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The private use costs that fleets incur

It is widely known that company cars are regarded as 4x4’s on the weekends and racing cars during the week.

This brings us to the important point that fleet managers must be very vigilant when it comes to managing all the costs that a fleet of vehicles are associated with. Using a company car for private use is commonly known as a perk, this practice is widely utilised in the fleet vehicle industry and is used to explain the use of a company car for purposes other than business.

The costs can be claimed back from the employer, and the methodology used for this will affect the company’s cost for that fleet vehicle. Some of the costs incurred on the fleet vehicle being used for personal use can be offset if the employer and the employee are prepared to share the cost of the personal usage of the vehicle.

An error that many fleet managers make when calculating the charges relating to private use of a fleet vehicle is to not include the concealed costs related to this private use.

The resale of the fleet vehicle can be influenced by the personal use of that vehicle; this is because the fleet vehicle’s goal resale price has a direct relationship to the amount of kilometers allowed on that vehicle for private use.

Also the fleet vehicle’s service life is shortened by each kilometer driven for private use, not to mention it’s expected residual value. A small fleet sedan car would average approximately 40000km per year. If the staff member uses that fleet car for personal use at a rate of 10% then the fleet manager can calculate an extra 4000km per year of mileage for that kind of fleet car. Most fleet managers will keep the small sedans in service for approximately 36 months. So it can be calculated from this that the sedan would’ve been used for private use for about a total of three months in its whole service life.

The service life is not the only thing affected, wear and tear items as well as tyres and maintenance parts for this type of personal usage will greatly affect the costs involved with this fleet vehicle.

If a fleet vehicle is used as an employee perk, then the fleet manager must also add an administrative cost onto the overall costing for the vehicle. The company needs to manage this whole process very carefully if it wants to avoid the possible high costs associated with the private use of a fleet vehicle.

Therefore it is easy to see just by this basic summary of costs incurred by a fleet vehicle for personal use, how important it is for a fleet manager to be cognizant of all the costs associated with this type of use.

This company perk has indirect as well as direct costs that need to be taken into consideration. Examples of these costs are fuel consumption, maintenance parts, added wear and tear, admin, insurance and risk.

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