Disposing of Your Company Cars: How to Make the Process Easy, Effective — and Even Profitable

Deloitte research found 41% of fleet managers were considering moving from company car models to alternatives like mileage reimbursement programs in 2021.

This stat is unsurprising, considering the surrounding data. Insurance costs are rising. Fleet accident rates are higher than ever. In short, company car policies are increasingly risky, while at the same time a less attractive proposition for employees.

Those companies that make the switch from company car fleets are seeing results. Virginia Eagle Distributing saved 10+ hours every month by changing to  paying employees for driving their personal vehicles for work.

But disposing of your company cars isn’t always easy. It’s a significant business decision, and there are plenty of things to consider.

Here’s everything you need to know to get it right.
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The market for used vehicles is strong — but choosing how to sell your fleet remains a complex decision

Since the pandemic, the supply of new vehicles has been limited, leading to higher costs for new cars. This, in turn, has increased the demand — and therefore the prices — for used cars.

With such a buoyant market for used vehicles — prices for remarketed fleet vehicles are "historically strong" — this year could well be a good time to dispose of your fleet. 

But this seller's market may not last. Cox Automotive have predicted that used vehicles will see “above-average depreciation.” In other words — take advantage while you can.

Moreover, running a company car program is ever more costly. According to Element, a global leader in fleet management:

“Extended replacement cycles of fleet vehicles increase the likelihood of unexpected maintenance. Inflation is causing a 11% increase in maintenance costs. This, compounded by longer repair cycle times for maintenance and accidents due to shop staffing shortages, can make unforeseen maintenance cost far more in vehicle downtime than the inflationary increase.”

All that to say: it’s a good time to make the move from company cars to programs like vehicle reimbursement. But there are a few things to decide  before making that transition. 

Consider, for example: 

• How you’ll sell your fleet (assuming you own it): Auctions, private sales, trade-ins, selling to employees — there’s a range of ways to dispose of your fleet, each with its own pros and cons.

• If you’ll keep a pool of reserve company cars: Spares can come in handy if an employee temporarily loses access to their own vehicle.

• How you’ll roll out your new employee mileage reimbursement policy: Moving every driver onto the new policy at once can be prohibitively difficult. Instead, consider taking a more progressive approach.

For example, you can move senior staff first, or those who already have personal vehicles and are likely most enthusiastic about the new benefit — if your mileage reimbursement platform offers the flexibility to support it. 

This phased approach is a more manageable way to roll out a new employee transport program— and it’s a great way to build up some early success stories.

You’ll also need a clear timeline for de-fleeting. This timeline needs to account for things like company budgets and market conditions, and it may involve staggering the disposal process to manage cash flow and minimize disruption to business operations.
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Preparing your fleet for disposal: a step-by-step guide

The right approach to fleet disposal for your business depends largely on your objectives. 

When moving away from company cars, some businesses are under pressure to complete the process quickly. 

Others need to maximize sale prices, and therefore might want to outsource vehicle valuation to get highly precise figures. 

Others may have limited resources to manage the process, so ease of disposition becomes very important.

Whatever your priorities, there are, broadly, three steps.

[.toc-bg][.toc-flex][.toc-list][.toc-number]1.[.toc-number]Make an inventory of your fleet[.toc-list][.toc-flex][.toc-flex][.toc-list][.toc-number]2.[.toc-number]Figure out its market value[.toc-list][.toc-flex][.toc-flex][.toc-list][.toc-number]3.[.toc-number]Decide how to sell your vehicles[.toc-list][.toc-flex][.toc-bg]‍

(If you lease your fleet rather than owning it, a lot of the following won’t apply to you, especially the stuff about selling your vehicles. Once you have an inventory and timeline, you can skip ahead to communicating the change.)

Step 1: Make an inventory of your fleet

A fleet inventory tells you what vehicles you have and what condition they’re in.

To make sure your inventory is accurate and comprehensive:

Put together a team. Bring together employees from various departments like fleet management, finance, and maintenance. This way you’ll get the full range of expertise you need.

Make a template for recording various vehicle details. You’ll need to capture all the same information about each vehicle in your fleet. Work with your team to figure out what information you need to include, and then make a template to record that information per vehicle.

Collect maintenance and accident records. Having these on hand can make the selling process smoother, and it’ll help you assess the value of those vehicles.

Inspect your fleet. This includes exterior things, like:

• bodywork
• paintwork
• glass
• tires and wheels
• lights and signals
• trim and accessories

Interior things, such as:

• upholstery
• dashboard and controls
• odors
• electronics
• instrument panel

And mechanical things, like:

• engine
• suspension and steering
• brakes
• exhaust

This part of the disposal process can be time-consuming, so you could consider hiring a professional inspector to take on some of the work.

Review your fleet management software. The tools you use to manage your fleet can tell you more about vehicle usage, fuel consumption, and other factors that could influence the disposal process.

This software should also contain a list of your vehicles, which can do a lot of the heavy lifting when it comes to creating the inventory.

Write up a summary report. Gather your key findings in one place. You can share this with senior stakeholders to ease the decision-making process.

Step 2: Figure out your fleet’s market value

Used vehicle prices are affected by lots of factors, including: 

• regional variations
• seasonal peaks and troughs
• depreciation
• physical condition
• mileage
• supply and demand

And, as we discussed earlier in this article, economic factors can have a huge impact on the resale value of your fleet.

Because of the number of factors involved, accurately estimating a vehicle’s market value can be tricky. But there are a few things that can make it easier.

Valuation Guides: Kelley Blue Book, Edmunds, NADA Guides — resources like these can give you an estimate of a vehicle's value based on its make, model, year, condition, mileage, and other factors.

Market Comparison: From online markets to local dealerships, reviewing what’s already on the market can give you a pretty good idea of what your fleet might be worth.

Fleet Management Software: Some fleet management software packages include tools to help value your fleet. These tools can pull in data from various sources to provide a more accurate estimate of what your vehicles are worth.

You don’t necessarily need a precise value on each of your vehicles, but it’s worth at least broadly categorizing your vehicles as high, mid and low value.

Step 3: Decide how to sell your vehicles

There are several ways to sell your fleet. The right one for you will depend on your priorities and objectives.

Private sales, for example, often command the highest prices — but they’re much more time-consuming. By contrast, dealership trade-ins are quick and easy, but sale prices will typically be lower.

Here are some of the options.

A. Direct sales to employees: Selling your vehicles to employees can be good both for them — because they get an affordable vehicle — and the business — because you know your employees have access to their own vehicles.

B. Private sales: Listing vehicles for sale privately through online platforms or classified ads can help you reach a wider audience and potentially command higher prices than other disposition methods. 

However, private sales are typically more time-consuming. You may need to manage inquiries, viewings and negotiations with potential buyers.

It’s also worth noting that private sales are deeply affected by interest rates. And research from Cox Automotive shows that average interest rates for auto loans increased by almost a full percentage point in March 2023.

C. Dealership trade-ins: Trading in your vehicles at a dealership can provide a convenient and straightforward option for disposing of your fleet. 

Dealerships may offer bulk discounts or incentives, but the trade-in value is typically lower than other disposition methods.

D. Auctions: Auctions can expose your vehicles to a large audience of potential buyers. The downside is that the final sale price is unpredictable.

Your valuation data can guide your decision-making here. For example, if you know which of your vehicles are particularly valuable, they might be better suited to direct sales to employees, or private sales.

But you’ll also want to think about what’s important for your business, like:

• Time constraints: If you need to dispose of your fleet quickly, auctions or dealership trade-ins may be more suitable. They typically offer a faster turnaround time than private sales or direct sales to employees.
• ‍Administrative burden: Consider the level of administrative effort required for each disposition method, such as managing inquiries and viewings for private sales or coordinating with auction houses. Choose a method that aligns with your available resources and capacity. Fleet remarketing services, such as those offered by Element or FLD, can ease this administrative burden.
• ‍Financial objectives: Determine the financial goals for your fleet disposal strategy, such as maximizing the return on investment or minimizing the costs of disposal. Choose a method that aligns with these objectives.
• ‍Employee satisfaction: If it’s particularly important to get your employees bought into the new policy, offering vehicles for sale directly to employees can be seen as a perk.
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With your fleet prepared for disposal, the next step is choosing a suitable mileage reimbursement platform.
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Communication is vital when moving from company cars — here’s how to get your team on board

Sometimes, defining your policy and preparing your fleet for sale is only half the challenge — communicating that policy clearly with your drivers can be just as important.

But get your comms right, and you’ll have engaged, supportive drivers happy to make the switch.

Here are some best practices, based on our experience helping companies move to mileage reimbursement programs.

Explain the rationale behind the decision

The many benefits of moving from company cars to mileage reimbursement may not be immediately obvious to your drivers and senior stakeholders.

By sharing the rationale for the change — along with the data used to reach that decision — you can help bring people on board.

When making a case to senior stakeholders, consider things like:

Adaptability: Mileage reimbursement programs can be scaled up and down as needed. This flexibility is in stark contrast to company cars, which are comparatively monolithic.

Cash flow: When implemented correctly, mileage reimbursement programs aren’t necessarily “cheaper” than company cars — if they were, you’d likely be pushing some expenses onto your employees.

But mileage reimbursement is much better for cash flow. It’s a monthly operating expense, whereas company car programs demand a hefty investment of capital up-front.

Reduced risk: When an employee crashes a company-owned car, the employer is liable, even if the car is being driven outside of work hours for personal reasons. 

This issue is known as “24-hour liability”, and it’s one of the biggest risks created by company car programs — and a significant contributor to the high premiums of commercial auto insurance.

It’s a risk that’s resolved by having employees drive their own vehicles for work and carry adequate insurance. The liability falls primarily on the employee’s auto insurance — even when that driving is done for work purposes.

[.split-text-wrap][.text-wrap][.text-wrap-paragraph]Improved employee satisfaction: Mileage reimbursement provides much greater flexibility for employees in terms of vehicle choice. And as long as you’re working with frictionless mileage reporting software, there’s no need to overburden employees with admin.[.text-wrap-paragraph][.text-wrap-paragraph]Reduced administrative burdens: Removing the burden of fleet management can be a huge time-saver. Virginia Eagle Distributing saved more than 10 hours per month by switching from company cars to mileage reimbursement.[.text-wrap-paragraph][.text-wrap][.mixed-font-b][.is-green-bold]10 hours[.is-green-bold][.is-info]time saved every month for fleet manager after switching to Everlance[.is-info][.mixed-font-b][.split-text-wrap]For employees, you could focus on:

‍Employee safety: Drivers in company cars are more likely to get into accidents than those in their own cars. There are many possible reasons for this, but a commonly cited one is the greater level of familiarity employees have with their own cars.

Long-term car ownership: Ultimately, by providing a fair mileage reimbursement program, you’re financially contributing toward your employees  owning their own vehicles.

Flexibility and vehicle choice: As noted above, mileage reimbursement programs give employees much more control over their choice of vehicle.

Simplicity of reimbursement. With technologies like mileage tracking apps, your employees can automatically record the miles they travel for work. They can then confidently and easily submit these mileage reports to the company for reimbursement, so the whole process takes very little time.

Encourage feedback and open dialogue

Establish regular channels for feedback, such as town hall meetings, focus groups or anonymous surveys, and encourage employees to voice their opinions and share their experiences. 

This open dialogue can help identify areas for improvement and foster a sense of ownership among employees.

You can even start with a small pilot program with a subset of 10 or so employees, and gather feedback from them about their experience before rolling it out more broadly.

Establish your success metrics

As you prepare to roll out your new employee transportation program, a great way to improve buy-in is to share success stories. One way to do that is to regularly share agreed-upon metrics.

You could monitor things like hours saved on administrative tasks and the level of employee engagement — and driver satisfaction — with the new program.

With your disposal plan in place, it’s time to define your mileage reimbursement program

With your strategy confirmed, your fleet prepared for disposal and your planned changes clearly communicated, it’s time to start on the details of your mileage reimbursement program.

Because, if your new mileage reimbursement policy isn’t clear to your employees, it’s much less likely to succeed. Your drivers need to know how the reimbursement program works.

When explaining the reimbursement process, make sure you include:

• Reimbursement rates
• Frequency of payments
• Step-by-step guidance for submitting mileage claims, including mileage tracking and documentation

As for eligibility criteria, be sure to cover things like:

• Annual mileage requirements
• Minimum insurance levels
• Vehicle requirements
• Your policy for drivers who break traffic laws

Getting your mileage reimbursement program right can be tricky. You have to juggle the needs and expectations of a variety of stakeholders, while paying close attention to the bottom line.

Here, we can help.
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Partner with a flexible, easy-to-use mileage reimbursement solution provider

Instead of making further investments into company car programs, more and more companies are instead choosing to reimburse employees for driving their own vehicles for work.

Partnering with a flexible, easy-to-use mileage reimbursement platform can help you minimize the burden on your employees, ensure fair and accurate reimbursements and create a smooth process of transition.

Ready to get started? Schedule a meeting with our team today.