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Five Reasons to Reconsider Driver Reimbursement

The issue of driver reimbursement is often a perennial issue confronting owners and managers that operate company vehicles. We find that there are two major factors that prompt this review.

Often when there is new corporate management, when sales are flat, or when new cost-cutting initiatives are instituted, someone invariably asks whether it would make better business sense to reimburse employees for their the use of their personal vehicles rather than providing company vehicles. These managers believe that an employee reimbursement program will cost less than company provided vehicles.

Shifting the burden of the company vehicle program to employees may seem, at first, to be the ideal way to accomplish cost reductions. But a closer examination shows that this may not be the case. If your company spends less by going to driver reimbursement, it is because its employees are shouldering the hidden costs. In fact, upon closer analysis, reimbursement may actually be your most expensive option.

The second common factor that prompts the search for an alternative to providing company vehicles occurs when there is a lack of an adequate program. Without an adequate vehicle management program in place, the commotion factor sets in and a disproportionate amount of manager’s time is consumed. Vehicle selection, acquisition, delivery, disposal, title and registration issues and many administrative responsibilities associated with operating vehicles require an organized approach and a structured program.

Here are five reasons why reimbursement doesn’t work:

1. Wrong Company Image May Be Projected
A company vehicle is part of your corporate image presented to the world. With driver reimbursement, your company’s image is decided by an employee.

2. Employee Vehicles Increase Liability Exposure
If a vehicle is not provided by the company, then the company must be certain that the driver has adequate insurance in the event of an accident. In addition, what is your liability if the employee postpones repairs? A company vehicle program controls these variables.

3. Employee Productivity Decreases
A business that does not provide a company vehicle has little or no control over the condition of the employee’s vehicle. If the amount of reimbursement is not sufficient, or the employee doesn’t budget properly, preventative maintenance may be deferred, which can lead to breakdowns and downtime.

4. A Hiring Advantage is Eliminated
Providing a company vehicle gives your company a competitive edge in hiring top-caliber salespeople, technicians, and managers. This is especially true if your competition does not offer a company vehicle program.

5. Costs are Unfairly Shifted to Employees
If it is more expensive for employees to use their personal vehicles for business than it is for a business to offer a company vehicle. Under a program like McMahon Automotive Group's Vehicle Management Program, vehicles are acquired at wholesale, financed at a lower cost than an employee is capable of and maintenance costs can be lower with a national account program.

If given the choice, employees prefer company vehicles to reimbursement. Employees see a company vehicle as a status symbol, taking pride in having been entrusted with an expensive corporate asset. While reimbursement might be helpful to the company’s bottom line by shifting the financial burden to employees, you can harm your business in ways you may not have considered.

McMahon Automotive Group's Vehicle Management Program allows you to outsource a significant amount of the administrative time associated with a company car program, and at the same time can lower your costs.