Vehicle reimbursement programs for organizations with employees who drive often incur unexpected costs beyond initial calculations. The four main options – company-provided vehicles, car allowances, cents-per-mile reimbursement, and fixed and variable rate (FAVR) reimbursement – each present distinct advantages and hidden expenses.
Fleet programs average $12,816 per driver annually when accounting for fuel cards, maintenance, and liability risks. Car allowances create tax waste while potentially disadvantaging employees in high-cost regions.
Cents-per-mile programs face challenges with mileage fraud and audit exposure, particularly with high-mileage drivers. FAVR reimbursements offer the most comprehensive solution by tailoring payments to geographic costs, though they require more complex administration.
Most companies benefit from implementing multiple vehicle reimbursement program types simultaneously to address different driving profiles, making comprehensive program management essential. Understanding these total costs helps businesses implement solutions that balance financial considerations with employee satisfaction and compliance requirements.
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