Why move from company-owned vehicles to reimbursement? 

Matt SchweinertVehicle Reimbursement

White generic fleet SUVs parked in a lot, side closeup on front

Share this Post

Traditional company-owned vehicles, or fleet programs, have been central to employee travel for decades. However, with the recent push to contain company expenses and find new efficiencies, AutoReimbursement.com has noticed a rise in demand in transitioning out of company-owned vehicles and into vehicle reimbursement. Undoubtedly, there is still a need for fleet vehicles in the marketplace; however, unless your vehicles are fitted with unique job-specific components, reimbursement may be a better solution.

Why are companies transitioning to reimbursement now?

With borrowing rates increasing to some of the most aggressive rates in the past decade, corporate lending and investment costs have risen directly. Furthermore, disruptions have also affected the procurement of new company-owned vehicles, causing many companies to receive cars several months after placing orders. That said, managing company-owned vehicle programs is not only labor-intensive but also requires significant capital for maintenance and repairs when necessary.

Company-owned vehicles pose a risk, leaving the company liable 24/7, including nights and weekends.
One of the main reasons companies come to AutoReimbursement.com and transition to a reimbursement program is the risk associated with fleet vehicles. When looking at your company-owned vehicles program, there are several important questions regarding risk.

  • Who is allowed to drive company-owned vehicles? Just the employee? Spouse? Children?
  • Do you allow personal use in company-owned vehicles? If so, do you allow your vehicles to trailer boats and campers? Do you require a personal use chargeback? 
  • What limitations do you have on fuel card use? How do you track personal use?
  • Where are the company-owned vehicles parked at night? On the road? 
Avoiding vs. Mitigating Risk

It’s important for companies to protect themselves from potential financial risks and liabilities that may arise from accidents caused by their drivers. There are two main approaches when evaluating risk management: avoiding risk and mitigating risk. 

There are many approaches companies may utilize to mitigate risk. For example, risk mitigation may include a compliance policy for seatbelt use and cell phone use and limits on the personal use of company-owned fleet vehicles. While risk mitigation certainly helps reduce company liability, it does not provide a liability shield for your business. Implementing safe driving policies and reducing liability for all businesses is essential. That said, a reimbursement program can help avoid the risk that company-owned vehicles expose you to. 

Why is reimbursement a better solution?

In reimbursement, programs such as an IRS-approved Fixed and Variable Rate (FAVR) program, drivers carry and receive reimbursement for their personal insurance, which is rated for business use and serves as the primary insurance in any accident-related claim. Furthermore, reimbursement removes the company’s liability and financial responsibility during all personal use; therefore, the company only reimburses for the driver’s business use. Best of all, reimbursement enables driver’s choice— drivers can purchase the best vehicle that suits their lifestyle and financial needs best! 

From the administration standpoint, reimbursement requires minimal labor and moves your company from asset management to financial management. A program administrator can often manage a program in just a few hours per month. While there are several different reimbursement methods, many Fortune 500 companies choose an IRS-approved non-taxable Fixed and Variable Rate (FAVR) program for its precision in delivering a fair and equitable reimbursement. 

FAVR (Fixed and Variable Rate) and why a FAVR program is the best option for employees on the road.

A FAVR (Fixed and Variable Rate) Program provides an IRS-Approved Non-Taxable vehicle reimbursement. This means drivers have no tax liability in a fully accountable FAVR Program. FAVR reimburses the drivers’ benchmark expenses based on actual vehicle data. The reimbursement is also geographically sensitive.

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. 

AutoReimbursement.com is a leading vehicle reimbursement provider in the FAVR industry. With over 200+ benchmark vehicles (including trucks and SUVs) updated annually, our exclusive program brings certainty to drivers and plan administrators. 

FAVR programs require significant data (vehicle cost, insurance, maintenance, ext.) and can be quite challenging to self-administer. Trust an AutoReimbursement.com FAVR professional for IRS compliance and program alignment with driver/company needs.

Why choose AutoReimbursement.com as your vehicle reimbursement provider?

At AutoReimbursement.com, we are experts in simplifying the complex process of calculating FAVR allowances. Here’s why you should trust AutoReimbursement.com (ARC) to streamline your vehicle reimbursement program. 

  • ARC’s exclusive database of over 200 benchmark vehicles, including sedans, SUVs, electric vehicles, and trucks, allows us to create FAVR reimbursement plans for any industry. Geographically sensitive vehicle data down to 44,000 zip codes. 
  • ARC system offers comprehensive reports and cost center reporting, enabling you to optimize your expense management easily.
  • Tailored company policy to ensure driver compliance and reduce the risk associated with drivers on the road.
  • Our mobile software is easily accessible from any device, whether a phone, tablet, laptop, or desktop.
  • Driver-specific insurance and driver’s license validation and management.
  • Track and record your mileage with MileIQ.
  • ARC is 100% employee-owned; we provide standard white glove service to all clients. Meaning all customer service requests are answered same day. It’s that simple!
Want more information on a Fixed and Variable Rate (FAVR) Program at AutoReimbursement.com?

To request a free demonstration or program evaluation, connect with us here and follow us on LinkedIn to learn more and stay updated with AutoReimbursement.com.

New to a FAVR Program? Learn more here