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A Fixed and Variable Rate (FAVR) reimbursement combines a fixed payment for vehicle ownership costs with a variable reimbursement based on business mileage and vehicle operating costs.
It’s designed to reimburse employees for the real, business-required cost of owning and operating a personal vehicle for work.
We’ve created the FAVR calculator below to help you understand how much your organization could save by implementing a FAVR program for eligible drivers.
Fixed and Variable Rate (FAVR) Reimbursement Calculator
This FAVR reimbursement calculator provides an estimate for informational purposes only. A calculator result does not establish an IRS-compliant FAVR program or determine whether an employer, employee, or vehicle meets applicable FAVR program requirements.
How is FAVR Reimbursement Calculated?
At its simplest, the calculation for a FAVR reimbursement looks like this:
Total FAVR reimbursement = fixed reimbursement + variable reimbursement
The fixed portion accounts for the cost of having a vehicle available for business use. The variable portion accounts for costs that change based on how much an employee drives for work.
The actual process of setting FAVR rates is more detailed than this basic formula.
FAVR programs use a standard vehicle and cost information tied to a driver's location rather than simply reimbursing an employee based on the vehicle they personally choose to drive.
Fixed reimbursement
The fixed portion of a FAVR reimbursement covers ownership-related vehicle costs.
These can include depreciation or lease costs, insurance, license and registration fees, and applicable vehicle taxes.
These expenses don't necessarily change much when business mileage changes.
An employee's insurance costs, for example, don't double just because they drive twice as many business miles one month.
Variable reimbursement
The variable portion covers vehicle operating costs that are more closely tied to driving.
Fuel is the most obvious example. Other variable costs can include oil, maintenance, and tires.
For a simplified FAVR calculation:
Variable reimbursement = business miles × variable rate per mile
That amount is then added to the employee's fixed reimbursement to calculate their estimated total reimbursement.
Why location matters
Where an employee drives can affect their FAVR reimbursement.
Fuel prices, insurance premiums, taxes, maintenance expenses, and other vehicle costs aren't the same everywhere in the United States.
A FAVR program can account for those geographic differences when setting reimbursement rates.
That's one reason a FAVR reimbursement isn't simply another national cents-per-mile rate.
FAVR Calculation Example
Here's a simple example of how the calculation works.
Suppose an employee has a $500 monthly fixed reimbursement, a $0.25 variable rate per business mile, and drives 1,200 business miles during the month.
Variable reimbursement = 1,200 × $0.25 = $300
Add that to the fixed portion:
$500 + $300 = $800
The employee's estimated FAVR reimbursement for the month would be $800.
These numbers are only an example, they're not Cardata benchmarks or recommended reimbursement rates.
Actual FAVR reimbursements depend on the program's cost inputs, standard vehicle, driver location, business mileage, and other program requirements.
What Costs Are Included in a FAVR Reimbursement?
FAVR separates vehicle expenses into fixed and variable costs.
This separation matters because vehicle costs don't all respond to mileage in the same way.
Fixed expenses are generally associated with owning and keeping a vehicle available for business use. Variable expenses are more closely connected to how much the vehicle is driven.
Together, the two components are designed to reimburse employees for the real, business-required cost of owning and operating a personal vehicle for work.
Why Can Your FAVR Calculation Change?
Your FAVR reimbursement isn't necessarily going to look the same every month.
The clearest reason is business mileage. Because the variable portion is tied to mileage, an employee who drives more reimbursable business miles will generally receive a higher variable reimbursement.
The costs behind the rate can change too. Fuel prices fluctuate. Insurance and maintenance costs can change over time. Vehicle costs and location can also affect the assumptions used to calculate reimbursement.
This is why it's useful to think about FAVR as two pieces rather than one mileage rate. The fixed and variable portions respond to different costs.
What Should You Know About FAVR Requirements?
Our FAVR calculator tells you what an estimated reimbursement could look like, but it doesn't tell you whether a FAVR program is compliant.
FAVR programs come with IRS requirements related to areas such as business mileage, participating vehicles, insurance, and program structure.
Employers also need appropriate mileage records and a defensible methodology behind the costs used to calculate reimbursements.
So, think of the FAVR calculator as a way to understand the numbers, not as a FAVR compliance test.
Calculate Your Estimated FAVR Reimbursement
A FAVR calculator gives you a clearer picture of how fixed costs, variable costs, and business mileage can come together in a reimbursement.
From there, the next step is making sure the program behind those numbers is structured and managed properly.
Looking to build a FAVR program or improve the one you already have? Cardata designs and administers FAVR and other mileage reimbursement programs for companies with employees who drive personal vehicles for work.
Talk to Cardata
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