How Much Are Food & Beverage Companies Spending on Vehicle Reimbursement?

Did you know that food and beverage companies reimburse each employee driver at an average of approximately $725 per month? That’s $8,700 per year, which covers everything from fixed reimbursements such as insurance, depreciation and taxes, as well as variable reimbursements. Variable reimbursements differ by vehicle use, and include maintenance fuels and tires. 

Companies using a company-owned fleet of vehicles could potentially be paying their employees even more than this — it’s worthwhile examining the benefits of a Fixed and Variable Rate (FAVR) vehicle reimbursement plan, so food and beverage companies can make sure they’re using the best option, both for the company and its employee drivers.

Introduction

Migrating from a traditional fleet to FAVR reimbursement could trim vehicle program expenses by as much as 30 percent. Importantly, when every reimbursed dollar meets IRS requirements for FAVR programs, neither the company nor the driver pays the respective payroll and income taxes, eliminating a substantial tax leakage that companies with taxable car allowances contend with.

How FAVR Reimbursement Works

A FAVR plan splits compensation into fixed elements—depreciation, insurance, licensing, and registration—and variable elements such as fuel, maintenance, tires, and oil. 

In order for FAVR reimbursements to be eligible to be considered by the IRS as tax-free income for drivers, it’s essential that all requirements are followed. For example, drivers are required to keep detailed records of all business mileage and clearly distinguish between business mileage and personal mileage. Other requirements include a minimum of 5 drivers on the program, specifications about permitted vehicles, and more. It’s mandatory for companies to stay up-to-date on IRS regulations to ensure that their FAVR program is compliant.

To make record keeping more streamlined, mileage tracking can be done through a mobile app that provides GPS-powered, accurate mileage logs, ensuring that drivers are reimbursed only for actual business mileage. Operational productivity rises as well: automated mileage capture could remove as much as 42 hours of manual work per driver annually, time that reps can redirect toward merchandising displays, shelf resets, new store prospecting, and more.

The Cost of Owning a Fleet

Fleet ownership, by contrast, layers multiple expense buckets onto the income statement. Depreciation and maintenance consume an average of about $4,551 per vehicle each year, according to the AAA. Add on insurance, fuel, registration, telematics subscriptions, and internal fleet management labor, and the annual costs of fleet ownership can rise. 

More hidden liabilities are also worth considering: accidents, idle assets, and extra administrative time can potentially further inflate the total cost of ownership. 

Strategic Comparison

When the two models are set side by side, the advantages of reimbursement become hard to ignore. At $8,700 per employee versus potentially much more for a company car, a vehicle reimbursement program could unlock tax-free savings for not just employers, but for employee drivers, too. Companies can avoid cluttering the balance sheet with depreciating assets, since drivers use their own personal vehicles. 

Reimbursement also scales much more easily. Instead of a company having to acquire additional vehicles when needed — or leave depreciating assets sitting idly by when teams scale back — managers can add or remove drivers by updating a rate table. In contrast, fleet departments must forecast demand, acquire vehicles, and manage resale risk. FAVR even suits small teams; organizations with as few as five drivers logging 5,000 or more business miles a year may be eligible, when other IRS compliance requirements are followed.

Implementation Roadmap

Food and beverage leaders who currently have a fleet of company-owned vehicles can begin with a data-driven audit of current spend, including any lease payments, maintenance invoices, fuel logs, and payroll tax reports. Next, they can compare those numbers against projected payments through a FAVR vehicle reimbursement program. FAVR programs can more accurately represent genuine vehicle expenses, including precise business mileage, local fuel prices, and insurance premiums. 

A limited pilot—for example, a beverage route in a single metro area—can validate administrative workflows and driver satisfaction before a broader rollout. 

Conclusion and Call to Action

The math is clear: reimbursing employees through a compliant FAVR program has the potential to outperform fleet ownership on cost, flexibility, and more. Consider speaking with a vehicle reimbursement expert at Cardata to learn more.

Disclaimer: Nothing in this blog post is legal, accounting, or insurance advice. Consult your lawyer, accountant, or insurance agent, and do not rely on the information contained herein for any business or personal financial or legal decision-making. While we strive to be as reliable as possible, we are neither lawyers nor accountants nor agents. For several citations of IRS publications on which we base our blog content ideas, please always consult this article: https://www.cardata.co/blog/irs-rules-for-mileage-reimbursements. For Cardata’s terms of service, go here: https://www.cardata.co/terms.