Automotive Fleet

NOV 2013

Magazine for the car and truck fleet and leasing industry

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Page 17 of 65

MARKET TRENDS BY MIKE ANTICH Is the Fleet Industry Grossly Underestimating Personal-Use Miles of Company-Provided Vehicles? I f you asked feet managers what the industry average is for personal use of company vehicles, most would say it is approximately 15-18 percent. But, is it? Automotive Fleet conducts an annual survey of thousands of feet managers who report, on average, 18-percent personal use. Is this accurate? AF publishes what feet managers tell us, who in turn are dependent on what their drivers report. Terein lies the heart of the matter. Are drivers being accurate (honest) about the number of personal and commute miles they report for their company vehicles? Most of us will agree that some drivers fudge their personaluse mileage, but no one knows by how much. Tere is a growing suspicion that personal-use mileage is far greater — perhaps substantially greater — than what the industry accepts as conventional wisdom. My contention, along with a few others, is that the exaggeration of personal-use miles is substantially greater. Tere is also a feeling that if we defnitively track all personal-use and commute miles, we'll be shocked by the degree of underestimating and misidentifying of business miles. A Hitherto Hidden Fleet Cost How much did the feet industry talk about unnecessary idling in the 1990s? I can tell you it was very little. Today, however, everyone agrees unnecessary idling is a substantial contributor to fuel consumption and engine wear. Te reason we discovered this hitherto "hidden cost" was through the installation of telematics devices on company vehicles, which tracked engine hours versus actual miles driven. Te results shocked the industry. While the amount of unnecessary idling varied by feet, some feets recorded idling as much as 35 percent of the time on non-PTO vehicles. Today, the technology exists to defnitively track and segregate business, personal, and commute miles for company vehicles and the early results support some of our worst suspicions. "One feet that switched to our automated program experienced a 17-percent reduction in business miles," said Matt Betz, VP of business development for CRS Fleet, which markets a telematics solution to track business, personal, and commuting miles. "If they were charging for the full cost of personal use, that equates to a 17-percent feet savings. Another feet we work with was very confdent that their personal use was 18 percent. Afer using our solution, they found that they had, on average, 38-percent personal miles and 9-percent commute miles." Scofaw drivers go to elaborate extremes to avoid reporting personal-use miles. One feet manager related a story about a former driver who installed a "kill switch" on his company- 14 AUTOMOTIVE FLEET I NOVEMBER 2013 provided vehicle to disengage the odometer when driving personal miles. Some drivers will even report driving zero personal-use miles. "Even the most well-intentioned drivers misunderstand the IRS rules and wrongly categorize miles. Most ofen, they do not report commute miles as personal miles," said Betz. "When feets switch over to a system that automatically measures commute, personal, and business miles, the number of personal and commute miles almost always dramatically increase, while business miles are reduced. For businesses that only want to pay for business miles, this is a huge area for potential savings." Personal Use Impact on Fixed & Operating Costs Personal-use mileage has an adverse impact on the resale value of feet vehicles. Tere is a direct cost relationship between the number of personal miles driven and the vehicle's ultimate resale value. Fleet industry lore states that personal use accounts for approximately 15-18 percent of the overall miles. What would be the impact if your personal-use miles were far higher? Each personal mile driven not only reduces a vehicle's residual value, but also shortens its service life by causing it to reach its optimal replacement mileage earlier. Imagine the impact on actual depreciation if personal-use miles were actually double what were reported. For instance, an intermediate sedan averages 24,840 miles per year, and, on average, is kept in service for 29 months. If a feet vehicle averages 4,000-8,000 personal miles per year, that means almost 5-10 months of a vehicle's 29-month service life has been consumed by personal use. Likewise, personal use decreases the life of maintenance "wear" items, such as tires and brakes, which need to be replaced at company expense — earlier than normal. Tere is also an administrative cost to provide personal use as an employee beneft. Administering a personal-use program is expensive, with internal costs ranging from $40 to $80 per year, per vehicle, depending on how a company manages the process. Te purpose of this editorial is a "call to arms" for feet managers to give their full and immediate attention to identifying their feet's actual personal-use miles. Do you really know how many personal-use miles your vehicles actually accumulate? Te honest answer is no. I predict that personal-use mileage will become the new fashpoint in our ongoing battle to reduce feet costs. Let me know what you think. AF

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