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Vehicle Programs: Which One is the Right Fit For Your Company?

By Ben Reiland July 9, 2020

Categories: Anywhere Workforce Vehicle Reimbursement

Vehicle programs. Whether you’re in the pizza business, the healthcare space or any of the numerous business services markets, chances are you have one. They’re often so much a part of what your company does, it’s hard to imagine there are different types, or that you might have the wrong one. So what might the right vehicle program for your company be?

What is a vehicle program?

A vehicle program is how your company provides, or reimburses for, its employees land-based business travel. That travel could be anything from a sales rep driving to meet prospects or waste management teams collecting garbage across the city. There are numerous different needs for vehicle programs, so there are many different types.

What are some vehicle programs?

Here’s a list of the most popular options. It’s likely the one you’re using is listed below.

Company-Provided Vehicles

If your company provides employees with fleet vehicles for business purposes, then this is your vehicle program. And it’s one of the more popular ones. However, it’s also the most expensive. Not only is your company paying for lease costs. It’s also paying for maintenance, fuel and exposing itself to incredible liability.

There are some industries that require utility vehicles that employees would have a tough time securing outside of the job. Garbage trucks, powerline trucks and tree trimmers to name a few. But not every company needs to provide their employees with a vehicle, no matter how much of a perk they think it might be.

Car Allowance

If your company provides employees with a monthly stipend for the business use of their personal vehicle, this is your vehicle program. Also known as a flat allowance, this option is popular because it’s easy. No matter how much or how little your employee drives, you give them a few hundred dollars a month. But what makes it the easiest option also makes it a bad one.

Employees receiving an allowance will not be compensated if they drive beyond the miles the stipend covers. This incentivizes them to drive less. But, perhaps worse, car allowances are perceived by the IRS as additional income. For that reason, they are taxable, costing employers more and paying employees less. An accountable allowance solves much of that issue.

Mileage Reimbursement

If your company provides employees with a cent-per-mile reimbursement for the business use of their personal vehicle, this is your vehicle program. Also referred to as a cents-per-mile reimbursement program, this program is fairly popular for a few reasons. It’s rather easy to implement and, if carried out correctly, it can be tax free.

The difficulties with this vehicle program lie in two main areas. The first is the proper mileage tracking. Employees are required to log a few essential pieces of information before and after each business trip. That doesn’t always happen, or at least not correctly. Mileage fraud can be a large issue. The second is equity. Employees across the company receiving the same cent-per-mile rate may seem fair, but gas prices, insurance and other driving costs vary, not just state to state, but within each state too.

Fixed and Variable Rate Reimbursement

If your program provides employees with reimbursement for both the fixed and variable costs of driving their personal vehicle for business, then this is your program. This option, often abbreviated as FAVR, benefits employees by covering more than just the gas employees drive for. It also benefits employers by enabling them flexibility with the program’s parameters.

Hybrid Program

Much like the various industries in need of vehicle programs, companies often need different vehicle programs for different employees. This is where the hybrid vehicle program comes in. It is not unusual for employers to use more than one vehicle program. For example, they may offer a mileage reimbursement program for employees that don’t drive over 500 miles each month and a FAVR program for those that do. This is especially true of employers that are larger and have more employees and various locations.

What vehicle program is best for my company?

The vehicle program your company decides on depends on the size and needs of your company. Whether you are concerned over potential issues of an idle fleet, the tax waste associated with car allowances or mileage fraud with a cents-per-mile program, there are solutions to most of these vehicle programs. You can learn more about each one by exploring the linked blog posts, or check out this comprehensive guide to vehicle programs.

Check Out the Guide

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