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Old 01-18-2018, 05:01 PM
SlackerInc SlackerInc is offline
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How is it cheaper for a company to rent an employee a car than to pay mileage?

I'm willing to accept the premise as true, as it was reported by a friend I've known for 20 years, who tends toward precision in all matters (and her job is as an auditor). So the question becomes: where is the arbitrage here?

Her company periodically sends her to their corporate HQ, about 200 miles away from her. But the only place she can rent a car is thirty miles in the opposite direction. So it's apparently so much cheaper to pay for her car rental that they pay her mileage to drive that 60 miles round trip, which actually makes her overall round trip driving (including driving the rental car) 520 miles instead of 400.

So if the rental car company can come in with such a "low bid" and still make a profit, then someone in the system has to be consistently overpaying (and it's apparently not the rental car customer).

Mileage reimbursement is, in theory at least, neutral: paying you the amount of money you lose (over the long run) by driving a mile: including your fuel, maintenance, and reduction in the vehicle's value above and beyond what it loses with time; but not providing you a profit. So my "Bayesian prior" (call it a hunch if you prefer) is that the 55 cents/mile she says is set by the IRS is too generous, for a trip with mostly highway miles in particular.*

But let's say that's not the case, that they are reimbursing mileage accurately. The only other explanation I can think of for how rental companies can be making profits, while charging significantly less than the mileage reimbursement amount to their rental customers, is that they are getting some kind of arbitrage in the late-model used car market: buying cars for much less than they are worth, then selling them for more than their real value. It seems unlikely to me, though, that they are able to do this consistently better than big used car lots and wholesalers who focus on this market exclusively. And in fact, it would mean that they are conducting rentals as a weird and pointless loss leader: they'd be better off just buying and selling cars (maybe storing them a while if that's part of the trick somehow) rather than wasting money on renting prime lot space at airports, not to mention the rental counter itself and all the employees who manage checking cars in and out. And then of course there's the liability: risk of theft and damage.

My friend prefers this arrangement despite it costing her an extra 120 miles of driving, because she puts a very high premium on reducing the wear and tear on her car. But if I'm right, she should actually be eager to drive her own vehicle and get the mileage instead. (Unless, I guess, she hates the process of trading in a car and haggling over a new one so much that it is worth a lot to her to put that off as long as possible.)

*It would be more complicated, but more accurate, for mileage reimbursement to factor in how much stop-and-go driving there is, maybe by paying a lower rate per mile but also paying a "bonus" ("penalty"?) for each stop--which was not feasible for many years but would now be easy with a GPS device.
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  #2  
Old 01-18-2018, 06:25 PM
Chronos Chronos is offline
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I think that the standard per-mile pay calculation also considers the driver's time. If they're paying for car rental instead of mileage, with nothing else in the deal, then they're not paying for the driver's time.
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Old 01-18-2018, 06:31 PM
SlackerInc SlackerInc is offline
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Originally Posted by Chronos View Post
I think that the standard per-mile pay calculation also considers the driver's time. If they're paying for car rental instead of mileage, with nothing else in the deal, then they're not paying for the driver's time.
Does it really? That surprises me. But it does then mean that it's still a bad deal for my friend to get the rental car rather than the mileage.
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Old 01-18-2018, 06:42 PM
SlackerInc SlackerInc is offline
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This IRS publication is not 100% clear, but it seems to consider costs of operation of a vehicle in two classes:

Quote:
fixed costs (including depreciation or lease payments,
insurance, registration and license fees, and personal property taxes)
and

Quote:
variable costs (including gasoline and all taxes
thereon, oil, tires, and routine maintenance and repairs)
No mention of the driver's time.
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  #5  
Old 01-18-2018, 06:57 PM
Tom Terrific Tom Terrific is offline
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A question: Is it her actually renting the car and being reimbursed or is she picking up a car rented by the company? When I had to drive my own car for my companies benefit I was required to have a certain amount of insurance. If the company is doing the renting they are assured that the insurance is the requisite amount.
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Old 01-18-2018, 07:17 PM
filmore filmore is offline
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Corporate rental agreements might mean they pay 1/3 of the regular rental price. So maybe just $25 or $30 for the day. And they typically have unlimited mileage. And it would insulate the company from any liability issues if the vehicle broke down. If you're driving your own car and get a flat or whatever, you might try to expense the repair cost since you had to get to the meeting.
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Old 01-18-2018, 07:22 PM
SlackerInc SlackerInc is offline
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Originally Posted by filmore View Post
Corporate rental agreements might mean they pay 1/3 of the regular rental price. So maybe just $25 or $30 for the day. And they typically have unlimited mileage. And it would insulate the company from any liability issues if the vehicle broke down. If you're driving your own car and get a flat or whatever, you might try to expense the repair cost since you had to get to the meeting.
But this still raises the question of how it can be profitable for the rental car company.
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Old 01-18-2018, 07:33 PM
filmore filmore is offline
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But this still raises the question of how it can be profitable for the rental car company.
I'm not sure of all the structure behind the scenes, but it could be that the corporate rentals help ensure the entire fleet is rented. Normal consumers pay $90 and mileage, while Apple's employees pay $30 and get free mileage. The rental car company probably isn't making a whole lot off the $30, but they're making a lot of the $90. Having the corporate customers mean the cars won't be sitting around earning $0.

And the rental company will sell the car after a few years. It doesn't cost them the whole purchase price of the car to get the car. The get some of the money back when they sell it later. And they do all their own maintenance, which means they aren't paying a regular garage rates.
  #9  
Old 01-18-2018, 07:47 PM
iamthewalrus(:3= iamthewalrus(:3= is offline
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But this still raises the question of how it can be profitable for the rental car company.
Companies don't have to make money on every customer as long as they make money on the average customer.

The average rental car is probably driven a lot less per day than this customer is driving it, so including unlimited milage makes sense, even if they don't make a profit on the few customers who drive hundreds of miles.
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Old 01-18-2018, 08:14 PM
BobBitchin' BobBitchin' is offline
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I may be off base but isn't companies making STUPID money decisions kind standard?
I feel like I'm always hearing about some corporation making moves that look good short term and are about as fiscally sound as payday loans and rent to own furniture.
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Old 01-18-2018, 08:45 PM
Sicks Ate Sicks Ate is offline
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I used to work for a state agency that required me to use my own car, unless a rental was cheaper than mileage reimbursement.

The way the math worked, for a one-day out and back I had to go about 90 miles one way to get a rental car.

The kicker was, they only looked at the rental rate, not the refuel included. So by the time I refilled the car mileage reimbursement was about $20 cheaper.
  #12  
Old 01-18-2018, 11:29 PM
t-bonham@scc.net t-bonham@scc.net is offline
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Originally Posted by SlackerInc View Post
But this still raises the question of how it can be profitable for the rental car company.
The big car rental companies are basically just dumps for the automakers unsold cars.

Hertz (and Thrifty & Dollar) was owned by General Motors; National (Enterprise, Alamo) was mostly owned by Chrysler interests, and Avis/Budget was connected to Ford. You could see this reflected by the cars that predominated in the fleet of each rental company.

So the actual profitability wasn't so important, as long as it basically at least broke even. The auto makers did OK just in selling their unsold inventory to the rental companies (and inflating their sales figures on the unpopular models).
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Old 01-18-2018, 11:58 PM
MichaelEmouse MichaelEmouse is offline
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Sometimes, big companies prefer to take the more expensive option that's easy to administer rather than the cheaper option that may require lots of case-by-case details to deal with, especially if they got burned in the past. "Whatever, just farm it out to some turnkey, all included package so we don't have to spend more time and headache on this."

Last edited by MichaelEmouse; 01-19-2018 at 12:01 AM.
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Old 01-19-2018, 03:07 AM
SlackerInc SlackerInc is offline
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Good points. I guess my real underlying question is: shouldn’t my friend be pushing or at least angling to drive herself? She seems to think she’s doing better with the status quo but I find that a dubious proposition.

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Originally Posted by iamthewalrus(:3= View Post
Companies don't have to make money on every customer as long as they make money on the average customer.

The average rental car is probably driven a lot less per day than this customer is driving it, so including unlimited milage makes sense, even if they don't make a profit on the few customers who drive hundreds of miles.
I thought they did have a mileage limit beyond which you get charged extra. That was certainly the case with U-Haul, and it strikes me as foolish not to do it with rental cars since people just using them around town won’t even come close to the limit.
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Old 01-19-2018, 06:26 AM
pullin pullin is offline
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My (very large) company strongly encourages airline+rental car even on relatively short trips. I have no official word on the reason, but my boss said it's a liability issue. With thousands of employees doing large amounts of travel, they presumably deal with fewer accidents and mechanical delays this way. I have a few medical issues that make airline travel difficult, and am frequently a little crossways with travel accounting since my expenses don't fit neatly in their forms. Their policy is to cover the cheaper of: either the vehicle mileage, or the cost of airline+rental car. Due to their significant discounts, I may end up losing a little money if I decide to drive.

Our travel department is so large Travelocity has developed a separate corporate site for us, and it seems we get pretty good discounts on airline and rental cars (I've tried planning the same trip outside the company, and it's almost always more).

To the OP, I don't know if it's cheaper in the single case you're talking about, but sometimes corporate rules make it cheaper in aggregate for them. Our company requires that we always purchase non-refundable tickets, which seems daft for some trips (with uncertain timelines). But over the many thousands of tickets they buy annually, it's cheaper to occasionally eat the cost when one of us has to stay longer.

Last edited by pullin; 01-19-2018 at 06:28 AM.
  #16  
Old 01-19-2018, 10:04 AM
Balthisar Balthisar is offline
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Quote:
Originally Posted by t-bonham@scc.net View Post
The big car rental companies are basically just dumps for the automakers unsold cars.

Hertz (and Thrifty & Dollar) was owned by General Motors; National (Enterprise, Alamo) was mostly owned by Chrysler interests, and Avis/Budget was connected to Ford. You could see this reflected by the cars that predominated in the fleet of each rental company.
Actually, Ford owned Hertz outright from 1987 to 2005. Thrifty and Dollar weren't part of Hertz during Ford's ownership. Hertz existed long before Ford, and stands on its own now.

I don't think (nor have I found evidence) that any auto OEM ever owned or controlled Avis-Budget or its predecessors.
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Old 01-19-2018, 10:33 AM
steronz steronz is offline
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So my "Bayesian prior" (call it a hunch if you prefer) is that the 55 cents/mile she says is set by the IRS is too generous, for a trip with mostly highway miles in particular.*
I think your hunch is correct. I sometimes bill my company for mileage, and they pay it but I can tell they don't like it, because $0.55/mi is awfully generous.

I did some quick back-of-the-envelope math and figured a compact car, with normal annual mileage, taxes, registration, gas, maintenance, repairs, is going to cost somewhere between 40 and 50 grand over a 15 year lifespan. Obviously the rental agency is selling them after a few years, but that lifetime cost is going to be factored into the resale, so it's still a decent ballpark. The IRS, meanwhile, would shell out over 100 large for the same lifespan.

I don't know if they're factoring in the cost of the driver (if so, it works out to roughly $17/hr), but the company is already paying for their employee's time, so that doesn't seem right. It's also a flat rate regardless of the kind of vehicle -- a full size pickup is going to cost a lot more, obviously, and the margin on the IRS rate is probably a lot more reasonable.
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Old 01-19-2018, 10:49 AM
mazinger_z mazinger_z is offline
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Aside from other good reasons like cleaner accounting and easier liability issues, the main reason why corporations encourage car rentals is for top line deductions, especially for profitable corporations in high tax areas. On top of that, if the employee expenses it on their own (even if company sponsored) credit card, they get to kite the reimbursement.


ETA: (apologies if posted twice), my accountant also highly encourages car leasing, especially if one has a home office or is their own corporation, but this is not tax advice)

Last edited by mazinger_z; 01-19-2018 at 10:51 AM. Reason: other tax info
  #19  
Old 01-19-2018, 10:52 AM
zimaane zimaane is offline
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Quote:
I may be off base but isn't companies making STUPID money decisions kind standard?
Companies that consistently make stupid money decisions won't be companies for very long.

Obviously, people who run companies make bad decisions sometimes, and if you really want to get into it, there are principal-agent problems in large enterprises, but as a general rule companies are good with money.

To the OP's question, the rental car company is probably price discriminating, charging less to your friend's company than to someone who just walks in. I would guess that that is because the rental car value the steady flow of cash they get from corporate customers (as opposed to the uncertain revenue from retail customers), and that they have streamlined the overhead with corporate clients, and maybe that corporate clients are better about returning cars on time and clean.
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Old 01-19-2018, 10:58 AM
SlackerInc SlackerInc is offline
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The weird thing is, the rate was actually higher ten years ago, even before adjusting for inflation.

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Originally Posted by pullin View Post
My (very large) company strongly encourages airline+rental car even on relatively short trips.
It's funny you mention that. Hers is a pretty large company too, and we got on the topic because we were talking about airline hubs and how annoying they can be. She said her company is always asking "can't you fly?" but it would either require driving 45 miles to a regional airport, then flying hundreds of miles in the wrong direction to a hub, before catching a flight to the HQ city, at which point she still has to get to them from the airport. Or she can drive three hours to a more major city and get a direct flight. Or she can drive four and a half hours (including the backtracking to the rental car place). If she drove her own car, it would be three and a half hours.

ETA:
Quote:
Originally Posted by zimaane View Post
Companies that consistently make stupid money decisions won't be companies for very long.

Obviously, people who run companies make bad decisions sometimes, and if you really want to get into it, there are principal-agent problems in large enterprises, but as a general rule companies are good with money.

To the OP's question, the rental car company is probably price discriminating, charging less to your friend's company than to someone who just walks in. I would guess that that is because the rental car value the steady flow of cash they get from corporate customers (as opposed to the uncertain revenue from retail customers), and that they have streamlined the overhead with corporate clients, and maybe that corporate clients are better about returning cars on time and clean.
I would still say though that there's no way, if that mileage reimbursement were not profitable for the people receiving it, that a rental car company could be in the black charging less. It's like that old joke about "making it up on volume".

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Originally Posted by mazinger_z View Post
Aside from other good reasons like cleaner accounting and easier liability issues, the main reason why corporations encourage car rentals is for top line deductions, especially for profitable corporations in high tax areas. On top of that, if the employee expenses it on their own (even if company sponsored) credit card, they get to kite the reimbursement.
Kite the reimbursement?
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Last edited by SlackerInc; 01-19-2018 at 11:01 AM.
  #21  
Old 01-19-2018, 11:22 AM
mazinger_z mazinger_z is offline
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Kite the reimbursement?

Typically large corporations do this, but any corp can, depending on quarterly tax filings. The short answer is that companies want to be paid now (for truer tax liability and to have cash in hand), but want to pay their debts as long out as they can (to preserve cash reserves). Any way my corp can lengthen the payment term back to reimburse me for my travel, the more benefit to them. A large corporation can earmark my estimated travel expense to a simple interest bank account and wait for the actual travel expense to clear, and then pay me from that bank account. With small companies, it probably isn't worth the peanuts in interest, but with large corporations with large deposits, and many travel expenses, it may be worth their while. Once you factor in offshore affiliates and tax havens, the savings against tax start to really mount up.
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Old 01-19-2018, 11:24 AM
DrCube DrCube is offline
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It's also a flat rate regardless of the kind of vehicle -- a full size pickup is going to cost a lot more, obviously, and the margin on the IRS rate is probably a lot more reasonable.
I think this might be it. People with small, reliable low-gas-mileage cars with cheap maintenance costs are getting a great deal at $0.53/mile, while people driving gas-guzzling Escalades with $500 tires are losing money at that reimbursement rate. Overall it balances out as far as the IRS is concerned, but there are winners and losers.

I think there are other reasons companies prefer to rent, though. For one thing, if you're picking up any customers or clients, the car is guaranteed to be pretty clean, while personally owned vehicles may be gross inside, or old and rusty outside, or both. Any sort of hiccup with a personal car can cost a lot of money in delays, and I think there's a perception that rental cars are better maintained than POVs and less likely to blow a tire, need a jump or fail to start for some other reason.
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Old 01-19-2018, 11:47 AM
Doug K. Doug K. is online now
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My (very large) company strongly encourages airline+rental car even on relatively short trips. I have no official word on the reason, but my boss said it's a liability issue. With thousands of employees doing large amounts of travel, they presumably deal with fewer accidents and mechanical delays this way. I have a few medical issues that make airline travel difficult, and am frequently a little crossways with travel accounting since my expenses don't fit neatly in their forms. Their policy is to cover the cheaper of: either the vehicle mileage, or the cost of airline+rental car. Due to their significant discounts, I may end up losing a little money if I decide to drive.
Liability, not cost, is the real reason. I work in schools, and I'm not allowed to use my own vehicle to transport students, because the school's insurance will not pay if someone gets in an accident using their own car. And there's a good chance our personal car insurance won't cover an accident if our car was being used for work purposes, leaving the school district holding the bag.
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Old 01-19-2018, 11:49 AM
mhendo mhendo is offline
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I work for the state of California.

Using a personal vehicle for work-related travel is reimbursed by the state at 54.5c per mile, but they also have limits about how much personal mileage they're willing to reimburse.

Last week, i had to travel to Long Beach from San Diego for work, a distance of 110 miles each way, or about 220 miles total. At 54.5c per miles, that would have been a reimbursement of about $120. But the official paperwork for this meeting said the following about travel by car:
Quote:
If you choose to drive your personal vehicle, we will only reimburse you for a maximum of two-day rental car equivalent, which will not exceed $80, even if the personal mileage reimbursement would be greater.
So i rented a car. Here in Southern California, car rental is ludicrously cheap. I rented a full-sized car (Chevy Impala) on my own, with no special corporate discount, and the full price for two days, including tax, was $62.92. Gas, which they will reimburse on top of the rental, was about $24.

Before we do any reimbursable, work-related driving, we have to take a defensive driving theory course (either in person or online), and we also have to certify that we have our personal vehicles insured at a level acceptable to the state.
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Old 01-19-2018, 11:53 AM
SlackerInc SlackerInc is offline
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I think there are other reasons companies prefer to rent, though. For one thing, if you're picking up any customers or clients, the car is guaranteed to be pretty clean, while personally owned vehicles may be gross inside, or old and rusty outside, or both. Any sort of hiccup with a personal car can cost a lot of money in delays, and I think there's a perception that rental cars are better maintained than POVs and less likely to blow a tire, need a jump or fail to start for some other reason.
Excellent points. They might just say "it's cheaper" so as not to have to make this awkward case to their employees. Although mhendo's tale does make it sound like a bargain to rent. One wonders why the prices are so low.
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Old 01-19-2018, 12:10 PM
SmellMyWort SmellMyWort is offline
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The car rental companies obviously know what works to make a profit because they have a ton of data they can use to predict how long it takes a certain type of car to be profitable. They can see that to make a profit on, say an intermediate class car, they need to rent it at an average of $X/day and resell it for $Y after Z miles. They also have a range of customer types, so on one end of the spectrum they have a less profitable customer that rents the cheapest car for a day and racks up a ton of miles, but then on the other end there is a customer that rents an expensive SUV for a week and only use it to commute a few miles a day while their normal car is in the shop.

I'm having a hard time understanding the assumption that the factors that go into a corporate/government mileage reimbursement rate are exactly those that go into the $/mile that a car rental company determines they need to make to turn a profit.

Last edited by SmellMyWort; 01-19-2018 at 12:12 PM.
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Old 01-19-2018, 12:13 PM
iamthewalrus(:3= iamthewalrus(:3= is offline
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I thought they did have a mileage limit beyond which you get charged extra. That was certainly the case with U-Haul, and it strikes me as foolish not to do it with rental cars since people just using them around town won’t even come close to the limit.
I don't believe I've ever rented a normal car in the US that had a mileage limit. U-Haul does have them, but that's a very different business. Maybe there's some "reasonableness" limit somewhere? I wonder what would happen if you went and rented a car somewhere with unlimited mileage, put it up on blocks, and just spun the wheels as fast as you could for a week, returning it with 20,000 more miles on it.

The thing about adding mileage limit is that it doesn't just recoup costs from customers who drive a long way, it also changes customer behavior (some customers will pick whichever is cheaper on the face, but be upset by excess mileage charges. Some customers will carefully calculate and choose the rental with the lower total cost, some customers will choose the company without the limit because it's simpler, some customers will do some weird fourth thing that doesn't make any sense, but they wouldn't do it with unlimited mileage for some reason...). And that change in customer behavior might just cost you more than the more efficient pricing model gains you.
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Old 01-19-2018, 12:16 PM
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I would still say though that there's no way, if that mileage reimbursement were not profitable for the people receiving it, that a rental car company could be in the black charging less. It's like that old joke about "making it up on volume".
I think the problem with this question -- how it's "cheaper" for a company to rent a car than to pay mileage -- is that it starts with the bad premise that the mileage reimbursement rate a company pays to employees is somehow linked to the business costs of a car rental company. As I understand it, most companies reimburse employees by using the standard mileage rate set by the IRS because it is the rate at which companies may claim for a business deduction. While the IRS presumably uses some metric related to actual vehicle operating costs to determine the standard mileage rate, this really doesn't have a direct correlation to the business costs of car rental company. As mentioned by several posters, several variables (ownership and subsidy by a car manufacturer, corporate discounts, etc) means that the rental rate a car rental company has to set to be profitable is different from what the IRS's calculation of a reasonable standard mileage rate.
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Old 01-19-2018, 12:22 PM
SlackerInc SlackerInc is offline
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I think the problem with this question -- how it's "cheaper" for a company to rent a car than to pay mileage -- is that it starts with the bad premise that the mileage reimbursement rate a company pays to employees is somehow linked to the business costs of a car rental company. As I understand it, most companies reimburse employees by using the standard mileage rate set by the IRS because it is the rate at which companies may claim for a business deduction. While the IRS presumably uses some metric related to actual vehicle operating costs to determine the standard mileage rate, this really doesn't have a direct correlation to the business costs of car rental company. As mentioned by several posters, several variables (ownership and subsidy by a car manufacturer, corporate discounts, etc) means that the rental rate a car rental company has to set to be profitable is different from what the IRS's calculation of a reasonable standard mileage rate.
They don't have to be "linked". It's just an oddity in economic terms for it to be cheaper to have someone rent a different car than to compensate them for the use of their own. Other things people rent short term don't work that way. I can for instance get an apartment that is much larger than a hotel room, for much less of a daily cost. Or maybe even closer to the idea of renting a car: have you ever rented a bike from a bike shop? I have, and the ratio of the cost of doing so for a few days to the cost of buying a bike was, I thought, way too high.
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Old 01-19-2018, 12:26 PM
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Here in Southern California, car rental is ludicrously cheap. I rented a full-sized car (Chevy Impala) on my own, with no special corporate discount, and the full price for two days, including tax, was $62.92. Gas, which they will reimburse on top of the rental, was about $24.
When I lived in Southern California I used to rent cars when taking trips to the bay area to visit friends because it was so cheap and I didn't want to put wear and tear on my car. I think the cheapest rate I ever got was $17 per day, not including taxes and fees!
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Old 01-19-2018, 12:40 PM
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Originally Posted by SlackerInc View Post
They don't have to be "linked". It's just an oddity in economic terms for it to be cheaper to have someone rent a different car than to compensate them for the use of their own. Other things people rent short term don't work that way. I can for instance get an apartment that is much larger than a hotel room, for much less of a daily cost. Or maybe even closer to the idea of renting a car: have you ever rented a bike from a bike shop? I have, and the ratio of the cost of doing so for a few days to the cost of buying a bike was, I thought, way too high.
I hear you about the oddity (see my post above about my experience with cheap car rentals in CA). My point was that you can't really assume that the standard mileage rate a company uses to reimburse an employee has any meaningful correlation to the expenses seen by a car rental company. Unlike private individuals, car rental companies pay fleet prices for cars, so they pay a much lower price for each car than you and I would. They also likely get discounts on gasoline given their volume, which is something you and I don't. They also have lower car maintenance costs because they either do it in-house or contract it out. All these factors mean that it costs less for car rental company to keep a car on the road than it does a private car owner.
  #32  
Old 01-19-2018, 01:01 PM
SlackerInc SlackerInc is offline
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It may be cheaper for them to keep a car on the road, but a private owner doesn't have a rental counter, a permanent parking space at the airport, advertising expenses, employees, etc.
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  #33  
Old 01-19-2018, 01:28 PM
TruCelt TruCelt is offline
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Quote:
Originally Posted by SlackerInc View Post
But this still raises the question of how it can be profitable for the rental car company.
Quote:
Originally Posted by filmore View Post
Corporate rental agreements might mean they pay 1/3 of the regular rental price. So maybe just $25 or $30 for the day. And they typically have unlimited mileage. And it would insulate the company from any liability issues if the vehicle broke down. If you're driving your own car and get a flat or whatever, you might try to expense the repair cost since you had to get to the meeting.
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Originally Posted by Sicks Ate View Post
I used to work for a state agency that required me to use my own car, unless a rental was cheaper than mileage reimbursement.
...
The kicker was, they only looked at the rental rate, not the refuel included. So by the time I refilled the car mileage reimbursement was about $20 cheaper.
It's also true that the IRS raised the reimbursement rate back when gas was $4gallon. AFAIK it hasn't come back down with the gas prices.

Quote:
Originally Posted by MichaelEmouse View Post
Sometimes, big companies prefer to take the more expensive option that's easy to administer rather than the cheaper option that may require lots of case-by-case details to deal with, especially if they got burned in the past. "Whatever, just farm it out to some turnkey, all included package so we don't have to spend more time and headache on this."
Also this. I haven't ever seen a big company whose travel office was properly staffed. They are always cutting back and forcing the most ridiculous generalizations as a result. There's just no other way.

And liability does come into it. On a longer trip, the corporate umbrella policy may prefer that employees be in a perfectly maintained vehicle. Or at least in a vehicle that - should it break down and the employee be harmed - another company has liability for any negligence on. If the employee's car breaks down while they are on company travel, and the employee is harmed, the company will be liable for workman's comp and other damages. If it's a maintenance problem on a rental car, the corporate insurance could subrogate the costs back to the rental car company's policy.

I wouldn't be surprised if keeping that a requirement across the board makes the corporate insurance policy cheaper.

Last edited by TruCelt; 01-19-2018 at 01:30 PM.
  #34  
Old 01-19-2018, 03:34 PM
iamthewalrus(:3= iamthewalrus(:3= is offline
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Quote:
Originally Posted by SlackerInc View Post
It's just an oddity in economic terms for it to be cheaper to have someone rent a different car than to compensate them for the use of their own.
The major difference is that the cost of the rental is set by the market and varies by the vehicle and location, and the cost of compensation is set by the government, and is a single rate.

Even if you assume that the IRS is 100% accurate about the average cost of operation of a vehicle, there should still be plenty of cases where the rental is cheaper (even after expenses and profit).
  #35  
Old 01-21-2018, 06:17 AM
pullin pullin is offline
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Originally Posted by Doug K. View Post
Liability, not cost, is the real reason. I work in schools, and I'm not allowed to use my own vehicle to transport students, because the school's insurance will not pay if someone gets in an accident using their own car. And there's a good chance our personal car insurance won't cover an accident if our car was being used for work purposes, leaving the school district holding the bag.
This is a good point, and IME there are subtle problems if one isn't paying attention. According to my policy and agent, driving myself on a business trip is the same as going to work (just further). My coverage isn't affected since I'm not using the truck as company transport. However, it gets murky if they request that I load up a bunch of lab equipment since I'm "going there anyway". I decline carrying anything but myself and my laptop because I'm not sure how the insurance company would react if my truck had a lot of Mega-Corp's equipment aboard in a crash.

Another interesting point, obviously liability related. I'm a pilot and once mentioned that I might fly my own airplane for convenience on one trip. This was met with a harsh warning that not only would the company refuse reimbursement, I would be terminated immediately if discovered aviating myself on company business.
  #36  
Old 01-21-2018, 02:33 PM
RickJay RickJay is offline
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I used to travel a lot for my job and whenever humanly possible drove my own car.

I made a fortune. It would have been cheaper for my employer to rent me a car, for sure (or simply enforce a rule that I had to rent for trips over X miles.) Hell, they could have literally bought me a car and saved money.
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  #37  
Old 01-24-2018, 04:24 PM
Mama Zappa Mama Zappa is offline
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My company has a rule that I have to have x amount of liability insurance if I use my car on company business (300,000 or more, I think). It protects them in case I do something stupid and my victim tries to sue my employer.

If I'm in a rental car, that might protect the company - whereas, if I drive my own, the company doesn't know for sure that I've followed the policy.

For a 200 mile trip (400 round trip): you're looking at the IRS rate of 50 cents or so per mile, or 200 dollars, in mileage reimbursement. A rental car for, say, 2 days, will be less than 200 dollars.

So yeah, it's cheaper for the company to rent a car for the employee (though if she truly has to drive 30 miles to / from the rental place, is she being compensated for that?).

For longer-term use, companies might well lease a car. My father was a sales representative and had company provided cars his last 10 years or so. Arguably less paperwork on both sides, though I gather he had to reimburse the company for personal use of the car.
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