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GREY FLEET: Business car experts on how to get to grips with grey fleet

Date: 12 July 2011

Grey fleet continues to be an issue for most businesses. Rachel Burgess looks at the big picture, from who the grey fleet is through to whether vehicles that fit this description should be removed

What is the 'grey fleet'?

Let's start with the basics. Grey fleet vehicles are any cars other than company cars (or cars funded by a car allowance or cash from the employer) that are used for business journeys. Estimates for the number of grey fleet drivers in the UK range from three to five million; enough to be an important aspect of business operations on a day-to-day basis. Indeed, recent research from GE Capital demonstrates that fleet decision-makers rate private cars being used on business as the seventh most important factor affecting fleet management decisions. The Company Car Trends survey also showed that firms expected grey fleets' significance in decision-making to become more important in 12 months' time.

According to Nigel Trotman, head of strategic consultancy at Alphabet, grey fleets are typically around seven years old, with average emissions in 2010 of 171g/km. Trotman compares this with its average new car leased to customers last year, which emitted less than 140g/km, making it "22% less polluting and more fuel-efficient than a private car".

It is difficult to generalise about grey fleet within an organisation, as the range of drivers and vehicles can differ dramatically, says Jon Mackney, head of consultancy at Arval. "As extreme examples, in the past we have had business mileage being claimed against quad bikes, Ferraris, an Austin 7 and even a forklift truck," he says. "Clearly not the type of vehicles that employees should be using on business journeys from a cost, safety and environmental point of view."

Alphabet's Trotman adds: "A driver at one company I advised was covering 30,000 business miles a year in his own vehicle. He was making a great deal of money while the business made a huge loss compared with giving him a company car.

"Someone signed off his expenses every month but the employer had no idea what he was driving and no-one questioned why he was doing so many miles in his own car."

Head of transport advice at the Energy Saving Trust Nigel Underdown notes that there is no doubt that grey fleet is the least well managed part of business travel. "We know that, on average, grey fleet cars emit 20% more CO2 than the average company car and HMRC-approved reimbursement rates still present to many drivers a good reason to travel further despite recent fuel price increases," he says.

The treatment of drivers

The grey fleet creates additional cost and risk to companies, says Jon Mackney, head of consultancy at Arval. "Despite increasing levels of publicity around the issue of grey fleet, it's clear that many companies aren't taking the action required to effectively manage it."

ING Car Leasing's national public sector manager, Clive Buhagiar, continues: "The issue with grey fleet revolves around the controls put in place to meet duty of care, health and safety, and corporate manslaughter requirements. Company car schemes are generally fairly well controlled and transparent - the company uses fleet insurance at the appropriate level; vehicles are serviced regularly (especially those with a maintenance agreement attached); MoTs, driving licence checks etc are all completed as required."

Buhagiar says there is a generally accepted obligation on the employer to show a duty of care to employees with anything that is supplied by the company: "The problem with grey fleet is that if the vehicles are being used for business purposes, for example, transporting clients or business trips outside the normally accepted places of work, then the same duty of care obligations remain with the employer.

"However, in many cases the employer does not recognise this fact and the employees may well object to having to prove their 'personal' vehicle is safe, fit for purpose, insured etc."

He adds that often grey fleet is not recognised as something that needs dealing with: "HR departments and directors do not actually realise their obligations and see grey fleet as potentially being a route to reducing fleet administration and costs." This is seldom the case because all the administrative obligations remain the same, he warns.

Alphabet's Nigel Trotman, head of strategic consultancy, says that the moment an employee begins a road journey on business they put the company's neck on the block legally and financially. "It's all about driving, not about managing company cars versus managing grey fleet cars," he says.

"More and more companies now use a single business driving policy that covers all use of vehicles on their behalf. Some of the procedures will differ between company car users and grey fleet drivers - insurance and maintenance for example - but all drivers get the clear message that all journeys carry equal weight and responsibility on both sides."

Trotman says the most important thing about a car policy is to make sure that every driver reads it and signs it at least once a year: "A few years ago, Alphabet asked companies whether all their drivers had read and signed their fleet and safety policies. 70% of employers and the majority of company car drivers answered 'yes', but more than half of those using their own car on business said 'no'."

If the use of a grey fleet vehicle is unavoidable, says Mackney, clear controls should be put in place around the vehicle specifications that are allowed. For example, a company can set limits on CO2 emissions and EuroNCAP ratings to maintain safety and environmental standards.

Using technology to improve management

Grey fleet has historically been a difficult area to quantify and subsequently manage. Many fleet departments struggle to get grey fleet taken seriously within their organisations because they are unable to properly define the associated cost as well as the impact on emissions and increased duty of car risk to both the company's own drivers and other road users, says Jon Mackney, head of consultancy at Arval.

Inchcape Fleet Solution fleet services director Steve Archer thinks it is a possible consequence of the high-pressure age we live in that businesses simply don't prioritise activities such as grey fleet reporting and maintenance, even with the threat of strict penalties.

"Recognising the widespread lack of proper grey fleet policing, many contract hire and fleet management companies have introduced systems that place strict controls over grey fleet drivers, ensuring no employee slips through the net," he says.

"These systems effectively replicate the checks that businesses would typically employ to protect their own company car fleets," Archer adds. "By automating the process, it leaves a business free to focus on other areas."

Alphabet's Nigel Trotman agrees that there is a growing range of software products design to help businesses manage travel in non-company vehicles. "Bear in mind that fleet safety and costs are primarily driven by distance travelled, so whatever system you use needs to be capable of capturing or importing mileage data from drivers or telematics devices."

TMC managing director Paul Jackson says: "Web-based solutions like online mileage reporting have transformed the ability to manage grey fleet travel.

"You can obtain a full year's data on a grey fleet driver almost effortlessly, for less than you would pay him or her in AMAPs for a single 30-mile trip. This data includes not only details of every business journey they make but also regular statements from the driver regarding the status of their licence, insurance, car servicing and MOT, for duty of care compliance, as well as details of their car's age and mileage, whether they carried passengers on any trips, and so on.

"All this data is held securely online, where the fleet manager can view it at any time and download it for analysis. From a grey fleet management perspective, it's an absolute goldmine.

"All this functionality and more is built into products such as TMC's Mileage Audit system, which can be used with all the common arrangements for paying owner-drivers, from straightforward AMAPs to lump sum payments with fuel-only expenses, either at fixed rates or actual cost.

Jackson concludes: "Many businesses struggle on with manual grey fleet process at best, or no grey fleet process at worst, not because they want to but because they are not aware that a mileage-capture system would solve most of their issues. TMC's Mileage Audit, for example, costs 99p per driver per month and there's no need to lease or install any in-car technology since it's all done online."

Should grey fleet even exist?

According to Nigel Trotman, head of strategic consultancy at Alphabet, a growing number of employers now question whether they should have a grey fleet at all, with a few already stopping almost all use of private cars for business journeys.

"The extent of the grey fleet management problem is proportional to the extent of the business's dependence on grey fleet," he says. "If you shrink the grey fleet, you shrink the management issues. So start by looking for ways to do that. However, for the majority of companies, getting rid of the grey fleet overnight is not an option and therefore it becomes an issue of measurement and cost-effective management."

ING Car Leasing's national public sector manager, Clive Buhagiar, adds: "The answer is not necessarily to remove the grey fleet altogether but to undertake a genuine analysis of the travel policies and activities within the organisation. Look at how many business journeys are made; average journey length; form of transport taken etc. This will, in most cases, lead to a holistic travel policy being developed that may include company cars, employee car ownership schemes, non-ECO personal cars, daily rental, public transport, etc.

"Done thoroughly, this will also help maximise the cost efficiency of your travel requirements as well as give a foundation for ensuring fleet policies and procedures are set in place to meet duty of care requirements."

Indeed, Inchcape Fleet Solution fleet services director Steve Archer agrees that the existence of the grey fleet is not the issue - keeping a tight rein over it is. He names short-term vehicle rental as an ideal alternative to own-car business usage, along with public transport and car pooling and car sharing: "A number of employees sharing a journey is naturally more cost-effective and eco-friendly but is less feasible to the spontaneity and unpredictability of the journey types grey fleet drivers make." Archer also suggests salary sacrifice schemes as another option.

Trotman adds that many businesses have a 'sleeping fleet' of company cars that sit in the car park from nine to five every day. "Rather than use their own cars, staff could use a colleague's company car for short journeys during office hours. The car is already on the company insurance and the regular driver just needs to note the mileage and claim the mileage payment."

"A key factor in reducing grey fleet use is to tackle business mileage reimbursement rates," says Jon Mackney, head of consultancy at Arval, "particularly when these can be so high that they actually encourage unnecessary mileage. By using fuel cards linked to effective alternatives to own-car use, any company can reimburse fuel at actual cost ensuring neither party is out of pocket. There are cases of companies paying employees as much as 80p per mile if they're using their own vehicle on business, at £800 per 1000 business miles a pretty strong incentive to use a car."

Indeed Archer concludes that from a cost perspective, investing in a grey fleet management system is by far the most effective option for a business wanting to police its grey fleet.