The Hybrid Program Approach: Vehicle Reimbursements and Fleets

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A lot is happening in the world of fleet management. The days of choosing between fleet vehicles or a Vehicle Reimbursement Program (VRP) are behind us. More and more companies are adopting a hybrid approach that blends and mixes both strategies, allowing for greater flexibility, scalability, cost-effectiveness, and sustainability. This mix and match strategy acknowledges that one size doesn’t fit all in the world of vehicle programs, and by combining fleet and VRP, businesses can better meet the needs of their mobile workforce while also driving toward their organizational goals and KPIs.

Why the hybrid approach makes sense

Historically, businesses have had to make a binary choice: maintain a company fleet or reimburse employees for using their personal vehicles — one or the other. While each has its merits, they also have limitations. Fleet vehicles can offer consistent branding and control over the type of vehicles used, which is useful for companies prioritizing brand awareness, sustainability initiatives or needing specific vehicle types, like electric vehicles (EVs) or plug-in hybrids, etc.

On the other hand, a VRP offers flexibility, allowing employees to use their personal vehicles for business purposes and providing companies with potential cost savings, particularly through tax compliance, mileage reimbursement, and variable rate programs like FAVR (Fixed and Variable Rate).

The hybrid approach allows companies to enjoy the best of both worlds. For example, a business can maintain a fleet of EVs to reduce emissions and benefit from available rebates, while also offering a VRP to employees whose roles don’t necessitate a company car but still require frequent travel. This combination eases the adoption of VRPs and maximizes the incentives available through government programs, both from a cost-saving perspective and in terms of employee perks.

Addressing fleet management challenges

Managing a fleet comes with its own set of challenges, from acquiring the fleet of cars (buying outright or leasing), to ensuring vehicles are up-to-date with the latest safety and emissions standards, to managing the depreciation and resale of vehicles. In states like California, where the green push for clean vehicles and sustainability is particularly strong, fleet owners must also navigate evolving regulations and incentives. [1]

By partially integrating a VRP, companies can reduce the size of their fleet, thus lowering overhead costs associated with fleet management but without compromising the resources needed for employees. This is particularly useful for businesses looking to electrify their fleet but who might be financially unable to scale. A smaller fleet of new, clean vehicles can be maintained for essential roles, roles that don’t require a specialty vehicle, while other employees are reimbursed for using their personal, possibly less environmentally sustainable cars.

The role of tech

Adopting a hybrid approach at work is more feasible than ever, thanks to advancements in mileage tracking and fleet management tech and software. These tools let businesses easily manage both fleet and VRPs. It means easily accounting for mileage rates, mileage bands, tracking and differing between business use and personal use, and optimizing cost savings for both the company and the mobile employees.

Additionally, as more vehicles become connected through tech and the cloud servers, the data collected can be used to refine fleet usage, predict maintenance needs, and further optimize the cost-effectiveness of both fleet vehicles and reimbursed personal vehicles.

Cost-effective and sustainable solutions

One of the primary drivers behind the hybrid approach is cost-effectiveness. Companies can strategically deploy fleet vehicles where they are most needed, reducing the overall fleet size and all the associated costs like acquisition, maintenance, insurance, and depreciation. Meanwhile, the VRP can provide a tax compliant and efficient way to reimburse employees, especially when structured around IRS guidelines for business mileage.

The sustainability angle is also en vogue. As businesses are increasingly held accountable for their carbon footprints, maintaining a fleet of green clean vehicles while reimbursing employees for personal vehicle use can strike a balance between business needs and sustainability goals. For instance, the hybrid approach lets companies participate in electrification initiatives and reduce their carbon footprint without the need for an all-or-nothing transition, but rather an eased and partial one.

FAQs

Can we still offer company cars and a reimbursement program?

Absolutely! A hybrid approach lets you tailor your vehicle strategy to meet diverse and varying needs within your organization. It’s also easier to do. If you start with the hybrid, you can compare the efficacy of both the fleet and VRP against each other and determine which better aligns with your business’ KPIs, gradually scaling with one over the other.

How do we manage the different tax implications?

Use technology to track and differentiate between personal use and business mileage, ensuring compliance with IRS rules and maximizing tax-free status and reimbursements.

Is this approach suitable for small businesses?

Yes, small businesses can benefit from the flexibility of a hybrid approach, because it balances the benefits of a small fleet with the cost savings of a VRP. However, VRPs operated through a third-party vendor are typically optimal with a minimum mobile workforce of five drivers.

Conclusion

The hybrid approach to VRPs and fleets offers a balanced, flexible, and forward-thinking strategy for companies navigating the complexities of fleet management and employee mobility. By combining the best elements of both worlds, businesses can optimize cost savings, align with sustainability goals, and ensure that they are offering competitive employee perks — all while staying compliant with evolving regulations and leveraging available government incentives.

This is not an either/or decision. It’s about finding the right balance for your company’s unique needs, and in doing so, driving toward a more cost-effective and sustainable future.