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Car Depreciation: How Motus Can Offset The Decreasing Value Of Your Vehicle

Headshot of a man with a blurred background By Ben Reiland August 2, 2019

Categories: Mobile Workforce Vehicle Reimbursement

Offsetting the Effects of Car Depreciation with Motus

When you purchase a vehicle, whether it be fresh off the lot or used from a dealership or online marketplace, this asset depreciates as soon as you start driving it on the road. Simply put, car depreciation can be defined as the declining value of an asset over time. The decreasing value is usually due to the use, or in other words the ‘wear and tear’ of the asset. Take, for example, an iPhone. Would you pay the same price for a used iPhone as you would a new iPhone? Of course not. A used iPhone is not nearly worth as much as a brand new iPhone because the more you use the device, the slower it becomes, the worse the battery life gets and so on.                         

The standard information on vehicle depreciation will tell you it’s value can decrease by up to 20% the first year. For the next four years, it will lose upwards of 10% annually. To investigate vehicle depreciation further, we ran a report to see if there was anything else we could dig up. Turns out, over the past 12 months depreciation accounted for 32.9% of the total cost to own and operate a vehicle. Regardless of the price of your vehicle, that’s a lot of money needed to maintain the original value of your asset. To get even more specific, there are many more fixed and variable costs associated with car depreciation than you might think. 

Fixed and Variable Rate (FAVR) Vehicle Programs

FAVR programs make sure all your costs are covered, beginning with the fixed ones. Fixed costs stay the same month after month, but these fixed costs vary from person to person. Some of these costs include insurance premiums, taxes, license and registration fees and, of course, depreciation. 

Variable costs vary month over month and are based off of the number of miles driven. Examples of variable costs include gas prices, oil, maintenance and tire wear. 

Chances are, if you drive your vehicle for work, it’s under a different vehicle program. Other vehicle programs would not be an ideal choice for someone looking to get accurately reimbursed for their vehicle. Let’s explore why.

Car Allowance Programs

With a car allowance program, drivers receive a set amount of money each month. The problem with this? The IRS taxes these amounts. The resulting amount may not even be enough to cover gas, let alone depreciation expenses on a vehicle. 

Cents-Per-Mile Programs

Another program that lacks the ability to consistently offset car depreciation is a cents-per-mile program. Also known as a mileage reimbursement, this program pays its mobile workforce a set amount of money for each mile driven. The problem with this program? Because prices vary based on location, it may not be enough to cover the cost of gas. That doesn’t leave a lot of money to cover the costs of ‘wear and tear’ on your vehicle.   

Where to from here?

If you are a current employee who drives for a living or an employer who has employees who drive as a part of their job, Motus can help. We offer many programs, including FAVR, which is better suited than other programs to offset the cost of depreciation. Learn more about FAVR here.

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