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The start point for the best source of fleet information |
Even though there are 14 million grey fleet vehicles on British roads - approximately 40% of all the vehicles in use - that cover approximately 12 billion miles and cost employers around £5.5bn every year, the grey fleet arena is an oft-forgotten and neglected area of the industry.
According to a report released by the European Transport Safety Council (ETSC) in 2016, nine million of those 14 million vehicles are used for business purposes on a regular basis. Meanwhile, in a survey carried out by fleet management provider CLM earlier this year, 74% of companies surveyed allowed their employees to use their own vehicles for business trips.
At first glance, if its employees only cover a reasonably small number of miles on business use every year, then it makes sense for an employer to allow them to use their own car. Go above a certain threshold, however, and everything starts to get a little bit less clear-cut.
Who runs the most grey fleet cars?
In general, it's fleets at the extreme ends of the scale that are more likely to allow the use of grey fleet vehicles. According to CLM's research, 93% of fleets that had fewer than 30 vehicles allowed the use of grey fleet, while 50% of fleets with between 30 and 99 vehicles allowed employees to use their own cars for business use. Meanwhile, 66% of fleets with 100 vehicles or more allowed the practice.
The public sector is one of the biggest users, too, according to a report co-published by the British Vehicle Rental and Leasing Association (BVRLA) and the Energy Savings Trust. According to the research, published in 2016, the public sector spends £786m a year on its grey fleet, 40% of which comes from NHS Trusts around the country.
Meanwhile, local authorities account for 34% of public sector grey fleet spending, the civil service 16%. Emergency services and further and higher education account for 10% of the overall figure.
In the private sector, companies spend approximately £5bn annually on reimbursing employees for driving their own cars on business. This equates to around 11 billion miles driven every year on UK roads by private sector grey fleet vehicles.
There's no doubt that for shorter journeys and employees that don't travel long distances, allowing them to run their own car, or offering an alternative to a more traditional company car scheme, makes financial sense.
However, once they reach a certain mileage, or cover a certain number of miles a day, allowing grey fleet usage among employees begins to lose its cost-effective sheen. This is because the HMRC Approved Mileage Allowance Payment (AMAP) of 45 pence per mile means that as costs start to stack up over high mileages it can often be cheaper to go for a short-term hire car. Or, if that employee covers longer distances more frequently, it will often be cheaper to move them on to a full company car scheme.
For example, the BVRLA recommends that if an employee averages over 55 miles per day of business travel by car, then it's cheaper for the employer to go for the daily rental option, rather than grey fleet. In its recent report, the BVRLA said: "Large companies and public sector bodies can hire cars, self-insured, under framework agreements for £18 per day or less. With a typical fuel cost of £0.12 per mile, the balance from the AMAP rate of £0.45 per mile to fund the hire car is £0.33 per mile. After 55 miles this will fully fund an £18 car, thereafter the business saves £0.33 per mile."
Meanwhile, the chairman of the Association of Car Fleet Operators, John Pryor tells BusinessCar that after around 5,000 or 6,000 miles a year, the benefits to a company running a grey fleet start to diminish. He also went on to say that many fleets he had spoken to work to a 10,000-mile a year limit.
Given the 45p per mile AMAP cost, however, that equates to £4,500 a year. If an employer can operate a leased or hire car for less than that per year, then it makes sense to stop allowing that employee to use their own car.
There are various other aspects that come into play, each of which affects the financial viability of continuing to allow grey fleet usage. Examples of this include the potential for corporate manslaughter charges to be brought against the employer, especially if the car is found to have not been maintained properly.
In its most recent annual report on motoring, Lex Autolease found that just 67% of fleet operators always checked their grey fleet's insurance cover, while 13% said they never did. Furthermore, just 47% disclosed they checked that their grey fleet vehicles had a valid MOT certificate, with 27% saying that they never did this.
This means there could be unroadworthy cars driving around as part of the grey fleet, which if they were involved in an accident could well end up costing the company even more. Astonishingly, 20% of fleet managers surveyed by Lex Autolease said they were unaware of the corporate manslaughter legislation that ties in to grey fleet management.
For smaller companies, especially, a well-managed grey fleet makes a great deal of sense. There isn't the capital outlay of purchasing or leasing new cars for your employees to drive, or the extra costs associated with insurance premiums or service, maintenance and repair.
If, therefore, your business drivers only do a small number of miles each year, then there is absolutely no reason why companies such as this shouldn't allow employees to use their own car for business use provided they are properly managed.
Switching away from grey fleet isn't just a financial consideration, however, and fleet managers should take into account other factors. These include the fact that, on average, a grey fleet vehicle is 8.2 years old, compared with the national overall average of 7.9 years. They are also significantly dirtier than the average car on the road, emitting 152g/km of CO2 on average.
More traditional company car schemes, as well as short-term renting and leasing, are almost always significantly newer and cleaner than this and the BVRLA's modelling suggests significant improvements in CO2 emissions if all grey fleet vehicles were abandoned, with over 3.5 million tonnes of CO2 emissions saved.
Meanwhile, it's also significantly more difficult for fleet managers to keep an eye on what's going with their drivers and their cars. For example, fleet managers have no control over maintenance and don't always check the MOT status of their vehicles, meaning their drivers could be driving around in potentially dangerous cars. This should be less of a concern when it comes to alternatives.
A full company car scheme doesn't suit every business, but neither, necessarily, does implementing a grey fleet policy. There are, however, alternatives. Car clubs, for example, work well for inner-city firms that only need to travel short distances irregularly, but also at short notice. They can be booked very quickly and provide many of the benefits of grey fleet - low upfront costs and flexibility - as well as mitigating many of the risks, including vehicle maintenance and licence checking. They're also cleaner: as of October 2015, the average car club vehicle emitted just 90g/km of CO2.
Short-term rental has already been discussed as a potential alternative to grey fleet, while encouraging active travel - walking or cycling to work - as well as greater usage of public transport are also considered by many as options, although they won't suit everybody, of course.
Lastly, according to the BVRLA, more and more companies are finding that salary sacrifice schemes are proving to be popular alternatives to the more traditional grey fleet car. These schemes lower business mileage reimbursement costs, improve staff retention and encourage employees into newer, safer and cleaner vehicles every three to four years, thereby improving the company's carbon footprint.
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