The Best of Both Worlds: How Fleet Leasing Decreases Expenses and Increases Transparency for Small Business
Hans Bodine, CEO - June 3, 2019
Think about your business. On any given day, your sales team is meeting prospective clients all over the region. At the same time, account managers and customer success professionals are doing the same thing. Maybe you have separate teams doing installation, follow-up, or other essential work to keep your business going.
As a small business owner, these and countless other scenarios present you with a choice: reimburse for mileage driven, or provide your own fleet. At the outset, reimbursement appears to have one huge advantage: convenience. By setting a flat per-mile reimbursement rate, you can simply calculate how much your employees are entitled to and cut them a check.
(Trying to choose between buying and leasing your fleet? Check out our earlier post here.)
This convenience, however, comes at a cost. Reimbursing anyone who drives over 10,000 miles per year may cost you 25-50% more than leasing a vehicle. As mileage increases, the extra costs do too – and that’s before you add the other benefits. In the end, the sacrifices of simplicity come into sharp relief. Even though mileage reimbursement is easier, it costs (a lot) more money!
Let’s explore why:
Higher Annual Driving Costs
Whether you opt for mileage reimbursement or to lease your fleet, your biggest expense will be the cost of the vehicle over the course of the year. For mileage reimbursement, this means the steady per-mile reimbursement rate; for leases, this is the cost of 12 lease payments.
Of course, this cost depends on the type of car leased. To understand the full range of this potential expense, we’ve compared leasing costs of three commonly leased cars at different mileage increments. These annual costs are then compared to the cost of reimbursing the same number of miles at the recommended 2019 per-mile rate ($0.55).
The results are clear – and stunning. For someone driving 12,000 miles per year, mileage reimbursement is more expensive than leasing a sedan or low-end midsize SUV. At 14,000 miles per year, the same becomes true for high-end midsize SUVs. This trend underscores a key point: As employees drive more miles, leasing provides greater savings.
How big are those savings? Depending on the specifics of the lease and number of miles driven, anywhere between a few hundred and several thousand dollars per year.
Annual Lease Savings
- 12K Miles: ~$2K
- 15K Miles: ~$3.5K
- 20K Miles: ~$6K
Low-End Midsize SUV
- 12K Miles: ~$1K
- 15K Miles: ~$2K
- 20K Miles: ~$4K
High-End Midsize SUV
- 15K Miles: ~$600
- 20K Miles: ~$2K
The Federal Highway Association found that the average American drives over 13,000 miles per year (over 16,000 for men). At this level, leasing almost always saves money.
More Time; Variable Expenses
Reimbursement and deduction of miles driven for business requires substantial paperwork. Between logging journeys, stockpiling receipts, and keeping track of expenses, management and traveling employees spend hours recording information. According to Forbes, this represents a whopping 15% of sales reps’ time every week. Time they could be out on the road making sales.
Fleet leasing removes the need for many of these tasks: as long as mileage remains within the terms of the lease, payments are constant. You are no longer subject to the month-to-month swings associated with traveling employees. As the business owner, you save too. The benefits of leasing enable you to reduce time spent on administration and payroll and focus on what matters.
Keeping your cars on the road gets easier, too. Nobody can prevent unexpected maintenance, but real-time monitoring and preventative maintenance can reduce how much it happens. And, the right fleet manager can aggregate your maintenance costs, compiling discrete transitions into one simple, easy expense. Not to mention that new leased vehicles are almost always fully covered under the manufacturer's warranty for the entire life of the lease, potentially saving your employees and your business thousands in repair costs.
Fraud: The Great Unknown
In 2017, a popular travel website declared that we live in the “golden age of travel expense fraud.” A ChromeRiver survey of over 1,000 business travelers found that 35% of expense fraud occurs via mileage fraud. This was greater than any other single form of fraud among those surveyed. The same survey found that for every $1,000 in travel reimbursements, over $50 is fraudulent.
Fleet leasing can solve part of this problem. You know your business, and can estimate how much your employees will need to drive in a given year; we’re happy to help!
The cost of a lease will incorporate that estimate, and will not change as long as your employees stay within the agreed-upon limits.
Save time and money. Streamline expenses. Reduce fraud. Fleet leasing can provide your small business with these benefits and more. Carlease is here to help you understand your transportation needs and drive your business forward. Our leasing specialists are standing by, ready to remove the costly time and expense of vehicle sourcing, customization vendor selection, and price negotiation.
Your business is going places, let Carlease take you there. Contact us today.
“Sedan” is representative of a Toyota Camry or Honda Accord. “Low-End Midsize SUV” is representative of a Ford Escape. “High-End Midsize SUV” is representative of a Jeep Grand Cherokee. All leases include a $25 per month maintenance fee.
Prices shown are purely informative and models, features, and options are subject to availability. Contact Carlease for further information.