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Streamlining Your Vehicle Program

Eduardo Valenzuela — Wed, 27 Aug 2025 14:35:40 +0000

Vehicle Programs Background

Coordinating processes across an organization comes with the job of an operations leader. From managing your mobile workforce to ensuring operational efficiency in the field, it’s no small task. It’s no wonder operations leaders constantly look for ways to improve the company’s processes. The rise of mobile workers has increased pressure on Operations leaders to improve efficiency within their driving teams.

While some mobile workers will require specialty vehicles to keep daily operations afloat (e.g., those who drive delivery trucks, such as 18-wheelers), non-specialty drivers such as sales and merchandising teams don’t need specific vehicles to do their jobs. For these mobile workers, driving their own personal vehicles for work makes the most sense.

For non-specialty drivers, companies have a variety of vehicle program options to offer their workers, including:

Flat Car Allowance

Cents-per-mile

Fleet Vehicle Programs

However, instead of administering just one of these programs, many companies administer multiple types of programs. Why? Because each one is uniquely suited for different business objectives.

Here’s an example …

A company provides their executives with a high-end vehicle as part of their hiring package. In this case, companies are managing a small, but expensive fleet in addition to gas cards exclusive to their executives.

What about everyone else, though?

Most companies won’t provide their entry-level employees with luxury vehicles because of the cost of purchasing and upkeep. Instead, companies often issue a cents-permile rate that accurately captures their high mileage – but it doesn’t end there.

What about the mid-level sales managers?

They’re on the road more than executives, but less than entry-level employees. Due to their position, they also expect a richer reimbursement. The company reimburses them with a flat allowance of $500 a month and a gas card.

Companies can administer and maintain a flat allowance, cents-per-mile and fleet vehicle program at the same time in order to achieve their hiring and business needs.

The problem with administering multiple vehicle programs at once is the expense. Companies don’t realize how much this practice ends up costing them. That expense extends beyond the costs of the small inefficiencies associated with each program to the administrative burden of maintaining separate programs.

The financial burden resulting from multiple programs can become even greater as companies are required to properly reimburse their driving employees as required by the IRS. The wide range of driving expenses include fuel and maintenance costs, depreciation, insurance and more. Each vehicle program has its own set of reimbursement calculations that companies must carefully consider. Failure to accurately capture and reimburse mileage may result in costly IRS audits or class-action lawsuits.

The problem with administering multiple vehicle programs at once is the expense. Companies don’t realize how much this practice ends up costing them.

Learn About The Risk And Potential Cost to Your Business

Failing to provide fair and accurate mileage reimbursements to employees could cost your business millions. Even the most well-known brands and corporations have faced reimbursement-related lawsuits. Consider the cases of Dominoes and Starbucks. Employees filed class-action lawsuits against both companies.

Delivery drivers working at multiple franchisees claimed the flat reimbursement rate they were given was below minimum wage.
The coffee chain settled a class-action lawsuit for $3 million when employees alleged the company never reimbursed them for business mileage incurred on their personal vehicles.

The Cost of Vehicle Programs

Companies commonly use a combination of car allowance, cents-per-mile or fleet vehicle programs, yet all three of these options can cause companies to lose thousands of dollars per employee each year.

How? To put it simply, these programs lack fairness and accuracy.

Car Allowance

To keep their program simple, companies use car allowances (for example, $300 a month per employee). This resolves the problem of complex expense calculations. However, car allowances ignore variances in the costs of driving, such as insurance premiums, property taxes and fuel prices. These fluctuate considerably by location.

Moreover, allowances are subject to both Federal Insurance Contributions Act (FICA) taxes for employers and income taxes for employees. Because of this, providing a f lat allowance of $300 costs an organization $322 after taxes, while employees take home only $225.

The costs of this “simple” solution quickly outweigh its convenience.

Car allowances also fail to deliver fair reimbursement to employees. No two business trips are the same, so no two employees should be reimbursed the same amount. This factor may convince some companies to use a cents-per-mile program. However, cents-per-mile programs also have failings.

CPM

Cents-per-mile reimbursements typically work well for employees who drive sparingly for business, mainly due to the fact that reimbursements only occur when employees drive for work (as opposed to year-round). However, cents-per-mile reimbursement programs can be very costly.

Most companies that administer a cents-per-mile program use the IRS business mileage rate to calculate what each individual employee should be paid back. However, the IRS rate is not recommended for reimbursement. The IRS share the rate annually as a guideline.

Reimbursements above the IRS business mileage standard are taxable. However, it’s impossible for this rate to account for each employee’s unique local costs and labor laws.

Fleet

A fleet vehicle program – where the employer provides company-owned vehicles for business use – is another popular option. Companies can influence the perception of their brands by selecting a specific vehicle type, make and model that best represents their image and values.

Leasing or purchasing fleet vehicles can be a problem for companies in many ways. Fleets are the most expensive vehicle program.

These create both legal risk and further administrative work for your business. Also consider employee turnover. The typical time frame from posting a job to having an employee at work is three months. In that time, fleet vehicles are depreciating in lots, still requiring regular maintenance, waiting for the next employee.

Finally, there’s employee personal use. Is your company willing to eat the costs for non-business-related trips, or will you seek to recover some of those costs? If you do want to recover personal use costs, how will you fairly and accurately track the appropriate chargebacks? Though presented as a perk to employees, this is actually a large company liability. If an employee is found at fault in an accident involving a company vehicle, the plaintiff will go after the company.

FAVR: The One-Stop Shop

No matter what combination of vehicle programs a company administers, every trip must be tracked, documented and reported to the IRS in the event of an audit.

Without compliant mileage logs, your company is exposed to an IRS audit. While the employee would be responsible for paying penalties and back taxes, it raises an important question: could a failed audit cause the IRS to take a deeper look into other driving employees or the company as a whole?

It is critical for companies to find an approach to reimbursement that streamlines the process using fair and accurate calculations.

The fixed and variable rate (FAVR) is the only IRS recommended methodology. FAVR is the most accurate reimbursement solution. It provides every mobile worker with a customized reimbursement based on their actual local costs and business mileage, which may vary month to month.

With today’s technology, there is no excuse —  companies must streamline their reimbursement processes.

The FAVR program reimburses employees tax-free for both the fixed (insurance, license and registrations fees) and variable (fuel, maintenance) costs associated with driving for business. Tracking these costs may seem time-consuming. Fortunately, technological advancements now make implementing and maintaining FAVR programs straightforward.

In the past, manually tracking, documenting and reporting mileage for every worker could be overwhelming. With today’s technology, there is no excuse. Companies must streamline their reimbursement processes. Using GPS-enabled cell phones and geographically-sensitive data, FAVR programs allow for the full range of costs involved in driving personal or company-owned vehicles for business to be measured in real-time, which creates employee-specific repayments.

What Comes Next?

There are several reasons why Operations leaders implement multiple vehicle programs – employee seniority, job function, improved accuracy. No matter the reason, the bottom line is simple. Companies need a vehicle program that suits their business needs. FAVR programs provide the accuracy and flexibility that make it the best solution to achieve this goal.

With the rise in today’s mobile workforce and several technologies available, the time has come for companies to consider streamlining their operations. By choosing one centralized vehicle program, companies can create cost savings, mitigate legal risk and still achieve their goals.

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Choosing the Right Vehicle Program Vendor

Nick Burger — Tue, 26 Aug 2025 23:49:58 +0000

Discover the right questions to ask to ensure you select the perfect vendor for your business.

Controlling costs and doing more with less is the name of the game—which means selecting the right vehicle program vendor is a decision you cannot afford to get wrong. With so many vendors to choose from, how can you make sure you choose the right one?

As you evaluate your options, use this guide to help you determine:

What a good (and bad) vehicle program vendor offers

What to look for to ensure you select the right vendor

Practical questions to ask during the selection process

This guide will help you confidently choose the right vendor on the first try.

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Why Vehicle Reimbursement is Not Compensation

Nick Burger — Tue, 26 Aug 2025 23:40:57 +0000

Your car allowance program might cost your business more than you think.

Car allowance programs are often viewed as compensation. The problem? These kinds of programs lack a firm connection between reimbursement and actual driving costs—causing serious issues for companies.

Use this guide to discover:

Why car allowances impact you and your employees’ wallets

How these programs can decrease employee productivity

Why technology makes it easier to capture driving costs and data

How to create a fair and accurate program

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Understanding Business Vehicle Programs

Nick Burger — Thu, 21 Aug 2025 16:15:32 +0000

Can your business benefit from a cents-per-mile program?

79% of organizations use cents-per-mile (CPM) for at least some of their employees. But is it right for your business? Check out our comprehensive guide to uncover:

Which kinds of organizations can benefit from CPM programs

The risks of a uniform reimbursement rate

How technology + CPM programs can lower mileage for mobile workers

Learn more about what a CPM program is and how to get the most out of it.

The post Understanding Business Vehicle Programs appeared first on Motus.

Change Management: Keys to Successful Vehicle Reimbursement Implementation

Eduardo Valenzuela — Wed, 16 Jul 2025 20:40:24 +0000

Transitioning to a new vehicle reimbursement program can transform your business, but without proper change management, organizations risk implementation inefficiencies, employee resistance, and program failure.

Common Implementation Challenges:

Employee Adoption - Resistance to change and technology learning curves impact program success

Cross-functional Coordination - Multiple stakeholders, systems integration, and policy changes require careful coordination

Financial Concerns - Upfront costs for employees acquiring program-compliant vehicles

Operational Disruption - Workflow interruptions and productivity loss during transition periods

Our comprehensive approach includes intuitive technology adoption strategies, financial transition support, structured communication plans, and expert implementation guidance. With 400+ annual implementations, we’ve achieved a 97% specialist satisfaction rate and 94% overall implementation satisfaction rate (2025).

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The State of Corporate Driving in America: 2025 Benchmark Report

Eduardo Valenzuela — Wed, 16 Jul 2025 20:19:58 +0000

The era of rigid corporate vehicle policies is ending. Get the data that's driving change.

For millions of American workers, their vehicle is more than transportation—it’s their primary workspace. Our comprehensive research reveals how the most successful organizations are adapting their vehicle programs to meet modern workforce expectations while optimizing costs and productivity. What you’ll discover:

How forward-thinking companies are treating cars as legitimate office spaces

Why satisfaction increases 43% when employees can choose their own vehicles

Why one-size-fits-all reimbursement programs are failing employees in high-cost regions

Why 64% of driving employees now prefer GPS-enabled tracking over manual reporting

This first-ever State of Corporate Driving benchmark provides the authoritative data you need to optimize your mobile workforce strategy.

The post The State of Corporate Driving in America: 2025 Benchmark Report appeared first on Motus.

2025 Motus Sustainability Report

Eduardo Valenzuela — Wed, 16 Jul 2025 19:28:30 +0000

Drive Toward a Sustainable Future.

Vehicle programs represent the biggest opportunity for immediate impact, with transportation accounting for 28% of all US greenhouse gas emissions. Get actionable insights from industry leaders to see how vehicle programs can be the centerpiece of your corporate sustainability efforts.

Automated compliance benefits: Transform sustainability reporting from headache to a streamlined, automated process

Centralized measurement platform: Learn how business intelligence enables actionable insights for real-time environmental impact tracking

Regulatory compliance framework: Stay ahead of EU Corporate Sustainability Reporting Directive and California disclosure requirements

Carbon reduction strategy: How companies cut emissions by 54% with strategic vehicle program optimization

Stop accepting environmental impact from outdated manual processes. Get the comprehensive sustainability strategy that transforms corporate responsibility into competitive advantage.

The post 2025 Motus Sustainability Report appeared first on Motus.

The Total Cost of Vehicle Programs

Eduardo Valenzuela — Wed, 16 Jul 2025 19:19:34 +0000

Introduction

Hidden fees and unexpected costs have become an unfortunate reality wherever consumers turn. From food delivery to concert tickets to lodging, the White House estimates that Americans are spending more than $65 billion on fees each year

The Most Popular Vehicle Programs

There are four main vehicle programs most companies use:

Company-provided vehicle
Car Allowance
Cents-per-mile Reimbursement
Fixed and Variable Rate (FAVR) Reimbursement

Today, rather than deploy a single, prescriptive program across the entire driving
workforce, most companies use more than one of these vehicle programs simultaneously.

One-by-one, we’ll break down the true costs of each solution, starting with the most
expensive option: Company-Provided Vehicle Programs.

The Total Cost of a Company-Provided Vehicle

Also referred to as a fleet program, this model calls on employers to either purchase or lease vehicles for their employees to drive. From the jump, that’s a considerable amount of overhead. Unfortunately, there are significant additional costs businesses aren’t aware of when they sign up for company-provided vehicles. Those costs include:

Fuel Cards

To pay for business mileage, companies provide employees with prepaid debit or credit cards specifically for fuel or gas. Unfortunately, there’s no easy way to track whether employees are using gas cards for business or personal trips

Vehicle Maintenance

When a company has a fleet of vehicles, they’re responsible for general upkeep, in addition to repairs following accidents and storing vehicles when turnover occurs.

Liability

In 2019, traffic accidents cost employers $72.2 billion. In the event of an accident, the situation is worse with fleet vehicles. Fleet vehicles are owned by the company, meaning that if an employee driving one is found at fault in an auto accident, the company becomes a target.

Businesses signing up for fleet will see an initial price tag, one that doesn’t consider the support costs. A fleet program will also often require a full-time hire or an outsourced effort to manage. On average, fleets cost companies $12,816 per driver.

On average, fleets cost companies $12,816 per driver.

The Total Cost of a Car Allowance

Also referred to as an auto allowance or vehicle allowance, under this model, companies provide employees with a flat stipend each month. Businesses like this program for a number of reasons: First, when the payment is the same each month, it’s easy to budget for. Second, it doesn’t take much effort to set up, and is mostly hands off once a rate is established. But with that ease comes a mountain of issues, including:

Tax Waste

Because a car allowance isn’t substantiated by mileage logs, the IRS considers it additional income. That means the company pays more and employees receive less.

Disengaged Employees

Everyone receiving the same stipend may seem fair, but $575 goes a lot further in a region with lower gas prices. Employees driving in high fuel cost areas will go through that stipend a lot quicker than other mobile workers. When they do, they lack incentive to continue driving and paying out-of-pocket for gas.

Fuel Cards

Some companies with car allowances end up finding their stipends are insufficient. To fix this issue, they provide driving employees with fuel cards. The result of this is ballooning gas spend with little to no insight into actual use.

Companies using a car allowance find it easy to focus on the ease of implementation and administration. However, the cost in tax waste, disengaged employees and fuel cards should not be overlooked.

The Total Cost of Cents-Per-Mile Reimbursement

Also referred to as simply Mileage Reimbursement, Cents-Per-Mile (CPM) programs let companies pay employees a flat rate per business mile driven. With this method, companies commonly use the IRS mileage reimbursement rate, as it guarantees tax-free reimbursements. But even using the IRS rate comes with unexpected costs, including:

Mileage Fraud

When companies rely on employees to manually record their mileage–opposed to an automated mileage tracking app–it’s common for incorrect travel logs to impact reimbursement. Rounding up cents on each trip may seem harmless enough, but multiplied across the mobile workforce? That number can explode.

Audit Exposure

Another issue with typical CPM programs is the manual process. Employees submitting mileage scribbled down on random scraps of paper might not have all the necessary information. This can expose both them and your company to an IRS audit.

High-Mileage Drivers

Mileage reimbursements are ideal for mobile workers who drive around 5,000 miles or less annually and work in the same general region. High-mileage employees, on the other hand, who exceed the 5,000-mile threshold are prone to being over-reimbursed as minor roundups and even inadvertent mileage fraud pile up.To pay for business mileage, companies provide employees with prepaid debit or credit cards specifically for fuel or gas. Unfortunately, there’s no easy way to track whether employees are using gas cards for business or personal trips

Unpredictable Reimbursements

Because a CPM reimbursement is based on an employee’s mileage trends, it’s difficult to budget ahead for employees with fluctuating commutes or schedules.

Companies using CPM might find it easy to set the new rate each year. Unfortunately, that leaves many exposed to mileage fraud, audit risk and at the whim of their highmileage drivers. That isn’t to say CPM programs don’t have a place.

Businesses with lower mileage drivers in the same general area can benefit from the simplicity of a mileage reimbursement program. Provided they use an automated mileage capture app to reduce mileage fraud and audit exposure, CPM can be a great reimbursement for both company and employee. For the companies that don’t fit that criteria, the cost of mileage reimbursement can be too high.

The Total Cost of Fixed and Variable Rate (FAVR) Reimbursement

Companies use a fixed and variable rate (FAVR) reimbursement for a number of reasons related to the many flaws found in the other standalone offerings. FAVR reimbursements pay for the fixed and variable costs of owning and operating a vehicle. These reimbursements are tax-free, specific to employees’ geographic costs and submitted through an IRS-compliant mileage capture app. There are, of course, some shortcomings including:

Business Mileage Floor

Employees must drive a minimum of 5,000 miles each year to qualify for FAVR reimbursement.

Complexity

There’s notably more to account for with a FAVR program than more straightforward tactics. Fortunately, the right vendor can simplify a lot of that complexity.

While FAVR might not be for every company, with the right vendor, it’s a program that offers the most.

Using Multiple Vehicle Programs

More often than not, different employee driver profiles will require different kinds of vehicle programs. This poses the following considerations for employees tasked with managing these programs, including:

Administrators must know which employee are a part of what vehicle program, what rate each employee receives and the rules each program must follow.
With so many moving parts, things can easily get mixed up and put strain on the administrator tasked with management.
Companies may also have safety programs or other vehicle program initiatives that require administrative lift.

What options does a company have when tackling this challenge?

One Partner for Comprehensive Vehicle Program Management

It’s typical for companies to look to experts for support in managing their vehicle programs. While one vendor may help with company mileage reimbursement, another may focus on specifically on car allowances. All of this is to drive home the point that not every vendor is equipped to support multiple vehicle programs, let alone simultaneously. Fortunately, Motus can prevent that.

Motus is the industry leader in reimbursement for a reason. With decades of experience across reimbursement types, areas and industries, our comprehensive platform supports multiple vehicle programs simultaneously. Whether it’s automating mileage capture or calculating accurate rates, sharing insight into your mobile workforce or ensuring IRS-compliant mileage logs, Motus is here to help if you want to use one or more vehicle programs.

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Business Vehicle Programs 101

Eduardo Valenzuela — Wed, 16 Jul 2025 19:15:10 +0000

Introduction

Many companies have a love-hate relationship with their business vehicle programs, but it doesn’t need to be this way.

No matter the industry, company culture or size, all employers need a business vehicle program capable of fairly and accurately reimbursing employees for on-the-job driving. Despite the wide use of these programs, navigating the best solution for your organization can be a complex undertaking.

However, organizations don’t need to lock themselves into one specific program. In fact, 64% of companies use two or more programs at the same time. There is no standard definition of the “best” business vehicle solution; the best is dependent on what works for your company and your employees.

Organizations don’t need to lock themselves into one specific program. In fact, 64% of companies use two or more programs at the same time.

Whether you’re a finance, sales, operations or HR leader, you’ve probably wondered: “How do we know we’re running the right program?”

Answering this question depends on a number of factors, including the types of driving your employees do, how frequently they’re on the road and the type of vehicles they need to drive for work. These, among other factors, represent a handful of inputs your organization must evaluate to make a strategic decision between a fleet program, allowances, mileage reimbursement or a combination of these approaches. It’s important to bear in mind that processes don’t need to be universal across your company, as it doesn’t make sense to treat both frequent and infrequent employee drivers the same.

Market pressures, new regulations and evolving employee demands can influence business vehicle program expenses and risk at a moment’s notice. Fortunately, your organization has the flexibility to modify or replace your programs at any point. For example, you might already use an allowance, but as your company grows and you manage employees across multiple locations, it may make more financial sense to transition to a cents-per-mile (CPM) or Fixed and Variable Rate (FAVR) Reimbursement program instead.

The following is an in-depth look at the four main types of business vehicle programs, including how the programs function in practice, their financial implications and their effects on employees

Allowance

Allowance programs are the simplest business vehicle solution: Employers pay workers a flat fee to cover driving-related expenses. While this is the easiest program to administer and budget for, this one-size-fits-all approach could result in windfall payments to some employees, and reimbursements that fall short of driving expenses for others.

Allowances are fixed amounts that often don’t represent any particular employee’s driving habits, such as the number of miles they log or their local fuel costs. To that end, allowances are taxable for both employers and employees, as they are considered a form of compensation, not an expense. Depending on their situation, however, companies can use this to their advantage, treating allowances as an extra benefit for employees, effectively functioning like a bonus.

These programs are best suited for organizations that want simplicity first and foremost, without concern for the potential tax burden. Because these programs are so easy to understand—and all driving employees receive the same amount—most employees perceive flat allowances to be a fair reimbursement method.

Financial Implications

The financial results of an allowance are straightforward and predictable. Program administrators simply multiply the allowance by the number of impacted employees. Unfortunately for employees and employers, allowances are subject to income and payroll taxes, which may significantly reduce the amount of take-home pay mobile workers ultimately receive.

Tax Implications of Allowances:

If an employer wants employees to net a certain dollar amount, they will need to tack on a significant cushion of up to 30% to account for taxes.

Effect on Employees

From an employee perspective, allowances give the illusion of fairness since all mobile workers receive the same fixed dollar amount. Allowances are not a direct reimbursement for driving expenses, but rather an additional form of compensation. There are no minimum driving requirements for granting an employee a vehicle allowance, giving organizations greater flexibility to use funds for reimbursement or additional compensation.

When used solely for mileage reimbursement, a set reimbursement fund can convince employees to take the most efficient route possible. Driving employees who incur costs beyond the allowance must make up the difference out of their own pockets, while those who keep their expenses below the allowance can treat the difference as surplus income. To reduce mileage, employees could try to avoid necessary travel (e.g., face-to-face customer meetings) or use other forms of transportation, such as Uber or rental cars, and expense the costs.

A critical downside of allowances is the reduction of employee take-home pay due to taxes. In addition, the tendency to over-reimburse drivers that traveled less, while under-reimbursing drivers that traveled more, can pose challenges. These programs also fail to account for regional differences in cost of living, fuel and vehicle maintenance, creating an unequal compensation program for organizations with a distributed workforce.

Allowance Scenario

Organization with 100 mobile workers: Each mobile worker receives $800/month for driving an average of 15,000 miles/year

OUTCOMES

$9,600 Annual allowance per employee
$2,880 Tax waste per employee
$6,720 Employee annual net take-home
$364,800 Total tax waste for the organization

Other Considerations

Allowances are rarely a sustainable long-term solution to mileage reimbursement, as flat allowances are virtually guaranteed to either under or over-reimburse mobile workers. Yet without access to mileage log data, it is impossible to determine who is potentially over reimbursed and who needs more money to cover driving costs.

One factor often overlooked with allowance programs is insurance. In most instances, employees aren’t required to have any specific personal auto insurance in order to qualify for a flat allowance. Though this eliminates paperwork, it also exposes organizations to tremendous risk and the expensive repercussions of incidents that occur when an employee drives for work.

Employees often don’t need specific auto insurance to receive a flat allowance, leaving organizations exposed to costly risk from work-related incidents.

Over time, employers also tend to consider allowances part of an employee’s compensation rather than as a reimbursement intended to cover legitimate business expenses. In some cases, this can result in employers rationalizing why salary levels are lower than the competition’s, making salary discussions more challenging.

That said, allowances are easy to administer and offer a high level of predictability. With only minimal back-office effort required, it’s easy for organizations to create or modify an allowance as business needs shift; there’s no real “legwork” required to begin using the program other than determining the affected employees and allowance amount.

Cents-Per-Mile (CPM)

Cents-per-mile (CPM) programs are some of the most common business vehicle reimbursement options. In fact, 79% of organizations use CPM for at least some of their employees. Under a CPM program, businesses reimburse driving employees at either the IRS business mileage standard—a national, standard rate used to calculate the deductible expenses of using a vehicle for work—or set a custom rate developed internally

The second component of these programs involves keeping business mileage logs to justify reimbursements and in case of an IRS audit, which requires organizations to ensure their mileage capturing systems are both accurate and complete. In other words, jotting down mileage on random business cards—or in different note-taking apps—isn’t enough.

To meet IRS criteria, drivers must report every trip’s start and end location, time and date, reason for travel and total distance. So long as these requirements are fulfilled (and the CPM rate is less than or equal to the IRS business mileage standard) reimbursements can be tax-free to employers and driving employees.

When CPM is Applicable

CPM programs are best for organizations with occasional employees who drive less than 5,000 miles per year for work. The main concern with CPM programs is accurately logging employee miles. Without outside verification, employees may dramatically overestimate their mileage. Even when self-reported miles are only slightly off, it adds up. For example, a 20-mile trip to the airport might truly be 17.5 miles, over time representing a significant (and unwarranted) expense.

Even small mileage errors add up. A 20-mile airport trip might truly be 17.5, creating significant (and unwarranted) expenses over time.

It’s also important to recognize that the IRS business mileage standard is based on averages, not necessarily the unique costs of driving in any specific location. This compels many organizations to set more realistic custom rates for their workforce.

Businesses may attempt to administer CPM programs unassisted, but the unreliability of manual logging—as well as the accuracy challenges, administrative burden and planning necessary to deploy automated mileage capture—usually demands third-party support or additional internal resources. Technology can help organizations implement mileage capture solutions and ensure mobile workers adopt and correctly use the tools.

The key to running IRS-compliant CPM programs relies on solid policies and controls. Generally, companies will want to log as much as possible automatically, and rely on driving employees to use manual means when absolutely necessary (ie. when reporting a trip’s purpose).

Another factor to consider with CPM programs is risk. Employers running a managed CPM initiative can set specific insurance requirements that employees must meet to qualify for the reimbursements. This helps organizations minimize their liability in the event of accidents or other on-the-road violations.

Financial Implications

Over time, CPM programs tend to over-reimburse mobile workers who drive frequently for work. In some cases, costs can quickly balloon out of control.

Without mileage capture technology, reimbursements under a CPM program can be less predictable than the spend associated with fleet or allowance programs. Implementing a mileage capture application is more than an investment in program compliance—it also gives employers unprecedented visibility into their business vehicle costs and increases productivity by eliminating the need to manually log miles. Data from mileage capture applications can be transformed into valuable insights that may be used to improve driving routes and minimize time on the road. Organizations that adopt mileage capture technology have been able to reduce mileage by as much as 25%.

Organizations that adopt mileage capture technology have been able to reduce mileage by as much as 25%.

Effect on Employees

With CPM programs, employee drivers have to keep accurate logs of business travel, but most of this activity can be automated and occur seamlessly in the background. They must be trained on the importance of properly recording this information. That’s because without complete logs, CPM programs will not comply with IRS standards and risk failing a potential personal or company audit.

Since the IRS business mileage standard was developed with employee drivers who log less than 15,000 miles a year in mind, employers that rely on it should closely monitor high-mileage drivers to ensure they’re not dramatically over or under reimbursed. Driving employees may also find that CPM reimbursements are unequal across geographic locations, which can be a cause of tension. For instance, the monthly costs of driving—including factors like fuel prices and insurance rates—in Des Moines are substantially lower than in New York City. A uniform reimbursement rate won’t account for these differences, leaving employees in more expensive markets under-reimbursed (and frustrated because of it).

Other Considerations

It’s important to note that CPM reimbursements qualify as expenses. When administered with the right mileage capture technology, CPM programs are simple, effective solutions for lower mileage drivers. Driving employees don’t have to worry about a paperwork burden for logging miles, and program administrators can remain relatively hands-off since the IRS business mileage standard is a fixed value that changes annually. Automating your CPM program with mileage capture technology is a great first step toward painting an accurate picture of the miles your workforce drives. Some organizations take CPM one step further, integrating insurance requirements into their programs to reduce risk and liability expenses.

Company-Provided Car Program

Fleets are one of the most traditional vehicle management programs. Organizations purchase one or a variety of vehicles and choose whether to assign them to employees or treat them as a pooled resource. Unlike other business vehicle programs, fleet vehicles are property of the employer and can be reassigned to new employees when needed.

When Fleet Programs Are Applicable

Subsidizing a collection of company-provided cars—not to mention their maintenance and insurance—is a major investment for many organizations.

71% of HR managers report that Millennials are less likely to ask for a company-provided car or vehicle reimbursement compared to Gen X and Baby Boomers.

In a few specific scenarios, fleets may be the most logical option. Fleet programs are a good fit when specialty or branded vehicles are required, or for equipment that needs to be hauled (e.g., plumbing contractors, construction workers, or municipal services). Few employees, for example, have utility trucks sitting in their driveways at home. Some companies wrap their vehicle with their branding for marketing purposes, like Red Bull’s Mini Coopers. For businesses in certain industries (like pharma), company-provided cars have traditionally been viewed as a perk and are ingrained deeply into their culture.

Today, the allure of the company-provided car can vary by employee age. For instance, 71% of HR managers report that Millennials are less likely to ask for a company-provided car or vehicle reimbursement compared to their Gen X and Baby Boomer counterparts. Before setting aside fleet funds (or deciding to continue a fleet program), business leaders should consider the demographics of their workforce and company objectives to ensure fleets align with their current and future needs

Financial Implications

The upfront costs of vehicles and fuel cards are the two primary financial implications of fleet programs. However, liability, damage and accident risk management become major concerns for organizations managing a fleet as well.

For starters, US traffic fatalities have continued to climb steadily year-over-year, with 12.06 fatalities per 100,000 Americans as of the latest OECD findings—up from just 10.40 in 2013. As such, accidents are a question of when and how bad, not if. Organizations will inevitably experience vehicle damage or injury to an employee and will need to manage subsequent costs and possibly legal fees

For employers, the average motor vehicle crash injuries on- and off-the-job cost employers $72.2 billion in 2018.

Employers are also open to increased manufacturer risk with fleets. Common defects in one of their selected models can translate into hundreds or thousands of repairs. Even if performed at the manufacturer’s expense, employers are left to suffer the costly mobile worker downtime (or price of short-term replacements).

On average, fleet vehicles cost employers 26% more than mileage reimbursement programs

In 2024, the auto industry recalled almost 28 million vehicles, while the rolling average for recalls has sat at almost 35 million for the past decade. Businesses must also account for the cost of storing and maintaining unused vehicles when employees leave the company.

On a positive note, fleet programs do provide employers with a consistent level of vehicle spending stability. There are standard models, fuel efficiencies, parts and maintenance costs that may be more predictable than under a CPM program.

The True Costs of Fleet Vehicles

vehicle costs

$8,700

Average Cost of Fleet Vehicles

$1,104

Average Annual Maintenance, Repair and Tire Costs

$2,860

Average Annual Fleet Vehicle Fuel/Oil Cost

Liability and Risk Costs

$78,000+

Average Cost of a Non-fatal Disabling Auto Accident

$1,000,000+

Average Cost of a Fatal Accident

80%

of Off-the-Job Crashes Account for Employer Crash-related Health Benefits Costs

Effect on Employees

Employee sentiment toward fleet programs has evolved dramatically over the years. Company-provided cars are no longer a prized perk or source of convenience in all driving employees’ eyes. Older employees tend to view a company- provided car as a benefit, and fleet programs can use this to their advantage to keep morale high and improve their reputation from a recruitment perspective. On the other hand, businesses looking to attract younger employees may find the benefit is less effective, as younger generations have a tendency to value autonomy in the workplace. As a result, businesses might have more success satisfying workers with programs that allow them to use their own vehicles.

Because company-provided cars are deemed fringe benefits by the IRS, employees’ use of fleet vehicles for personal errands and other non-business purposes is treated as taxable income. Today, 70% of organizations estimate that personal use accounts for up to one-quarter of the annual mileage accumulated across their fleets. Not only does personal use accounting create a financial burden on employee drivers, it creates more work for employers to calculate the fair market value of each employee’s fleet vehicle.

Other Considerations

As one of the most expensive and high-risk vehicle programs, businesses should turn to fleets only when it fills needs other programs cannot meet. For example, those with specialized branding or niche vehicle needs are the best candidates for a fleet program. Program administrators should also evaluate how imminent changes to lease accounting rules will affect their internal fleet management costs.

Given company-provided cars’ fringe benefits status, the IRS requires that each driving employee maintain an accurate mileage log of their personal use activity. Accurately capturing both business and personal mileage helps your company stay in compliance, even if an employee or your company is audited.

Fixed and Variable Rate (FAVR) Reimbursement

Fixed and Variable Rate (FAVR) reimbursement is widely considered a “best of breed” program that blends the fixed costs of operating a vehicle with geographically-specific variable expenses (such as fuel) to produce highly accurate reimbursements. FAVR programs are the fairest option for organizations, regardless of company size.

Employers start by choosing a vehicle model (or models) and setting insurance requirements that fit their organization’s objectives. For example, salespeople may need midsize sedans for highway driving and engineers may require pick-up trucks to navigate oil and gas fields. Employees driving personal vehicles for work that meet these business requirements are also eligible for reimbursement. FAVR isn’t limited to a direct make and model match of the vehicle selected, providing both employers and driving employees additional flexibility over vehicle choice.

Employee drivers receive a fixed sum, which is designed to cover insurance, taxes, depreciation and registration. Employees are also granted a variable CPM reimbursement scaled to the price of gas locally, which accounts for the cost of fuel, maintenance, oil, tires and other incidental expenses. This structure allows employers to provide fair and accurate reimbursements based on where mobile workers live and work.

When is FAVR Applicable?

FAVR is a great fit for geographically dispersed organizations looking to avoid under-or over-reimbursing their employees and account for regional driving differences. This is also a smart option for companies wanting to supplement their existing mileage programs with an option for frequent drivers, whose high mileage often distorts and highlights weaknesses in other business vehicle programs.

FAVR programs are the fairest option for organizations regardless of company size.

Financial Implications

FAVR avoids the capital drain associated with fleet programs, freeing organizations from buying and maintaining company vehicles. This offers the same benefits as an allowance plan, but at a 30% to 40% lower expense ratio. In fact, many businesses report saving $2,000 to $3,000 per driving employee.

In contrast to flat allowances, FAVR is a tax-advantaged program, ensuring employees are reimbursed for mileage tax-free. This represents a unique benefit among mileage programs, making FAVR especially attractive to employers and employees.

Effect on Employees

Under a FAVR plan, employees are reimbursed more precisely than is usually possible under other plans. Organizations with a large geographic footprint in particular reap the benefits of FAVR, since universal mileage reimbursements (whether through an allowance or CPM) tend to exacerbate cost of living differences.

FAVR programs also give employee drivers the flexibility to choose their own vehicle, rather than having a specific car or truck assigned to them. This structure opens the doors for additional employee benefits and incentive programs that other programs can’t accommodate. Employees, for instance, can take advantage of the resale value of their vehicle and rewards for cost-conscious driving. This also allows employers to engage with their staff on an individual basis, rather than grouping all drivers together under an allowance or CPM program.

FAVR vs Allowance Plan:

30-40%

Lower Expense Rate

SAVES PER MOBILE EMPLOYEE WITH FAVR:

$2,000 to $3,000

Other Considerations

FAVR programs, combined with advanced mileage capture technology and analytics, can generate powerful and actionable business intelligence. Many organizations already have the information they need to transform their business at hand but may lack the tools to accurately record or analyze available data. By tapping into mileage data with better tools, organizations can optimize sales routes, identify new markets and more accurately assess employee performance.

Reimbursement Comparisons

Based on one employee driving 15,000 miles/year for work

Allowance

$9,600

Yearly company impact

$800/month

CPM

$10,500

Yearly company impact

2025 IRS standard mileage rate of $0.70/mile

FIXED AND VARIABLE RATE (FAVR)

$6,900

Yearly company impact

Fixed Costs  

(insurance, taxes, depreciation,  registration) = $4,350

Variable Costs

(fuel, tires, maintenance)  at $0.17/mile= $2,550

Conclusion

There is no wrong answer when searching for the best mileage program. Depending on your organization’s needs, there may be a time and place for fleets, allowances, cents-per-mile and fixed and variable rate programs. While it’s unlikely that any single reimbursement program will be a silver bullet, your company can combine several programs to meet its goals. A business might use CPM for occasional travelers, while using FAVR for more frequent mobile workers or those in geographies poorly represented by the IRS business mileage standard.

Consulting with a business vehicle solution provider can help your company identify hidden costs in existing reimbursement methods and find the right solution for your organization. Working with a third party grants your company the expertise to integrate different programs seamlessly, and the flexibility you need to move employees easily between reimbursement programs as your needs change. It’s important to choose a plan not only based on administrative ease of use, but also total cost to your organization. While an allowance program might be easy to administer, it could cost your company more in the long run if used to the exclusion of other options.

The right blend of business vehicle programs doesn’t only help your organization’s bottom line, it can help mitigate risk, provide value to operations and sales teams, and promote a healthy business culture. A personalized mileage reimbursement program minimizes the chance and fallout of safety issues, unpredictable travel costs and regulatory noncompliance.

Fairer and more accurate reimbursements can also alleviate and prevent employee grievances around business travel. Business vehicle programs can serve multiple purposes beyond mere reimbursement, from morale-boosting to altering benefit packages and generating new business insights

The post Business Vehicle Programs 101 appeared first on Motus.

Guides & Reports Archives | Motus

Streamlining Your Vehicle Program

Vehicle Programs Background

For non-specialty drivers, companies have a variety of vehicle program options to offer their workers, including:

Here’s an example …

Learn About The Risk And Potential Cost to Your Business

The Cost of Vehicle Programs

Car Allowance

CPM

Fleet

FAVR: The One-Stop Shop

What Comes Next?

Choosing the Right Vehicle Program Vendor

Discover the right questions to ask to ensure you select the perfect vendor for your business.

Why Vehicle Reimbursement is Not Compensation

Your car allowance program might cost your business more than you think.

Understanding Business Vehicle Programs

Can your business benefit from a cents-per-mile program?

Change Management: Keys to Successful Vehicle Reimbursement Implementation

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Drive Toward a Sustainable Future.

The Total Cost of Vehicle Programs

Introduction

The Most Popular Vehicle Programs

The Total Cost of a Company-Provided Vehicle

The Total Cost of a Car Allowance

The Total Cost of Cents-Per-Mile Reimbursement

The Total Cost of Fixed and Variable Rate (FAVR) Reimbursement

Using Multiple Vehicle Programs

One Partner for Comprehensive Vehicle Program Management

Business Vehicle Programs 101

Introduction

Allowance

Financial Implications

Tax Implications of Allowances:

Effect on Employees

Allowance Scenario

OUTCOMES

Other Considerations

Cents-Per-Mile (CPM)

When CPM is Applicable

Financial Implications

Effect on Employees

Other Considerations

Company-Provided Car Program

When Fleet Programs Are Applicable

Financial Implications

The True Costs of Fleet Vehicles

vehicle costs

$8,700

$1,104

$2,860

Liability and Risk Costs

$78,000+

$1,000,000+

80%

Effect on Employees

Other Considerations

Fixed and Variable Rate (FAVR) Reimbursement

When is FAVR Applicable?

Financial Implications

Effect on Employees

FAVR vs Allowance Plan:

SAVES PER MOBILE EMPLOYEE WITH FAVR:

Other Considerations

Reimbursement Comparisons

Based on one employee driving 15,000 miles/year for work

Allowance

$9,600

CPM

$10,500

FIXED AND VARIABLE RATE (FAVR)

$6,900

Conclusion

SAVES PER MOBILE EMPLOYEE WITH FAVR: