Whether your construction company has grown and you need to add more workers or you’re thinking of opening a delivery business, you’ll need to successfully operate commercial vehicles — i.e. fleet ownership. Fleet ownership can seem a bit daunting, but with the right preparation, you can make the process of operating commercial vehicles much easier.
Of course, the whole point of becoming a fleet owner is how you use your vehicles to further the purpose of the business. It’s that purpose that will inform many of the decisions you make along the way.
Whether you run a fleet of vans as part of your HVAC repair business, a fleet of pickup trucks as part of your landscaping business, or a fleet of semis as part of your moving company, the vehicles are a tool that drives your business toward success.
In this article, we’ll discuss some of the legal requirements of fleet ownership and give you a set of steps to follow to get you started on your way.
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Requirements For Fleet Ownership
Many of the requirements for fleet ownership depend on the type, size, and use of the vehicles you operate.
So, for example, if you run a fleet of SUVs as part of your in-town flower delivery service, you may not need to satisfy the requirements on this list.
On the other hand, if you run a fleet of pickup trucks that tow large RVs to dealers across the country or a fleet of semis that move your construction equipment across state lines, you’ll need to make sure you’re up-to-date with all of the requirements on this list.
Either way, it’s a good idea to talk with someone at the BMV or DMV in your area to find out what you need to do to comply with local, state, and federal laws.
The list of requirements below gives you an idea of what it takes to own and operate a fleet of large commercial vehicles anywhere in the United States. Your requirements may differ.
Federal Registration Numbers
Fleet vehicles that transport passengers, interstate freight, or hazardous materials must have one, if not two, federal registration numbers.
The first, a United States Department of Transportation (USDOT) number, is a unique vehicle identifier that serves to distinguish commercial vehicles when reporting and monitoring safety information acquired during audits, compliance reviews, crash investigations, and inspections.
The second, a Motor Carrier (MC) number (sometimes called an Operating Authority) gives a business the legal right to conduct specific transportation activities within their state and across state lines.
Depending on what your business does, you may need to obtain multiple MC numbers to authorize the daily activities of your fleet.
To find out if you need an MC number, visit the Federal Motor Carrier Safety Administration (FMCSA) website for more details.
International Fuel Agreement Registration
The IFTA manages and enforces the International Fuel Tax Agreement (also IFTA) which is a tax collection agreement between the 48 contiguous states in the U.S. and the 10 provinces in Canada that border those states.
After the registration process is complete, the IFTA (the association, not the agreement) will supply credentials that the business will then need to display on the outside of all applicable vehicles along with photographic proof of your IFTA license.
Intrastate License And Registration
Some states may require additional licensing and registration depending on a variety of factors, including geographic variables such as:
- Whether cargo or passengers are transported across state or international borders
- Whether goods are transported within one state but part of the trip crosses into another state
- Whether goods are transported within one state but the cargo originates or finishes the trip outside the state
To ensure that you’ve got all the proper intrastate licensing and registration necessary for your fleet vehicles, check with your local state driver licensing agency (typically a DMV or BMV).
Heavy Vehicle Use Tax
If any number of your fleet vehicles weigh more than 55,000 pounds and operate on public highways, you’ll need to register for and pay
Heavy Vehicle Use Tax (HVUT).
Registration is done through the IRS on Form 2290, and fees are based on the weight of each vehicle in your fleet.
If your vehicle weighs between 55,000 pounds and 75,000 pounds, you’ll be required to pay a base fee of $100 and $22 for each additional 1,000 pounds.
So, for example, if one of your vehicles weighs 60,000 pounds, you’ll be required to pay an additional $110 ((5,000 pounds / 1,000 pounds) x $22) for a total of $210. If your vehicle exceeds 75,000 pounds, the IRS gives you a break of sorts and charges a flat fee of $550.
How To Become A Fleet Owner
1) Write A Fleet Plan For Your Business
The first step on the road to fleet ownership is writing a plan for this part of your business.
This is distinct from a regular business plan in that it covers topics like:
- Projected fleet expenses
- The number of vehicles you plan to start with
- Whether you’ll be purchasing or leasing
- Insurance costs
- Maintenance costs
- Storage and housing
- Driver overhead
It’s also a good idea to include in your plan how long you estimate it will take to recoup the purchase costs of your fleet vehicles.
2) Consider Getting Your Commercial Driver’s License
This step isn’t necessary if you’re planning to field a fleet of cars, SUVs, work vans, or pickup trucks. But, if you’re planning on purchasing and operating semis, you might want to consider getting your commercial driver’s license (CDL).
Keep in mind that this step is completely optional. And if you’re going to focus instead on running the business itself and leaving the driving to others, you probably don’t need a CDL of your own.
3) Buy Or Lease Fleet Vehicles
The next step on the road to fleet ownership involves acquiring the commercial vehicles you need to get the job done. If you already use one or two work vehicles in your business, then you may be familiar with the process needed to acquire more.
But whether or not that’s the case, after deciding which vehicles make the most sense for your business, the next big choice is whether to buy or lease.
Buying your vehicles outright gives you the freedom to do what you want with them and control how they’re used and maintained.
Leasing can help you save money when you’re first starting out, but you’ll be locked into terms and conditions for quite some time. You might, for example, choose an open-end lease that expires after one year (with your choice to then extend the lease on a month-to-month basis).
These leases typically don’t include repair and maintenance costs and may even levy a terminal rental adjustment clause (TRAC) that holds your business responsible for maintaining the vehicle’s defined resale value.
Or, you might choose a closed-end lease that remains in effect for a minimum of three years or more.
These leases typically include mileage restrictions and location limitations (e.g., the vehicle is prohibited from traveling outside a certain radius) but may also include repair and maintenance costs in the premiums so you don’t have to pay out of pocket for these expenses.
Both buying and leasing have their pros and cons, so be sure to do your research and make the right choice for your business.
For more information on the leasing process, check out this article from the Coast blog: What Is Fleet Leasing And How Does It Work?
4) Purchase Insurance For All Fleet Vehicles
Purchasing insurance for your vehicles is an essential (and mandatory) part of fleet ownership.
Depending on the type of vehicles you have, the insurance company you partner with, and whether you buy or lease, you may need to purchase one or all of the following types of coverage beyond primary liability:
- Lease gap coverage
- Physical damage coverage
- Non-trucking liability coverage
- Motor truck cargo coverage
Talk to your preferred insurance provider for more details.
5) Stay In Compliance
We mentioned a number of requirements for fleet ownership in the previous section (i.e., USDOT and MC numbers, ITFA registration, HVUT, and intrastate licensing), but you’ll also have to abide by other compliance regulations along the way, including:
- Hours of service (HOS)
- Driver-Vehicle Inspection Reports (DVIR)
- Compliance, Safety, and Accountability (CSA) scores
Visit the Commercial Vehicle Safety Alliance (CVSA) website for more details.
Streamline Fleet Ownership With Coast
After you obtain the proper permits, purchase insurance, and get your vehicles on the road, you can make fleet ownership easier by controlling fuel costs and driver spending.
The Coast fleet and fuel card can help.
The Coast fleet and fuel card can be used anywhere Visa is accepted, comes with advanced spending controls, and provides access to an online expense management platform that empowers you with real-time information related to your fleet.
For more information on how Coast can help you manage your fleet better and continue on the road to operational excellence, visit CoastPay.com today.