Private mileage: an issue of trust
May 14, 2019
By Scott Chesworth, operations director at RAM Tracking.
It is not uncommon for fleet drivers to keep their vehicles at home. It increases productivity by allowing drivers to begin their shift immediately, rather than spending time travelling to pick up their work vehicle. However, business owners must trust that drivers will not use their vehicle for personal use, and sometimes that trust is broken. Vehicle tracking systems could be the answer to reducing these private mileage issues.
Private mileage is when a business vehicle is used for personal reasons that have not been approved. The main three examples of private mileage are: out of hours usage, where drivers use the vehicle outside of agreed working hours; ad hoc trips, perhaps to transport large items such as furniture; and unplanned long-distance journeys, which could include holidays. People may do these things because the vehicle is larger than their personal car or to avoid building up mileage on their own vehicle.
Many examples of private mileage come under out of hours usage. Out of hours usage can invalidate insurance if the policy only covers certain hours. This leaves business owners without protection, potentially leading to financial trouble or even legal issues if the driver is involved in any accidents. Insurance can also be invalidated purely through a vehicle doing more annual mileage than claimed when the insurance application occurred, making private mileage a real risk.
Those who use their business vehicle for personal use are usually doing so in a way they consider minor and insignificant. However, controlling private mileage is a common challenge for business owners, where even the odd trip here and there can cause disruption and harm. Fleets are made up of multiple vehicles, and if every driver is to use their vehicle in a way which was not agreed, problems can build up.
In general, private mileage can reduce profits considerably by creating unnecessary and unexpected costs. For example, fuel for fleets tends to be paid for by the business, and if people are making unscheduled journeys then fuel consumption rises. Budgeting for fuel costs forms part of any fleet management programme and unplanned trips can make producing accurate forecasts especially difficult.
As well as this, increased wear and tear from passengers who may not be as careful as employees, such as children, can result in a drop in the valuation of the vehicle. Increased mileage can also lower resale prices and vehicles to need servicing and replacing prematurely. If valuations are lower than predicted, then this can lead to financial issues when it becomes time to refresh fleet stock – some fleet managers may also find that they can afford to replace fewer vehicles than they originally thought. Fewer vehicles ultimately mean that less work can be carried out and could harm profits, potentially putting businesses on a downward spiral, which can be difficult to recover from.
To avoid the difficulties caused by unapproved private mileage, investing in vehicle tracking systems could be a wise choice. If a business has a private mileage policy in place, telematics systems can create reports allowing business owners to see when vehicles are used outside of agreed hours. These reports are generated digitally, meaning they cannot be falsified, removing the need to search through paperwork during a private mileage dispute.
Vehicle telematics can also ensure mileage records are entirely accurate, unlike manual recording which can lead to inaccurate mileage logs, unbeknownst to the business owner. This is a real danger - if HMRC believes mileage records are inaccurate, then businesses can find themselves with a sizeable fine, even reaching into the millions for large fleets. Using tracking systems however, allows business owners to view the location of their fleet vehicles at all times, so if a driver is somewhere they should not be, business owners are fully aware of it.
The majority of employees who have access to company vehicles can be trusted not to use a business vehicle for excessive personal use. However, installing vehicle tracking systems can discourage drivers from doing so, and make sure business owners are informed if private mileage does start to creep up. Transparency is key when tackling this issue, and telematics systems can provide this clarity by ensuring accurate mileage records are kept and vehicles are used appropriately.