You may think of corporate fleet vehicles as the ubiquitous brown vans that carry packages for UPS. Perhaps the term fleet vehicle evokes images of the variety of particular purpose vehicles belonging to a utility company or a police departments’ patrol cars. By definition, a single car, truck, or van used for work is a fleet vehicle. How do you determine if a company fleet is right for your business?
Reimbursements and Rentals
Does your company reimburse employees for the use of their car to conduct company business? If yes, explore whether providing a company car would be more cost-effective. As opposed to renting vehicles for use in your business, buying or leasing company cars and trucks may save your company money in the long run.
Currently, under IRS rules, the actual expenses (rule 1.61-21(d)(5)(v)) of maintaining a fleet of vehicles are deductible. Examples of actual costs are maintenance, registration fees, and lease payments. A mileage deduction up to 57.5¢ (rule 1.61-21(e)) is an allowable deduction from a company’s taxes. Keep in mind these rules are subject to change and specific criteria.
Buying or leasing fleet vehicles from the same car lot equate to buying in bulk. For the chance to sell or lease multiple cars or trucks at once, the dealership will likely offer a discount. Depending on the dealer Cars.com reports your business may have to order a minimum of 5-15 vehicles to receive a discount.
Benefits of Fleet Vehicles
Corporate fleet vehicles belong to the company, so the business owner doesn’t assume additional personal debt to purchase cars and trucks for a fleet. Interest on a loan to pay for business vehicles is deductible.
An Additional Employee Perk
With a company car, an employee doesn’t have to worry about added wear and depreciation on their vehicle. Having a company car frees employees of the potential liabilities of using their vehicles for work. All this means workers will likely view the use of a company car as an additional company benefit.
An employee not being able to get to a meeting on time or missing a sales call because of an unreliable conveyance can cost a company money. An employee’s car may not be reliable because of age or a lack of preventive maintenance. Fleet vehicles are new or newer, and the corporation controls the servicing of its cars and trucks.
Parked along the street or moving through traffic, countless people see a company vehicle. It only makes sense to display your company’s logo and other information on its cars. Using fleet vehicles to advertise reaches potential customers who might not otherwise have learned of your company.
The Downside of Owning a Fleet
Maintenance And Storage
Depending on the size of your fleet, you might have to hire an automotive technician and other additional employees to keep your fleet running. How will the vehicles be stored? Do you already have sufficient space, or will you have to build or rent a garage or parking lot?
We have already touched on the possibility of owning a fleet expanding your payroll and costing extra for storage. Other added expenses to take into account are payments, insurance, registration, and maintenance, to name a few. Some of these expenditures are deductible. The question is whether or not the deduction offsets the added expenses.