Report: Vehicle Reimbursement and Fleet Trends in Manufacturing

Industry Report Manufacturing

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Executive Summary

This data benchmarking report analyzes vehicle reimbursement practices across 64 manufacturing companies in the U.S. and Canada, encompassing many thousands of active drivers between 2023 and 2025. It highlights how organizations balance cost, compliance, and employee satisfaction in personal vehicle use for business—particularly in high-mileage roles like sales and field service.

The report also discusses the fleet and company cars within the manufacturing space, with a view to educating field teams, finance and HR leaders, and fleet managers on the best way to enable mobility in the manufacturing industry.

Key Findings

Manufacturing has a high-mileage workforce:
- Average monthly mileage is 1,361 miles (about 16,300 miles/year), placing these drivers in a high-utilization category.
- Typical roles include outside sales, field technicians, and territory managers.
Dominance of FAVR and Hybrid Models:
- A majority of companies use FAVR (Fixed and Variable Rate) reimbursement, combining a fixed stipend for ownership costs (insurance, depreciation) with a variable per-mile rate that adjusts for fuel and maintenance.
- Average monthly fixed payment is $468, average per-mile rate is $0.23, and total reimbursement averages $756—substantially higher than the total market car allowance average of roughly $600.
Consistent Rate Adjustments:
- Companies periodically adjust reimbursement rates to account for inflation, fuel price fluctuations, and regional cost differences.
- This active maintenance helps ensure equitable coverage and compliance with evolving IRS/CRA guidelines.
Program Scalability and Flexibility:
- Participants range from small (<100 drivers) to large (>1,300+ drivers) organizations across North America.
- Despite diverse geographies, geographically sensitive program structures (especially FAVR) effectively accommodate varying travel needs.
Shifting Fleet Composition and Sustainability Trends:
- Many manufacturing firms have transitioned away from traditional sedans toward small SUVs and light-duty trucks, balancing utility, cost, and driver comfort.
- Early-stage electrification is emerging, with growing interest in hybrid and electric vehicles as charging infrastructure improves.

Implications for Decision-Makers

Accurate, Fair Reimbursement: High-mileage roles require precise calculations to cover real-world expenses. FAVR and Tax-Free Car Allowance programs help avoid over- or underpayment (compared to IRS or CRA standard rates).
Regulatory Compliance: U.S. employers must navigate varying state reimbursement requirements (e.g., California) and IRS rules for non-taxable plans. Canadian companies adhere to CRA guidance on per-kilometer allowances to maintain tax efficiency.

Vehicle reimbursement strategies in manufacturing must evolve alongside changing travel patterns, cost pressures, and regulatory landscapes. This dataset confirms that FAVR-style plans, proactive rate adjustments, and a focus on high-mileage roles are key to maintaining fair, competitive, and compliant programs. By regularly reviewing and refining their vehicle policies, manufacturing organizations can optimize costs, support mobile employees effectively, and stay aligned with both industry benchmarks and broader fleet trends.

Common Fleet Vehicle Types in Manufacturing

Manufacturing companies typically deploy light-duty trucks and cars as part of their fleet for sales and service roles. Popular choices include full-size pickup trucks (e.g. Ford F-150, Chevy Silverado) for technicians who need to carry tools or equipment, as well as cargo vans (like the Ford Transit) for deliveries or maintenance teams. For sales representatives and managers, mid-size sedans and crossover SUVs are common due to their fuel efficiency and comfort—in recent years many fleets have shifted from sedans toward SUVs/crossovers for improved space and all-weather traction.[1] For example, fleet surveys have highlighted Ford and GM models (e.g. Chevrolet Bolt EV as Fleet Car of the Year, Chevrolet Silverado as Fleet Truck of the Year, Ford Escape as a top fleet SUV) as popular in corporate fleets.[2] Overall, manufacturing fleets often balance utility and cost: heavy-duty trucks may be used in production or distribution operations, but the typical company car fleet in manufacturing is dominated by light trucks and passenger vehicles that support day-to-day business travel.

(In Canada, fleet vehicle preferences are similar – pickups and vans for industrial roles and sedans/SUVs for sales – with a growing interest in hybrid or electric options in both countries.)

Car Allowance Programs: Rates & Structures

Many manufacturing firms provide a car allowance to employees who use personal vehicles for work. A car allowance is a fixed cash stipend (usually paid monthly) intended to cover fuel, insurance, maintenance, and depreciation of the employee’s vehicle. This allowance is added to the employee’s paycheck. Typical car allowance amounts in the U.S. average $600 per month. For example, a manufacturing sales representative might receive a flat $600 per month as a car allowance, regardless of how many miles they drive. Higher-level roles or those with extensive travel may receive more, while some entry-level positions might get less (e.g. $300-$400). It’s important to note that in the U.S. a standard car allowance is typically treated as taxable income, so the employee pays taxes on that $600 just like salary. This taxability means part of the benefit is lost to taxes – analyses reveal that about 30% of a car allowance budget can be lost to taxes.

(In Canada, car allowances follow similar patterns but with important tax differences. A flat monthly car allowance in Canada is generally taxable as employment income unless it’s based on kilometers driven. Canadian employers often prefer to reimburse per kilometer (at prescribed rates) rather than give flat allowances, to keep the payments tax-free. For instance, an Ontario sales rep might get a combination of a modest fixed allowance plus $0.68/km – aligning with CRA’s rates – to avoid tax implications. Flat allowances (e.g. $600/month) are used by some Canadian companies, but because those are taxable, many ensure the allowance is “reasonable” per CRA rules or use per-km reimbursements instead.)[3]

Vehicle Reimbursements and FAVR Programs

Instead of (or in addition to) flat allowances and fleets of company cars, manufacturing firms often use vehicle reimbursement programs. A mileage reimbursement pays employees a certain rate per mile (or kilometer) driven for business. In the U.S., the IRS Standard Mileage Rate serves as a benchmark: for example, the rate was 67¢ per mile for 2024 and increased to 70¢ per mile for 2025 (the IRS rate is adjusted annually to reflect fuel, maintenance, and other operating costs). Companies can reimburse at the IRS rate and the payment is tax-free to the employee as long as proper logs are kept. Some organizations reimburse at a lower rate (for cost savings), though if the rate is below the IRS standard, employees cannot deduct the difference (due to tax law changes in 2018—the Tax Cuts and Jobs Act). On the other hand, reimbursing above the IRS rate is allowed but the excess is treated as taxable income.

In the manufacturing industry, vehicle reimbursement programs are a cornerstone of how mobile employees—such as sales reps, service technicians, and field managers—are compensated for business travel using personal vehicles. Based on data from 64 companies and over 8,000 drivers, it’s clear that manufacturing organizations are increasingly relying on structured, compliant, and scalable vehicle programs, with a strong preference for FAVR (Fixed and Variable Rate) reimbursement models.

FAVR Preferred by Manufacturers

Among the companies analyzed:

81% of active drivers are on FAVR programs
13% receive Tax-Free Car Allowances (TFCA)
5.5% use other hybrid or custom reimbursement approaches
0.5% fall under Canada-specific programs

This overwhelming majority (81%) adoption of FAVR stands out when compared to other industries. In the chemical manufacturing sector, for example, only about 49% of drivers use FAVR, with the other half on TFCA. In field service, the number climbs even higher—84% on FAVR, showing that manufacturing sits squarely between these two benchmarks, reflecting a balance between compliance, flexibility, and administrative efficiency.

What the Numbers Reveal: Cost and Usage Patterns

The average manufacturing driver logs:

1,361.17 business miles per month
76.18 trips monthly, or approximately 3–4 trips per workday
Annualized, this equals roughly 16,300 business miles per year, putting manufacturing workers solidly in the high-mileage category (the cutoff for FAVR program participation is a mere 5,000 miles per year).

How much manufacturing employees drive varies widely by job function. Manufacturing sales representatives and field service engineers often cover large territories, racking up higher mileage, whereas plant managers or local service techs may drive only within a city or region. Industry data shows that annual business mileage in manufacturing-related sectors averages 16,300 miles per year.

Employees in the manufacturing industry, whether reimbursed with FAVR or TFCA, can expect to receive the following figures:

Reimbursement Component	Monthly Average
Variable Rate (CPM)	$0.23
Fixed Component	$468.44
Total Reimbursement	$755.97

Importantly, the combined total reimbursement amount aligns with IRS guidance and stays tax-compliant when administered correctly. On a FAVR program, you can even pay over the IRS standard rate, tax-free.

Dynamic Rate Management

Over the observed period (2023–2025):

CPM rates ranged from $0.22 to $0.26, indicating responsive rate-setting based on regional fuel prices or economic fluctuations.
Fixed rates ranged from $439 to $512, with a stable average of $468.44.

These trends demonstrate that manufacturing firms are actively managing reimbursement rates, adjusting quarterly or annually to reflect real-world cost changes—an essential trait of mature, well-managed vehicle programs.

In Canada

Although only 0.5% of the dataset represents Canada-specific drivers, the structure is consistent with CRA-compliant reimbursement. Canadian manufacturing firms typically align to CRA-prescribed per-kilometer rates (e.g., $0.70/km for the first 5,000 km in 2024), or use modified FAVR-like approaches to retain tax-free status while reimbursing equitably. In cross-border operations, many companies opt for provider-managed programs that can accommodate both CRA and IRS requirements.

Regional Reimbursement Rules and Regulations

United States: There is no federal law mandating how much employers must reimburse for business use of personal vehicles – but several states have their own requirements. Notably, California, Illinois, and Massachusetts require employers to reimburse employees for necessary business travel expenses, which includes mileage on personal vehicles. California’s Labor Code §2802 is one of the strictest: it obliges employers to indemnify employees for all expenses incurred on the job, effectively forcing companies to reimburse mileage at a reasonable rate. Illinois and Massachusetts have similar statutes/regulations ensuring employees are paid back for using their own car for work. These laws don’t specify an exact rate (e.g., it doesn’t explicitly force the IRS rate), but employers in those states often peg reimbursements to the IRS standard to demonstrate reasonableness. In states without specific reimbursement laws, companies technically could offer no mileage reimbursement, but most do provide it as a standard business practice or to comply with general labor principles. It’s also worth noting that because the IRS standard rate is widely considered a safe harbor, many multistate employers choose a single national policy (using the IRS rate or a fixed allowance) to simplify administration and avoid running afoul of any state laws. As mentioned, since the 2018 Tax Cuts and Jobs Act, employees cannot deduct unreimbursed mileage expenses on their federal taxes, so employees are wholly dependent on employer policies to cover those costs – this has put more onus on employers to have fair reimbursement policies in all states. Apart from labor laws, another regulation consideration in the U.S. is taxation: to keep reimbursements non-taxable, companies must use an “accountable plan” (employees submit mileage logs, etc.). FAVR programs must adhere to IRS rules as discussed; if they do, the payments are not reported as income.

Five-Year Trends and Developments (2018–2023)

The landscape of company vehicle programs in manufacturing has evolved in the past five years, influenced by economic shifts, technology, and the push for sustainability. Key trends include:

Rising Reimbursement Rates: Both the U.S. and Canada have seen significant increases in standard mileage rates due to higher fuel prices and vehicle costs. The U.S. IRS rate climbed from 54.5¢/mi in 2018 to a record-high 62.5¢ in mid-2022 (a special increase due to fuel price spikes)[4] and now stands at 70¢/mi for 2025.[5] Canada’s CRA rate similarly jumped from $0.55/km in 2018 to $0.68/km in 2023, reaching $0.70 in 2024 and $0.72 for 2025.[3] These rapid increases have prompted companies to adjust allowances and reimbursement budgets upward. Notably, the IRS even made a rare mid-year adjustment in 2022, bumping the business mileage rate from 58.5¢ to 62.5¢ per mile for the second half of 2022 to address soaring gas prices.
Fleet Composition Shifts: There has been a clear move away from sedans to SUVs in corporate fleets. Manufacturers discontinuing many sedan models (Ford, for example, phased out sedans in favor of trucks/SUVs) led fleets to replace midsize sedans with small SUVs. Fleet managers report that modern crossover SUVs offer comparable fuel efficiency and lower total cost of ownership while providing greater utility, making them attractive replacements for sedans. In manufacturing company fleets, this translates to sales teams perhaps moving from a Ford Fusion to a Ford Escape, or from a Chevy Malibu to an Equinox, etc. Light trucks (pickups) have remained dominant for heavy-duty needs, but there’s also interest in smaller pickups and vans that are more fuel-efficient. Overall, the fleet mix in 2023 skews more towards trucks and SUVs than it did five years ago, aligning with broader auto market trends.[6]
Electrification and Sustainability: The past five years have seen the beginning of electrification in manufacturing fleets. While adoption is still modest, it’s accelerating. As of early 2024, about 14% of corporate fleets have incorporated at least some EVs,[7] and fleet surveys indicate a “significant trend toward EV adoption in the next five years.” Many manufacturing companies have announced sustainability goals that include converting fleet vehicles to electric or hybrid where feasible (for example, using electric delivery vans for short-range routes, or providing sales reps the option to order an EV as their company car). An industry poll found 80% of fleet operators plan to electrify at least 25% of their fleet by 2030, and nearly 50% expect EVs to comprise over half of their fleet by 2030.[8] Over the last five years, hybrid models (like the Toyota Prius or Ford hybrid pickups) also gained popularity as an interim step toward full EV. Charging infrastructure has become a consideration for companies – installing chargers at facilities or providing allowances for home chargers is increasingly part of fleet policy discussions.
Policy and Program Changes: With cost pressures and tax changes, many companies revisited their fleet strategies. The 2018 U.S. tax law (eliminating employee unreimbursed expense deductions) led some firms to move away from low cents-per-mile rates (since employees could no longer write off the gap) toward more fair rates or allowances. Additionally, the new lease accounting rules (ASC 842/IFRS 16) in 2019 made leases (including fleet leases) appear on company balance sheets, which in some cases made reimbursement programs more attractive financially than maintaining a large leased vehicle fleet. The COVID-19 pandemic in 2020 also caused a dip in business driving as travel was restricted; some manufacturing companies temporarily reduced car allowances or paused fleet vehicle orders during that period. However, by 2021–2022, business mileage rebounded and even surged in some sectors (especially as people avoided air travel and drove more). The pandemic also highlighted the importance of flexibility – some firms downsized their permanent fleet and implemented on-demand mobility solutions (like motor pools or car-sharing for employees) combined with mileage reimbursement for personal vehicle use when needed. Another trend is the greater use of telematics and data in managing vehicle programs: fleet managers now leverage data logging to optimize routes (saving fuel) and to ensure compliance (e.g., verifying mileage submissions). Safety policies have also tightened—many manufacturing fleets now include driver monitoring or training programs, given that sales and service employees spend so much time on the road.
Greater Use of Benchmarking and Outsourcing: In the last five years, there’s been an increase in companies benchmarking their vehicle reimbursement against peers and seeking expert solutions. Providers like Cardata have released industry-specific reports (for chemicals, construction, food & beverage, etc.), which help manufacturing firms see how others structure their programs (e.g. what is the “average” allowance or how many miles a typical field engineer drives). This data-driven approach has led many to refine their programs—for example, adjusting a flat allowance to a “tax-free car allowance” under IRS rules (meaning they ensure the allowance doesn’t exceed what the equivalent mileage reimbursement would be). Some companies have transitioned from company cars to reimbursement programs to cut costs; others have done the opposite for certain roles after analyzing total cost of ownership. Fleet management and reimbursement are increasingly handled with specialized software and outsourced program management to ensure compliance with the myriad of IRS, Department of Labor, CRA, and state rules. The result for manufacturing organizations is more efficient vehicle programs that align with both cost control and employee satisfaction.

Conclusion

For finance, HR, and operations leaders in manufacturing, keeping abreast of these trends is crucial. The types of vehicles in your fleet should match the job needs (and new EV options should be evaluated); car allowance amounts should be revisited regularly to remain fair and competitive; and reimbursement methods (CPM vs. FAVR vs. company cars) should be chosen based on data like employee mileage patterns and tax implications. By understanding regional regulations and industry benchmarks, decision-makers can design vehicle programs that minimize cost and risk while maximizing productivity and driver satisfaction. The past five years have underscored that vehicle programs are not set-and-forget policies—they require active management in the face of changing fuel costs, technologies, and workforce expectations. With informed adjustments, manufacturing companies can ensure their car allowances and fleet strategies remain efficient, compliant, and supportive of their mobile employees on the road.