Reducing and managing grey fleet should be a priority for organisations, both from an environmental and cost perspective. Numerous cost-effective and convenient alternatives exist.
‘Grey fleet’ refers to vehicles that are privately owned or leased by employees but used for business travel.
In many organisations, grey fleet mileage is unnecessarily high. On average, grey fleet vehicles are older, less safe and more polluting than alternatives, such as company or pool cars. Energy Saving Trust and BVRLA estimate that employees drive over 12 billion miles each year, costing employers around £5.5 billion a year, contributing to congestion, air pollution and emitting 3.5 million tonnes of CO2.
There are also duty of care implications. The law is clear – an organisation has a legal duty of care to an employee, regardless of vehicle ownership, which means grey fleet needs to be managed as diligently as company-owned or leased vehicles. For more detail on duty of care and health and safety implications, see a guide to managing grey fleet mileage.
Making grey fleet the last resort for staff is also likely to result in substantial savings for an organisation as alternatives, such as daily hire vehicles, can be more cost-efficient. Proactive grey fleet management also tends to be associated with reduced mileages and therefore reduced costs and higher productivity.
For more detail, see Drivers for change (in Process, Drivers, Considerations and Monitoring).
To help finding the breakeven point, see Daily car rental vs Private car costs spreadsheet.
Managing grey fleet can be challenging and requires numerous teams to collaborate. One reason why grey fleet is often overlooked is that no one is responsible for its overall management. In some organisations, the fleet manager might assume responsibility, but an individual could also be appointed from finance or HR.
It can be helpful to establish a working group to assist with developing and implementing a grey fleet policy, especially for a large fleet or public sector organisation.
See the Stakeholder Engagement Matrix for help in identifying who should be involved and how. The Energy Saving Trust guide to managing and reducing grey fleet mileage also offers some tips to help overcome barriers (see p13).
Also see Cabinet Report which may be useful when presenting to a local authority committee or building a business case for action.
Understanding who is making journeys in grey fleet vehicles, and crucially, why, is an essential step when developing or improving a grey fleet policy. This involves analysing the available data and reviewing existing fleet policies.
In order to track progress, you’ll need to establish a baseline, using data from over 12 months to account for seasonal variations. It's useful to collect data on mileages, payments claimed vs mileage rate, fuel use, number of claimants and non-car travel use. Data sources include telematics, booking systems, fuel cards and employee surveys.
Questions to consider are summarised in the table below:
Vehicles (grey fleet)
If this information is not available, you’ll need to review your data collection procedures.
To comply with health and safety legislation and the HSE’s Driving at Work guidance, any grey fleet policy should include statements relating to the vehicle, the driver and the journey.
See Processes, Drivers, Considerations and Monitoring for more details.
Appendix 2 in the Energy Saving Trust guide on Managing and reducing grey fleet mileage lists measures that need consideration and monitoring.
You should also review current fleet policies. In particular, check that you know which employees are eligible for which type of vehicle and update the break-even costs in terms of mileages and lease costs for company cars, pool cars and daily hire vehicles. It’s also worth reducing maximum CO2 emissions allowed for company vehicles every year or so because average CO2 emissions improve year-on-year as new models become available.
A travel hierarchy sets out a decision-making framework to minimise travel and its impact. The framework can take the form of a simple flow chart or an interactive website. Staff should follow the framework to help them make the right travel choice.
The first decision point should be whether a journey is required, or if phone or video conferencing would be suitable. See the Energy Saving Trust guide to Mileage management for best practice regarding web conferencing. The next step should be to consider public transport, walking or cycling.
After this, the most appropriate vehicle is likely to be linked to mileage and may include daily hire cars, pool cars, car clubs, company cars or vans. Grey fleet should be the last resort.
To assist you in implementing changes, here are several example fleet policies to adapt:
Company cars may be the most cost-efficient option for employees undertaking high business mileage (i.e. over 8,000 or 12,000 miles a year). As company cars are normally newer, this also reduces emissions and leads to better risk management.
Where available, a lease car scheme can be cost effective. An allowance is determined for employees towards leasing the vehicle, and business mileage is reimbursed (usually at HMRC’s advisory fuel rates) to cover fuel costs.
Salary sacrifice schemes are another option, but following taxation changes, they are now most cost-effective for ultra-low emission vehicles. This is where employees sacrifice a portion of their gross salary in exchange for a benefit – in this case, a company car. For more information, see gov.uk.
It is possible to incentivise or require company car drivers to select lower emission choices, for example by restricting vehicle choice lists or setting a CO2 cap. As company car tax and NI are closely linked to CO2, this is also financially attractive for both employees and employers.
A pool car or van fleet can be a simple, cost effective, low emission and safe method of meeting staff travel needs, especially for daily trips.
To be effective, a pool car fleet needs to be well used by staff. Through the travel hierarchy, staff without company cars can be asked to use a pool car as their first option. It helps if there is a straightforward booking system and vehicles are modern, comfortable and fit-for-purpose (i.e. suitable for carrying equipment or clients if needed). Vehicles should be fuel-efficient and low carbon to maximise savings for the company. The target is to operate the pool car fleet at 45p/mile or lower, the grey fleet mileage reimbursement rate.
For help introducing managing pool cars, have a look at our template Pool Car Strategy and adapt it to suit your organisation.
Also see Car Share FAQs (NB. about pool cars, not car clubs) and the case studies below.
Hire cars are more cost-effective than a grey fleet vehicle for journeys over 80-100 miles a day. Using a daily hire vehicle also ensures the trip is made in a modern, well-maintained, lower emission car. It is possible to specify a CO2 cap for the vehicles provided, such as 100g CO2/km.
For further information, see Understand how daily rental can benefit your business. To help finding the breakeven point, see Daily car rental vs Private car costs spreadsheet.
A car club provides its clients with quick and easy access to a car for short term hire, to be used for local journeys.
Car clubs can be an alternative or supplement to pool cars and can be very cost effective where staff are making lots of short local trips. Your organisation may be able to host vehicles at your office or depot, or have exclusive use during working hours.
Further information and advice can be found at CoMoUK (formally CarPlus).
Approved Mileage Allowance Payments (AMAP) rates are set by HMRC, and are used to reimburse employees who have used their own vehicle for business travel, tax-free. They are designed to include the depreciation, fuel, insurance, servicing and maintenance costs. For the first 10,000 business miles, the AMAP rate is 45p per mile for cars and vans.
If an organisation pays staff more than the AMAP rate, this is considered a benefit and employees need to pay tax on the excess. Energy Saving Trust recommends that AMAP rates are used, as if higher rates are used, there is an incentive to cover more miles.
Energy Saving Trust also strongly recommends that organisations use HMRC Advisory Fuel Rates (AFR) when reimbursing mileages for company car drivers. AFRs are around 11-14p for a typical petrol or diesel vehicle (see gov.uk for current rates) and based on fuel costs. Using these rates discourages higher mileages, as it removes most 'profit' elements (except where large capacity efficient cars are in use) and discourages drivers from buying fuel at expensive locations.
Also consider using fuel cards for company car drivers and adjusting rates to reflect actual costs.
See Maximise Fuel Economy for details and methodologies.
Once alternatives have been provided and efforts made to reduce mileages where possible, the final stage is to reduce the impact of the journeys undertaken in grey fleet, to reduce emissions and fulfil duty of care requirements.
Consider implementing minimum standards on grey fleet vehicles, especially cash ‘opt-out’ vehicles, giving good advance warning and a grace period. These should be based on the standards for company cars and include a maximum age limit of five years, for example, and include restrictions to ensure that appropriate vehicles are chosen by drivers.
An age limit for grey fleet vehicles (which are not cash ‘opt-out’ vehicles) could be set at seven years, a maximum mileage of 100,000 or 150,000 miles, or a CO2 cap of 130g/km, or a minimum of NCAP 4-star crash rating.
If a Clean Air Zone (CAZ) is being introduced locally, which will charge non-compliant cars and vans, a business could also set a minimum standard of a Euro 6 diesel or Euro 4 petrol vehicle. Businesses may also wish to update their expense policies to state that CAZ charges will not be covered if an employee chooses to drive a non-compliant vehicle.
To see how other organisations have reduced their grey fleet use, cutting costs and emissions in the process, read: