It may appear rudimentary when looking at the different ingredients that go into vehicle reimbursement for companies with drivers on the road. Depending on the reimbursement type (car allowance, cents per mile, or FAVR program), it is commonly mistaken that vehicle depreciation and fuel make up most of the reimbursement rate. While those two ingredients account for a large majority of the total reimbursement, insurance is one aspect that significantly impacts the total reimbursement.
- Traditional car allowance or cents-per-mile programs do not account for insurance variability.
- Drivers in specific geographic regions may be under-compensated or, in some cases, over-compensated based on market insurance rates.
- Regardless of the size of your company or the state/ city that your drivers primarily drive in, it is essential that drivers are reimbursed based on the expense that they are incurring.
At AutoReimbursement.com, we have the data to support what we like to call an “HR-defensible” reimbursement program.
By utilizing the IRS-approved non-taxable Fixed and Variable Rate (FAVR) program supported with data from unique vehicle insurance data in 44,000 zip codes, AutoReimbursement.com crafted programs that are data-driven and provide the driver with clarity that they are being reimbursed. To best demonstrate why specific, targeted data is needed, AutoReimbursement.com used its extensive database to show how insurance rates can vary significantly within the same city. In some cases, just a few zip codes over can be a difference of $500+ in annual insurance costs.
| Postal Code | City | Insurance |
| 94102 | San Francisco, CA | $ 3,928.07 |
| 94105 | San Francisco, CA | $ 3,459.66 |
| 34747 | Orlando, FL | $ 3,117.14 |
| 32803 | Orlando, FL | $ 2,980.17 |
| 30337 | Atlanta, GA | $ 2,383.19 |
| 30625 | Atlanta, GA | $ 1,705.38 |
As demonstrated in the example table above, trusting a FAVR provider with your reimbursement needs is essential to provide the most accurate reimbursement to your drivers. Using other methods, such as a taxable car allowance, may over-compensate drivers in one region and may under-compensate others who may own a vehicle in a higher-cost region. Moreover, when looking at FAVR solutions, it’s important that rates are data-driven and drivers have a clear understanding of what their reimbursement includes.
FAVR (Fixed and Variable Rate) Programs can be beneficial for employees on the road
A FAVR (Fixed and Variable Rate) Program provides an IRS-Approved Non-Taxable vehicle reimbursement. This means there is no tax liability for drivers in a fully accountable FAVR Program. FAVR reimburses the drivers’ benchmark expenses based on real vehicle data. The reimbursement is also geographically sensitive. Therefore, a FAVR program calculates direct costs the driver incurs daily. Not only this, it enables driver’s choice— drivers can purchase the vehicle that suits their lifestyle best!
There are two main components to a FAVR Vehicle Reimbursement Program.
- Fixed reimbursement: The fixed rate includes depreciation from a benchmark vehicle, insurance down to 44,000+ zip codes, and license, registration, and property tax by state.
- Variable reimbursement: Cost of fuel, maintenance, and tires per mile— this is based on mileage driven each month.
Why Choose AutoReimbursement.com for FAVR
At AutoReimbursement.com, we have one of the top databases in the industry. Many Fortune 500 companies have trusted us to build HR Defensible programs that are cost-effective for companies while also providing a highly regarded benefit to drivers on our Fixed and Variable Rate Programs.
Want more information on a Fixed and Variable Rate (FAVR) Program?
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