The Benefits of a Good Car Policy: You Save Time, Money and Possibly Lives

The most serious companies I know don’t play with this. Their car fleet is not a simple means of transportation nor just the usual benefit for keeping happy employees. Their car policy is a rigorous set of realistic measures, obligations, advantages and rules for using the car fleet for business and private purposes.

However, I am amazed how many companies treat their car fleet usage as a joke and ignore the fact that their employees spend thousands of hours and kilometers in unknown or improper conditions. This post is for those companies that are not aware they put at risk their people, their capital and their reputation by not having a proper car policy.

The right car policy must be a unique set of applied regulations resulting after assessing the company’s needs regarding its transportation means. Here are a few guidelines about the minimal criteria that should be covered by a car policy:

Definitions —  first thing first. Here the car policy must explain its scope and why the company provides vehicles to its employees. The importance of the definitions is paramount to understanding of the car policy by all employees, no matter their experience in the company.

Fleet Management — This section details the tasks and responsibilities of the fleet department, which include — among others — car selection and acquisition methods (lease vs. ownership), cost controlling, usage record systems, communication with drivers, employee eligibility and loss of eligibility for company cars, driving programs etc.

Driver Eligibility  — from a safety point of view, this is one of the most important explanatory parts of the car policy. This section covers the requirements for selecting the employees that can use a company car. To name a few, it starts with driver’s license requirements, previous driving track record, medical conditions check-ups, minimum age requirements for different vehicle types and disability guidelines.

Vehicle Selection and Acquisition — Beside covering the vehicle selection analysis and acquisition types, this section should explain the employees the decision-making process behind this step. It is vital that the management and the employees understand correctly the concept of TCO (Total Cost of Ownership). This will make them aware about the costs induced by the car fleet (depreciation and fuel costs, financing, insurance and taxation costs, maintenance and repair costs and the downtime cost) and about the right ways to minimize them. In this section, the car policy can also break down the driver-paid costs.

Vehicle use  — From car delivery and reception to daily operation and car return, all usage regulations must be covered here. Cover here details about commuting routes, fuel policy, park rules, record keeping, car care and maintenance as well as private use, mobile device limits during driving, smoking policy, passenger policy, driving time limits etc.

Tip: make sure you inform the driver is solely responsible for code and law violations. Set up the liability forms and limits for negligent driving and unauthorized driving in all situations.


The company car comes with great benefits but also with great responsibility and it is a privilege that can be withdrawn at any moment for non-compliant or improper use.

Insurance and safety — Define here the insurance terminology, exclusions, coverage and the minimum amount of financial loss (franchise) for the employee. Make sure the employees understand their part of liability.

Include accident definitions (preventable vs. non-preventable etc). Explain the importance of safe and defensive driving as well as road etiquette. Adopt a penalty and incentive program and explain it here in detail. It is one of the best options to guarantee a proper car usage. Define the measures to protect against car-theft. Explain the role of the safety devices (from seat belts to advanced car safety technologies). Do not miss the procedure for accidents and accident reporting steps. Insert a list of direct phone contacts (emergency, fleet manager, HR manager, towing company, insurance company, repair shops etc) to be informed in case of a road incident as well as a template for the accident report. All eligible employees must sign at the end of the car policy an acknowledgement and understanding form. Obviously, a car policy manual must be carried by each driver with the corresponding vehicle.

Replacement Guidelines — Explain the car replacement procedures, including the return conditions, vehicle condition reports, remarketing conditions and reconditioning measures.

These sections should represent the basic components of a car policy. Without a proper car policy, a company is guaranteed to lose money each time its car fleet is on the road or even when it is parked. Certain leaders know that a serious and updated car policy not only optimizes costs but can also save lives. The impact is right on cost-saving and life-saving. Being aware of the benefits and the costs of driving a company car makes an employee more responsible and self-conscious. The consulting firm Mercer evaluates each year the evolution of the car policies across the globe, in hundreds of companies (you can get a free sample of their last report here).

“A sound car policy should reflect the company’s benefits philosophy without exceeding its budget. It should be internally equitable for employees and externally competitive with the market. The policy should also be relatively easy for the company to administer and sufficiently clear for employees to understand” — stated their Global Car Policy report.

Now, when was the last time you checked your car policy?