In the vehicle reimbursement industry, there is constant talk about the importance of data when building reimbursement programs. At first glance, companies may elect for a taxable car allowance that pays a fixed amount to all drivers regardless of their geographical location. Another option may be using a cents-per-mile program like the IRS standard mileage rate. However, in both of these options, drivers in different geographic regions are going to experience different ownership costs.
In many cases, traditional taxable car allowance or cents-per-mile programs may result in under and over-compensation for drivers in specific geographic areas due to differences in the cost of ownership. Regardless of your company’s size or the primary driving locations of your employees, it is important to have a true benchmark of the expenses incurred by each individual driver.
Read more about the importance of benchmarking expenses in your program here.
In an IRS-approved non-taxable Fixed and Variable Rate (FAVR) program, insurance costs typically rank as the second highest expense category, following depreciation expenses. Therefore, obtaining location-specific insurance data is essential for ensuring accurate reimbursement and budget forecasting.
At AutoReimbursement.com, our foundation is based on data accuracy. Unlike other FAVR providers relying on generalized ‘regional’ insurance data, we utilize specific zip code-sensitive data based on where drivers own their vehicles. Our methodology mirrors that of large insurance companies. With an expansive database covering over 200+ specific benchmark vehicles in every zip code across the continental United States, we ensure that our FAVR program delivers accuracy and fairness in rate calculations. Our comprehensive approach distinguishes AutoReimbursement.com and provides reliable and precise vehicle reimbursement solutions.
Why does zip code-specific insurance data matter?
In a recent analysis, AutoReimbursement.com identified a discrepancy in reimbursement rates for a driver residing in Glendale, New York, under a competitor’s program. Upon further investigation, our Real Cost Database revealed erroneous regional rates sourced from the New York (Brooklyn) “area,” instead of the driver’s actual garaging address. This oversight resulted in an annual over-reimbursement exceeding $2,000 because insurance reimbursement rates for the benchmark vehicle in Glendale were $3,800 compared to the Brookland rate of approximately $5,800. Despite the close proximity of Glendale and Brooklyn, approximately 3 miles apart, AutoReimbursement.com was able to pinpoint the source of the over-reimbursement. However, under typical IRS-approved regulations, this discovery raised significant questions regarding the reliability of regional data in FAVR programs designated as “reimbursement.”
| City | Zip Code | Insurance Cost Per Year |
| Brookland, NY | 11212 | $5,800 |
| Glendale, NY | 11385 | $3,800 |
Conversely, regional insurance data can also result in under-reimbursement compared to the actual costs incurred by employees. Depending on state laws, it is crucial for companies to select vendors with data that we refer to as “HR Defensible.” At AutoReimbursement.com, we present our data in a manner that addresses all questions from drivers, program administrators, Human Resources, Finance, executives, and the IRS.
Choosing a Fixed and Variable Rate (FAVR) provider is a decision that should be made carefully. Ensuring that your program meets your budget’s needs while offering a fair and reasonable reimbursement to your drivers is essential. Data is one component of an FAVR program that should be evaluated, along with driver ease of use, customer service, and program administration ease of use/functionality.
FAVR (Fixed and Variable Rate) and why an 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: The 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, etc.) 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.
- 80K 5-star reviews. Start your free MileIQ trial today!
- 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.