Driver’s Want Choice!

Ben RaseyUncategorized

Fixed and Variable Rate (FAVR) Program Brings Driver Choice

The way of conducting business in the past 20 years has changed significantly due to Millennials and Generation Z entering the marketplace. One thing is for certain; everyone wants a choice for their employee benefits. When deciding between a vehicle reimbursement plan, there are a few options. There are fleet programs, taxable car allowances, or a Fixed and Variable Rate (FAVR) Program.

In a fleet program, all drivers receive a standard company vehicle. The driver has little choice in this situation and must drive what the company provides to them. Many companies require the employee to pay a personal use charge-back that is taken out as a payroll deduction. A personal charge-back of over $100 per month is not uncommon making it less attractive to employees. In most cases, they are driving a car they would not personally purchase. Drivers may also have company driving restrictions and limitations that impact the value provided to the driver. A fleet program cannot address individual drivers’ needs.

In a car allowance program, drivers receive a fixed monthly amount that is the same for all drivers. This way drivers can purchase or lease the vehicle they want. This gives the driver choice; however, the allowance is classified as income and subject to federal and state income tax. This is where a FAVR program can truly give drivers choice! 

FAVR Program: Enables Driver Choice

As business evolves, so does the vehicle reimbursement industry. Using an IRS-Approved, non-taxable Fixed and Variable Rate (FAVR) vehicle reimbursement program, drivers are reimbursed off the cost of a benchmark vehicle. This enables flexibility for drivers to purchase or lease the vehicle they want.

There are two main components of a FAVR vehicle reimbursement program. Each vehicle plan contains a fixed rate which includes vehicle depreciation, insurance, license, registration, and property tax. The variable rate is comprised of fuel cost, maintenance, and tires per mile. Variable costs change every month based on monthly mileage.

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