The CFO Challenge in Uncertain Times
Rising interest rates. Tariff uncertainty. Higher oil prices. Inflation that refuses to ease. CFOs are navigating a shifting terrain, where every cost category is under pressure. One area that often slips under the radar: the employee driving program. What once seemed routine now hides volatility. In today’s climate, companies need programs that flex with economic realities rather than compound risk.
Tariffs are still a top concern. In the CFO Survey from Duke University and the Federal Reserve Banks of Richmond and Atlanta, tariffs and trade policy ranked first among CFO concerns for a fifth straight quarter, and by June CFOs had added 1.1 percentage points to their 2026 price and unit cost growth projections. The policy itself keeps moving: the Supreme Court struck down the IEEPA tariffs in February, and refunds are still working through the system. Employee driving spend sits directly in the path of that uncertainty.
These conditions make the case for a closer look: company cars and flat allowances weren’t designed to flex with this kind of volatility.
Why Company Car and Allowance Models Don’t Hold Up
- Company cars: Escalating Costs and Lack of Agility
Company car programs may feel like control, but the costs behind them can be hard to predict. Insurance, maintenance, depreciation, and repairs all compound into ongoing expenses. AlixPartners estimated in September 2025 that 80% of tariff costs would ultimately be passed into new vehicle prices, adding more than $1,700 to the average price. For companies locked into company car contracts, that means significant sunk costs with limited ability to adjust.
- Allowances: Tax Leakage and Equity Gaps
Flat car allowances appear simple: one line item, one payment. But the reality is more complex and costly. Allowance payments without mileage substantiation are taxable wages, and for every $100 a company pays, roughly $38 goes to payroll and income taxes. That leakage hurts both employees and employers, draining dollars that should cover business costs. Flat allowances also fail to account for real-world differences in driving patterns. Employees in rural areas or high-cost regions often end up underpaid, while others are overpaid. That imbalance drives up spend and undermines fairness across the workforce.
- Compliance and Audit Exposure
The IRS requires mileage substantiation for reimbursements to qualify as business expenses. Flat allowances do not provide this, leaving companies exposed to audits and penalties. Company car programs add their own risk: personal use and accident liability. Without the right substantiation and risk controls, outdated programs jeopardize compliance.
Why CFOs Are Making the Shift Now
Economic Forces Aren’t Temporary
Cost pressure isn’t easing on its own. The Conference Board forecasts US GDP growth of 1.9% in 2026 and 1.8% in 2027, down from 2.8% in 2024, and the Federal Reserve raised interest rates this month for the first time since 2023. In that environment, employee driving spend is worth a closer look.
Risk Mitigation Is Front and Center
Commercial auto insurance has become a volatile budget line. Rates rose 5.8% in the first quarter of 2026, the 59th straight quarterly increase, according to the Council of Insurance Agents & Brokers. Programs built on company cars carry the most direct exposure. Flat allowances don’t solve it either: without mileage capture and insurance monitoring, companies lack visibility into the risk their drivers carry. For CFOs, an unmanaged employee driving program is an exposure worth measuring.
Workforce Satisfaction Is a Business Priority
Retention is a financial priority, too. In a Morgan Stanley at Work survey, 65% of HR executives said hiring and retention is their company’s top strategic financial priority for 2026. Programs that don’t fit how people drive can erode trust: company cars limit personal choice, and flat allowances create inequities. In competitive labor markets, those gaps can hurt retention.
The Reimbursement Alternative: Modern Reimbursement Models
Many CFOs are evaluating Fixed and Variable Rate (FAVR) reimbursement and similar approaches. These programs offer compliance, fairness, and cost control. Here’s how they map to CFO concerns:
- Optimize spend: An independent Aon study found FAVR delivered 17-20% per-driver savings compared with a leased fleet. Savings come from reducing tax waste, trimming hidden overhead, and aligning spend with actual business use.
- Reduce Risk: Mileage substantiation and audit-ready records reduce IRS exposure, and documented driving gives finance clearer visibility into risk.
- Increase Productivity: With centralized data and simplified administration, organizations spend less time on program management and more time on strategic priorities.
- Improve employee satisfaction: Reimbursements tailored to real driving costs are fairer for employees and let them choose a vehicle that suits their needs. That supports engagement and retention.
Strategic Lessons from Recent Market Shifts
Economic volatility is putting every cost structure under review, and employee driving programs are part of that review. Company cars and flat allowances were built for steadier conditions. Today, they’re being weighed alongside capital expenditures, supplier contracts, and labor strategy.
- Tariff policy keeps shifting: The 2025 auto tariffs and the Supreme Court’s February ruling on IEEPA duties show how quickly the rules can change. A reimbursement program isn’t tied to what a vehicle costs to buy, so it’s easier to budget through that swing.
- Insurance costs keep climbing: With commercial auto rates up for 59 straight quarters, programs without documentation or controls leave finance with less visibility into risk.
- Employee expectations are shifting: Fairness, flexibility, and transparency matter more in how drivers are paid.
Key Takeaway for CFOs
Volatility has become part of the planning environment. For CFOs, the employee driving program is a spend category worth a closer look. Reimbursement models like Fixed and Variable Rate (FAVR) reimbursement can help organizations optimize spend, reduce risk, increase productivity, and improve employee satisfaction.
See how your program compares. Download the Driving as a Business System: 2026 Trends Report, or estimate your potential savings with the ROI calculator.
FAQs
- Why do employee driving programs matter in today’s economy?
Because vehicles are capital-intensive, usage-dependent, and exposed to tariffs, fuel costs, and insurance volatility. In the latest CFO Survey, CFOs raised their 2026 price growth projections by 1.1 percentage points, and tariffs were their top concern for a fifth straight quarter.
- How do tariffs affect company car costs?
AlixPartners estimated in September 2025 that 80% of tariff costs would be passed on to buyers, raising the average new vehicle price by more than $1,700. Tariff policy has kept shifting since, which is one reason mileage-based spend is easier to plan around.
- Can switching to a reimbursement program deliver ROI within a year?
Many customers see it. Motus reports that 92% of customers achieve ROI within 12 months, thanks to reduced tax waste and better alignment of spend with business use.
