Auto Market Volatility Causes Company Car Challenges for Corporations; Runzheimer Provides Four Recommendations for CFOs to Manage Cost and Risk

Leader in Services for the Mobile Workforce Shares Tips For Better Managing Business Vehicle Programs

WATERFORD, Wis., June 25 -- Frequent shifts in today's auto industry raise a new challenge for high expense company car programs - how to maintain cost stability and manage risk. According to Runzheimer International, the industry leader in employee mobility programs, corporations must scrutinize their current business vehicle programs and seek out alternatives in order to control costs, reduce program administration, and minimize liability and risk exposure. The U.S. currently accounts for 3,358,000 commercial auto fleet vehicles.(2)

The median cost per driver in a business vehicle program is roughly $9,000, according to research from Runzheimer International. For a company with 500 business vehicle drivers, the price tag associated with the program would be $4.5 million per year. As 29 percent of organizations expect those numbers to increase in the coming year and 45 percent of organizations anticipate their population of employee drivers will stay at current levels,(2) opportunities continue to exist for companies to cost-effectively reform management of these programs.

For companies that own or lease cars, economic challenges exist due to a down economy, employee layoffs and volatility in the auto industry. With cars sitting idle and fuel prices fluctuating, organizations are having difficulty predicting and accounting for ongoing expenditures.

"Many companies struggle with the administrative burden and expense related to a corporate fleet program," said Greg Harper, president, Runzheimer International. "There is an urgent need to reduce exposure to marketplace volatility and organizations need to completely rethink how they are managing their vehicle programs."

To effectively manage cost and risk, corporations must examine four key areas:

  1. Asset utilization--seek alternative vehicle management models that
     enable rapid and seamless adaptation to changing economic conditions
     and workforce size fluctuations
  2. Liability--analyze risks related to insurance costs or being locked-in
     to a lease program
  3. Program expenses--assess the total costs to maintain a company car
     program, including vehicle-related expenses and administration time
  4. Flexibility--define a structure that offers greater control and
     predictability for the future

Options exist to restructure existing company-owned car programs (see Reengineer Your Business Vehicle white paper available on the Runzheimer website). The WorldatWork Company Car and Vehicle Allowances 2008 Survey Brief indicates that 68 percent of businesses have implemented changes to their company car programs, including restrictions on car options or models, as well as the use of cars for fewer positions and the cash amount of allowances and reimbursements.

Several company and employee advantages exist for a program where employees are reimbursed for driving their own cars. Companies are able to free-up capital and are provided lower liability. Employees can take direct advantage of today's favorable financing rates and then benefit from the resale value.