What Is Grey Fleet Management?

Grey Fleet

Grey fleet management is the process of using employee vehicles to serves business functions. For example, an employee may be asked to use their car to make deliveries, and then be reimbursed for any petrol costs that they incurred.

This is a pretty effective way of saving money for businesses that might not be able to afford a fleet of its own vehicles. Smaller businesses might want to put their precious capital elsewhere, so saving on vehicle costs by using employee-owned vehicles can be huge help.

Gas prices are higher now than they have been in a considerable while, so saving money where you can is crucial. While you'd obviously still have to pay to fuel each delivery or trip, you won't have to cover entire tanks of petrol in order to keep your fleet well-filled.

What Is Grey Fleet Management?

A grey fleet is a fleet of vehicles that are each individually owned by employees, rather than belonging to the business itself. This is typically used for smaller businesses that might not be able to afford an entire fleet of vehicles. Instead, they can save money by simply paying for the necessary fuel for each trip.

Let's come up with an example – a small flower shop with a handful of employees, each with their own personal car. A flower shop would need to generate a lot of profit before investing in its own dedicated delivery fleet, but it would still benefit from the ability to deliver flowers. This flower shop could fund each employee's ability to use their own car as a delivery vehicle by reimbursing petrol costs.

It's not an uncommon method. In fact, the UK alone, there are an estimated 14 million grey fleet vehicles on the road. These vehicles drive a total of 1.5 billion miles a year, at an approximate cost of £786 million.

What Are Grey Fleet Management's Benefits?

The main benefit of grey fleet management is the saving on cost. Not spending money on vehicles, maintenance, and insurance is a great way for small businesses to save on costs. This is the main benefit of a grey fleet, but it's a fairly sizeable one, and can be make or break for any small businesses trying to buff their margins.

What Are the Risks of Grey Fleet Management?

Obviously since these vehicles don't belong to the business and are tied entirely to each individual worker, the business has no real control or jurisdiction over these vehicles. If an employee leaves, then that's one less vehicle in the business's fleet. And it can be trickier hiring an employee willing to submit their car to this kind of system. If a car is damaged or needs repairs, then it's on the employee to cover those costs.

Of course, the business could cover these costs, but this investment would go entirely into the employees' property, and not the business's. Many businesses that use grey fleet management do indeed cover employee vehicle repair costs, as it is indeed in their own interests, but it would definitely be a sunk cost.

It can also be a bit more of a pain to gauge fuel costs. With a conventional business fleet, you simply pay to fill them up when they run low on petrol. But with a grey fleet, you'll need to keep a close eye on the amount of miles tallied up by each car, and whether these miles are for business or for the employees' own usage. Not an enormous pain, but definitely something to keep on top of.

And while this isn't a risk, it's still an overall negative – grey fleet vehicles emit roughly 1.5 times the amount of CO2 as an average company car.

How Much Does Grey Fleet Cost?

Very, very little! At least compared to owning your own fleet. Since a grey fleet is made up of vehicles that have already been purchased by each employee, the business itself won't have to invest much in their fleet costs, like insurance, maintenance, and the initial purchase of the vehicles themselves. The only major cost that goes into this model is the fuel reimbursements.

One thing worth considering is mileage. When a business owns its own fleet, it is in complete control of the kinds of vehicles it uses. When it's a grey fleet, the employees might be using some real gas-guzzlers that you'll have to pay disproportionately more to reimburse. When it's a curated fleet, a business will be able to choose fuel-efficient vehicles to minimise costs, but in a grey fleet, you'll have to make do with what your employees own.

How to Effectively Manage a Grey Fleet?

In order to smoothly run a grey fleet, employees will need to be diligently trained on how to tally and report their fuel consumption. Frequent and accurate numbers are key in maintaining a healthy grey fleet – otherwise your business may be overspending on petrol, or your employees will be fronting business expense costs, both of which are not ideal.

The best way to do this is to jump on reimbursement as quickly as possible. If an employee does a delivery and needs to be covered for their fuel expenses, it's best to wrap this up quickly as they return, or at least tally it up for a reimbursement at the end of the week/month. If you leave expenses floating around too long, things could get lost, and employees could get annoyed if they feel that they're taking too long to be paid back.

Next Steps

Whether or not grey fleet management is for you, we're here to help. We know all there is to know when it comes to fleet management and fuel cards. If your business relies on vehicles to perform shipping or deliveries, you'll want to at least familiarise yourself with these services, even if you don't end up opting for them.

Duncan Lambden
Duncan Lambden Senior Writer

Duncan (BA in English Textual Studies and Game Design) is an Australian-born writer for Expert Market. His articles focus on ecommerce platforms and business software that allows small businesses to improve their efficiency or reach, with an emphasis on invoice financing and customer relations. He has written for Website Builder Expert and Tech.co, and has been featured in Forbes. In his free time, Duncan loves to deconstruct video games, which means that his loved ones are keenly concerned about the amount of time he spends looking at screens.