By Cardata
April 16, 2025
Recent developments in global trade—particularly the imposition of new tariffs1—are rippling through the automotive sector. Businesses that rely on vehicle programs for employee mobility are feeling the effects across the board.
In this post, we’ll break down how tariffs are influencing three key areas:
- Company-owned fleet programs
- Vehicle reimbursement models (VRPs)
- Broader strategic and operational decisions businesses are making in response
Tariffs and Company-Owned Fleets
When tariffs are applied to imported vehicles or parts, the most immediate effect is a rise in acquisition costs. For fleet managers, this can alter the economics of refreshing or expanding a company-owned fleet.
Rising Purchase Prices
Imported models or vehicles that rely on globally sourced components will become more expensive, putting pressure on procurement budgets. This may lead companies to delay vehicle replacement cycles or pivot to different makes and models, especially to those produced domestically. This delay in replacement or pivoting to more affordable models can present a challenge for fleet uniformity and brand consistency.
Maintenance and Repair Costs
Tariffs don’t just impact purchase prices, they also affect the cost of repairs. Vehicles that rely on parts from outside the United States may incur higher maintenance expenses.
Depreciation and Residual Value
Higher acquisition costs can also skew residual value projections. When the expected resale value at the end of a vehicle’s lifecycle becomes harder to predict, it complicates total cost of ownership (TCO) models and depreciation strategies. While existing fleet stock may appreciate in value, a benefit to the business, new vehicle acquisition costs will also increase, making replacement undesirable.
Strategic Shifts
To cope, many companies are reevaluating their procurement strategies. Some are sourcing vehicles domestically, while others are reassessing lease-versus-buy decisions in light of shifting costs. Moreover, some companies are evaluating moving non-specialty vehicles (standard cars and light trucks) to vehicle reimbursement models, where employees drive personal vehicles for work, to maintain mobility while reducing company cost burdens.
What This Means for Vehicle Reimbursement Programs
The impact of tariffs extends beyond fleets. It’s also reshaping how companies reimburse employees who use their personal vehicles for work. Common vehicle reimbursement models like FAVR (Fixed and Variable Rate), Tax-Free Car Allowances, and Cents per Mile programs all depend on underlying cost assumptions—which are now in flux.
Having a vehicle reimbursement partner is especially important at moments like this for swift and accurate rate recalculation.
FAVR and TFCA: Data-Driven and Responsive
FAVR and TFCA programs are built on real-world fixed and variable vehicle cost data, including purchase price, insurance, fuel, and maintenance. When these inputs change, the reimbursement rates adapt. Businesses using these programs can be recalibrated regularly to ensure fairness. Those with vehicle reimbursement partners providing their reimbursement solution can work with their partner to update their program details, including vehicle profile prices, to reflect escalating costs.
Cents per Mile: Linked to Operating Costs
Cents per Mile programs pay a per mile rate, generally at or below the IRS safe harbor rate (70¢ in 2025; changes annually). Mileage reimbursement rates are influenced by fuel prices, depreciation, and maintenance. When these factors spike due to tariffs, businesses using this model—whether adhering to IRS rates or custom benchmarks—could consider updating their per-mile compensation to remain equitable.
Flexibility is Key
No single model is universally “better,” but the current climate highlights the need for agility. The best reimbursement programs are those that can respond quickly to changing costs and still keep employees compliant with tax and company policy.
Strategic and Operational Implications
Beyond cost increases, tariffs introduce a layer of economic uncertainty. This uncertainty is prompting a broader strategic response from businesses with mobile workforces.
More Scenario Planning
With the potential for tariffs to shift again, forward-thinking companies are incorporating scenario planning into their vehicle program strategies. This allows them to prepare for a range of future cost scenarios and avoid being caught off-guard.
Leveraging Technology
Digital tools like GPS mileage tracking are gaining traction. These technologies help businesses monitor fleet usage, track maintenance needs, and optimize vehicle utilization, helping offset some of the cost pressures introduced by tariffs.
Industry-Level Engagement
Many organizations are also engaging in policy advocacy or joining industry forums. Staying informed—and involved—helps them anticipate changes and shape how new regulations are implemented.
Final Thoughts
Tariffs are reshaping the vehicle landscape—raising costs, increasing complexity, and forcing companies to rethink their fleet and reimbursement strategies. But with the right tools and insights, these challenges are navigable.
At Cardata, we help businesses modernize their vehicle programs. Whether you manage a company fleet, oversee reimbursements, or are exploring the best-fit model for your workforce, we’re here to help you stay ahead of the curve.
Have questions? Want to explore how your current program stacks up in this new environment? Reach out—we’d love to hear from you.
1 – Fact Sheet: Imports of Automobiles and Automobile Parts into the United States
