6 Options for Your Company Car Program: CarData Explores The Pros and Cons of Each

AMHERST, N.Y., Feb. 14, 2019 /PRNewswire/ -- Every time the fiscal year or tax year ends, executive attention turns to expenses. Many organizations recognize that their fleet vehicle or company car program is one area where there's opportunity for reducing operational costs or taxes, maybe both. New companies or companies considering adding a vehicle reimbursement program (VRP) are in the same position. The dilemma becomes deciding which type of vehicle reimbursement program will enable greater ROI to shareholders and less obligation to the IRS.

There are options – and CarData can provide help to sort through them! Let's get started:

Company-Owned Vehicle, the "Company Car"
In this classic approach, the company buys the vehicle, covers all costs and assumes all risk involved. It's the most expensive option. It's also a branding opportunity for some companies. However, when it comes to providing company cars to sales representatives or employees who drive as part of their role, the car goes home with them, which adds risk and cost.

Company-Leased Vehicle
Obviously, the only difference between owning and leasing is which company has the asset on their books. Leasing is the second-most expensive option, so that's one advantage for the company.

Flat Monthly Payments, an "Allowance"
With flat monthly payment programs, the employee provides their own vehicle and is granted a monthly allowance. Allowances are easy to administer, one of the greatest advantages. However, a flat rate allowance is all taxable money because it doesn't reimburse based upon business miles, or the expenses in the employee's region. And, when an employee's expenses near or exceed the allowance, they are inclined not to drive, which is bad for business.

Flat Rate, Plus a Fuel Card
The only difference from a Flat Rate (Monthly Allowance) Plan is that the employer adds exposure by providing a fuel card and, sometimes, paying maintenance expenses. The employee owns the car and is responsible for the depreciation, financing, title, licensing, and insurance.

Cents Per Mile
The IRS Standard Rate is commonly used to reimburse employees for occasional business mileage. Often called "Cents-per-Mile" reimbursement, it's also known as "driving for dollars." A Cents-per-Mile program makes sense when an employee uses their vehicle only occasionally for work. Otherwise, it's just not accurate because it doesn't factor in the differences in the cost of living when employees are spread across the U.S. – it's easy to overpay and underpay drivers.

To learn more about these options, click here.

Fixed & Variable Reimbursement
As the most recognized of the company car programs, fixed and variable reimbursement (FAVR) is supported by the IRS through Rev Proc 2010-51 and Publication 463. A FAVR program separates vehicle reimbursement into two distinct categories:

• Fixed Expenses – Costs that do not vary from month-to-month such as licensing, depreciation and insurance, calculated based on the vehicle location.
• Variable Expenses – Everything else that contributes to the cost of operating the vehicle, including fuel, maintenance and actual miles driven while on the job.

At the end of each month, known recurring costs are combined with the changing expenses drivers incur doing their jobs.

CarData Consultants is Here to Help
We're confident that what we've explained is a good starting point, but also understand that every business has unique needs to be considered when making what is a very important business decision. With decades of experience evaluating programs and serving a very diverse spectrum of customers, CarData is happy to work through everything from the basic program to customized services designed to cut costs, lower your risk and simplify your tailored vehicle reimbursement program.

MEDIA Contact: Megan Dean
Marketing Communications | CarData Consultants Inc.
Direct: 303-434-3307 | FAX: 929-235-7525
[email protected]
www.cardataconsultants.com

SOURCE CarData Consultants

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