (not require) that if an employee 35 is taking a vehicle 54 for an extended vacation, they pay for the fuel while on vacation, said Barb Bonanti, fleet manager, STERIS Corp. We pay 3 for the fuel when 11 they 20 leave for vacation and when they come WHAT Conditions are approved for personal use? At all times/whenever necessary Only during non-business hours Only during work hours Only to and from work *Other includes: within reason on weekend, nights; Emergencies; only for agency head; routine errands and personal business; only on vacation $0- $ Percentage of fleets that perform mvr checks $50- $100-on $150+ non- $99 $149 Employees driving Company-provided Vehicles what factors govern the assignment of company-provided vehicles? 47 Annual Business Miles Driven Fringe Benefit Job Title Job Function More fleets are allowing personal use at all times, whenever necessary (76 percent) in 2011 compared to 2010 (66 percent). 1 *Other includes: if duties require, Regional VP or management Approval, and emergency On-call personnel only. Total exceeds 100 due to ability to select multiple responses. In 2011, fleets are looking to job function (71 percent) and annual business miles driven (47 percent) to determine assignment of company-provided vehicles JULY 2011 I automotive fleet

3 76 personal use survey factor for company-provided vehicle assignment is job function; however, this has dropped to 71 percent (from 77 percent in 2010), with more fleet managers looking at total business miles driven (up from 41 percent in 2010 to 47 percent in 2011) and job title (up from 42 percent in 2010 to 44 percent in 2011). More fleets are 3 also performing motor vehicle record (MVR) checks on non-employees driving 8 company-provided vehicles than in the past, compared to only 56 percent in 2010 (which was down from 63 percent in 2011). Performing MVR checks helps reduce potential risks and helps fleets understand who is operating its vehicles. Accidents are also part and parcel of a fleet and may occur while the vehicle is being operated for personal use. In 2011, 78 percent of fleets reported that they do not charge employees for any portion of repair costs for accidents occurring in a vehicle during personal use, down from 83 percent in 2010 and up from 74 percent in For fleets that 5 do institute a charge, one 20 fleet manager who wished to remain anonymous noted, We charge up to $400 for 11 all 1 preventable 11 accidents, whether on business or personal use how are personal use charges collected? Payroll deduction 3 Employee check how do you determine personal use charges? By calculating cost to the company Using industry average or competitive benchmarks Using 100 of Annual Lease Value Using a pro-rated Annual Lease Value (based on an expected average personal-use percent) By including a fuel benefit (typically 5.5 cents per personal mile, for company-provided fuel) Using an average cents/mile expense based on IRS standard rate Using commuting charge only The largest percentage of fleets (28 percent) 7 calculate the cost to the company when determining personal use charges *Other includes: by previously set per diem, leasing company calculations, and tier-based. Expense account deduction $0- $49 $50- *Other includes: additional taxable income $100- on W-2 and $150+ expense account deduction. $ $ The majority of fleets, 87 percent, collect personal use charges via a payroll deduction automotive fleet I JULY percentage of fleets 20 that do not charge employees for any portion of repair costs for accidents occuring in a company vehicle 5 0 during personal use. $0- $50- $100- $49 $99 $ how are employees reimbursed for business use of a personally owned vehicle? $ Per-mile rate Fixed 60 & Variable Rate Allowance (FAVR) Combination per mile/flat rate Down 2 percentage points from 2010, 90 percent of fleets reimburse drivers a per-mile rate for business use of a personal 20 vehicle

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5 Personal use survey how often 3 does your company 5 perform personal-use 8 reconciliations, or a true-up *? **Other includes twice per year, 3 7 quarterly and monthly what 8 is your fleet s average personal 71 use charge? $0- $49 68 Most fleets, 68 percent, perform an annual personal-use reconciliation, or true-up $50- $99 38 $100- $149 Annually Every two years Never **Other * True-up is bringing personal use costs into alignment with predetermined criteria or processes. The majority of fleets surveyed were charged $100-$ per month for personal use of a company-provided vehicles $ Percentage of employees charged directly for personal use of companyprovided vehicles. No One-Size-Fits-All Solution In general, no fleet is the same. According to Tom Armstrong, director of fleet for ThyssenKrupp 7 3 Elevator, Each fleet operates differently, for some [personal use] is a perk and these would be treated differently than other fleets that look at it strictly as business. In either fleet, you must manage and track those who abuse it. One fleet manager reported that unfortunately, the personal 90 use program was cancelled at his company when a vehicle was stolen from an employee s home. Another fleet manager cautioned, When this privilege isn t regulated or prohibited, it becomes an entitlement. The only way to monitor and regulate it is through automatic vehicle location (AVL) or GPS. 80 Reviewing and Charging for Personal 70 Use The most common way to determine personal 60 use charges is using an industry average or benchmarks (28 percent of respondents). 50 One fleet 47 manager s brief, but 44 succinct advice: Don t make it too complicated. Second to benchmarking, 20 per- 40 cent 30 of fleets determine charges by calculating the cost to the company. 20 Most fleets (87 percent) collect 18 personal use charges via a payroll deduction, on par from 88 percent in 2010, followed by expense account deductions (10 percent). 0 Of fleets that allow personal use of company-provided vehicles, 61 percent charge employees directly for vehicle use. Also, the majority of fleets reported using a per-mile rate when reimbursing employees for business use of a personal vehicle (90 percent). Fleets are also increasing use of Fixed & Variable Rate Allowances (FAVR) for reimbursing employees, up to 7 percent in 2011 over 1 percent in Another good piece of advice: Make sure you have a good method for collecting mileage at least monthly and a method for auditing the collection of mileage, recommended one fleet manager who wished to remain anonymous. The majority of fleets perform a personaluse reconciliation, or true-up, annually (68 percent, up from 66 percent in 2010). A true-up is the process of bringing personal use costs into alignment with predetermined criteria or processes. An astounding 18 percent never perform a personal-use reconciliation. Finally, and perhaps most importantly, is a fleet s average personal use charge. As monthly charges have increased to an average of $118 per month, AF s survey shows that 38 percent of fleets charge between $100-$149 per month, the same percentage reported in However, fleets that charge $150-plus per month increased to 14 percent in 2011 (versus 10 percent in 2010). Ensure your company has a personal use policy and procedures in place, and make it a living, breathing document. AF 26 automotive fleet I JULY 2011

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