Retail Industry Vehicle Reimbursement Rate Benchmarking

Executive Summary

This benchmarking report analyzes vehicle reimbursement and fleet management practices in the North American retail sector, combining real-world reimbursement data with regulatory insights and industry trends. The data covers over thousands of active drivers across dozens of companies from 2023 to 2025. In retail—a sector defined by geographic dispersion, merchandising routes, and territory sales—the use of personal vehicles is widespread. Companies employ a mix of Fixed and Variable Rate (FAVR) programs, Tax-Free Car Allowances (TFCA), and per-mile reimbursement structures to balance cost, compliance, and employee satisfaction.

This report allows professionals to benchmark their fleet, car allowance, or reimbursement program against recent data.

Key Findings

• FAVR is the dominant reimbursement model, used by over 64.6% of retail drivers.
• The average monthly reimbursement is $532.27, combining a $392.70 fixed component and a $0.17 CPM variable rate.
• Drivers in retail average 77.39 business trips and 958.68 miles per month.
• State laws in California, Illinois, and Massachusetts require reimbursement, impacting national policy design.
• 95.6% of retail drivers use automated tracking, indicating a strong shift toward digital-first compliance.

Fleet vs. Vehicle Reimbursement in Retail

Summary:

When Fleets Are Used

Fleet vehicles are rare in retail but remain important in specific roles. These include:

• Specialized vehicles: if you’re delivering cargo in a large truck or transporting temperature sensitive merchandise, your vehicle is likely specialized. This is not usually a use case for employee-owned vehicles and reimbursements. 
• Visual merchandisers or logistics specialists who may need larger cargo space for display units or product samples.
• Premium or luxury brands, where high visibility sales reps occasionally use fleet vehicles for brand image or consistency.

Why Vehicle Reimbursement Dominates

Most retail companies prefer reimbursing employees for personal vehicle use due to:

• Lower overhead costs compared to owning/leasing fleets (no maintenance, insurance, or depreciation).
• Greater flexibility for employees to choose vehicles that suit both business and personal needs.
• Avoidance of taxable income if structured correctly via FAVR or Tax-Free Car Allowance (TFCA) programs.[1]

Detailed Program Comparisons

Fleet Company Cars

Company-provided vehicles have historically been offered to certain retail employees as a benefit or to ensure reliable transportation for work. Under a fleet program, the employer owns or leases the vehicles and handles all expenses (acquisition, fuel, maintenance, insurance). This grants the company control over the type of vehicle (which can be important for branding—e.g. uniform branded vans) and ensures that employees have a suitable car for the job. From a tax perspective, an the business use of employer-provided car is generally not considered additional income for the employee; however, personal use of a company car is a taxable benefit that must be tracked (both IRS and CRA require valuation of personal-use mileage). Employers can mitigate this by restricting personal use or charging employees for it. In Canada, if a vehicle is used strictly for work and not available for personal use, it’s not a taxable benefit.[10] Compliance for fleets mostly involves reporting personal use and staying on top of licensing, insurance and safety regulations.

Cost-effectiveness: Fleets can be cost-efficient when the company can purchase vehicles in bulk or at fleet discounts and fully utilize them. Depreciation and maintenance are spread over high mileage, and fuel is often cheaper via bulk fuel programs or on-site tanks. However, idle or under-utilized vehicles erode cost efficiency – a fleet car provided to an employee with only modest business mileage ends up costing the company far more per mile than a reimbursement would. 

One downside frequently cited is that reimbursement programs “lose vehicle acquisition benefits” such as volume purchase incentives and control over resale, meaning the company foregoes savings that a well-managed fleet might capture. This can make reimbursements appear costlier on paper for high-mileage cases. On the other hand, fleets carry hidden administrative costs – dedicated fleet managers, remarketing used vehicles, and the risk of asset depreciation swings. The St. Louis Fed reports that new vehicle prices in the U.S. rose ~20% from 2019 to 2023, which inflates fleet replacement costs.[13] High interest rates (for financing leases) and fuel price volatility further increase fleet operating expense uncertainty.

Employee impact: Employees with a company car enjoy convenience and savings – they do not have to invest in a vehicle or pay for fuel/maintenance out-of-pocket. This can be a strong incentive in recruitment/retention for certain roles. 

However, some employees feel limited by the company’s vehicle choice (they can’t choose a personal car to drive). In retail organizations, fleet vehicles might also not be uniformly offered below certain job levels, so there can be a perceived hierarchy (only the “higher-ups” get a car). 

From an operations standpoint, fleet vehicles ensure that even remote field reps (e.g. those in rural territories) have reliable transportation, which can be critical for coverage. But maintaining a fleet in many geographical areas can be complex (e.g. coordinating oil changes and tire swaps for vehicles spread across states).

When fleet is advantageous: If employees are driving extremely high mileages (think 50,000+ miles per year, which is very unusual—the average annual mileage is around 11,500 business miles per year for employee drivers) or carrying equipment, a fleet program may be most cost-effective and practical. Also, if branding (company logos on vehicles) or special vehicle configurations (delivery vans, trucks with shelving) are needed, company-owned vehicles are the clear choice. 

For these reasons, some retail-service companies with heavy delivery components retain a fleet for those specific needs, while reimbursing personal vehicles for lighter-duty sales roles.

Vehicle Reimbursement Programs

Vehicle reimbursement programs pay employees for using their personal cars on company business. This category includes standard Cents per Mile reimbursements (such as paying the IRS standard rate for each business mile) and more sophisticated FAVR (Fixed and Variable Rate) programs that split reimbursement into a monthly fixed amount plus a per-mile rate. The hallmark of reimbursement programs is that payment scales with usage—employees who drive more for work get paid more, which naturally aligns cost to actual business activity. 

These programs in the U.S. can be made 100% non-taxable if structured under an IRS accountable plan (requiring the employee to substantiate mileage and not be paid more than the prescribed rates). In Canada, the straightforward way to reimburse tax-free is paying the CRA’s per-kilometre rate (which similarly scales by distance).[11]

Substantiation and compliance: Reimbursements demand mileage tracking. Under IRS rules, employees should log each business trip’s date, purpose, and miles. Many companies use apps or telematics devices to automate this. As long as the reimbursement per mile does not exceed IRS limits (e.g. $0.655 in 2023, $0.70 in 2025)[12], payments are not taxable to the employee. If an employer chooses to pay a higher rate per mile, the excess is considered taxable wages. FAVR programs have additional IRS requirements – for example, the company must have at least 5 drivers in the program and each must drive enough business mileage annually (the IRS suggests ≥5,000 miles). The fixed portion of FAVR is calculated based on expected annual business use (business use percentage of the car) and localized cost data for things like insurance, registration, and depreciation. The variable portion is often pegged to things like fuel price indices by region. This complexity means FAVR is typically administered with the help of specialized software or vendors. In Canada, FAVR as defined by the IRS doesn’t exist. Thus Canadian employers typically pay a per-km rate (most common) or provide a flat allowance (taxable) plus perhaps a smaller per-km top-up.

Cost-effectiveness: Well-managed reimbursement programs can optimize cost per mile. For drivers with moderate mileage (not so high that IRS rate overpays, and not so low that a monthly allowance would be wasteful), paying per mile often ensures the company only pays for actual business travel. This avoids paying a fixed sum to someone during months they barely drive. Traditional flat mileage rates (like the IRS rate) are an average—some employees in low-cost regions or with fuel-efficient cars might quietly profit, whereas those in high-cost regions might be underpaid. FAVR solves this by tailoring rates to each driver’s location and driving pattern, thus improving fairness and cost accuracy. For example, in a low-cost state a FAVR driver might get a lower per-mile rate than one in California where gas and insurance are higher, saving the company money in the former case while properly funding the latter. Another cost factor is liability and insurance: with personal vehicle use, employees bear the primary insurance. Employers usually require employees to carry certain coverage limits and may reimburse a portion of insurance costs (often built into FAVR fixed payments). This shifts risk and cost from the company (contrast with a fleet, where the company’s insurance covers the vehicle). However, one must consider reimbursement program administration costs – whether internal (staff time to audit mileage submissions, etc.) or fees paid to reimbursement service providers. These are lower than the overhead of managing a fleet, but they are not zero.

Employee experience: Employees often favor reimbursement schemes when they drive a lot, since it directly rewards their effort and doesn’t add to taxable income. A driver who puts 1,000 business miles on their car in a month at $0.65/mi will get $650 tax-free, which can more than cover fuel, maintenance, and a share of wear-and-tear. They benefit by recouping depreciation on their personal asset. If the reimbursement rate is fair, employees break even or better on vehicle expenses, which boosts satisfaction. There is also a sense of autonomy – they use their own car (no need to swap vehicles for personal activities) and simply get paid for work use. The downsides include potential cash-flow issues (fuel costs are paid upfront by the employee and reimbursed later) and the administrative task of tracking trips. If an employee forgets to log miles properly, they might miss out on reimbursement (or face added scrutiny in audits). Some employees also worry about accelerated depreciation and higher maintenance on their personal car; a generous reimbursement program should alleviate this by covering those costs, but the employee has to manage the long-term upkeep or eventual replacement of the vehicle. By contrast, with a fleet car, those concerns are the company’s.

Use cases: Reimbursement programs are highly popular for sales representatives, merchandisers, and regional managers in retail who travel to various store locations or client sites. These roles often involve unpredictable travel schedules that are well-served by variable pay-per-mile. Many U.S. retail companies have migrated formerly fleet-provided roles onto reimbursement programs after the 2017 Tax Cuts and Jobs Act, since employees could no longer write off personal vehicle use – making it incumbent on employers to provide non-taxable reimbursements (The Rise of FAVR Vehicle Reimbursement | Cardata). The flexibility of reimbursements is also valuable in multi-state operations: it’s easier to roll out one reimbursement policy than to manage vehicle assets across every territory. Overall, reimbursement programs strike a balance of cost control for the company and fairness for the employee, provided they are maintained at current cost rates. The popularity of mobile apps and telematics (for example, vehicles with GPS that log trips) has further reduced the friction in these programs, leading to rising adoption year over year.

Retail Industry Vehicle Reimbursement Snapshot

Program Distribution: FAVR Leads

FAVR programs dominate due to their ability to:

• Accurately reflect local cost structures (fuel, insurance, depreciation).
• Offer tax-free reimbursements above the IRS mileage rate, if properly structured.[2]
• Stay compliant with IRS Revenue Procedure 2019-46 and Publication 463 guidelines.[3]

TFCA remains in use for:

• Businesses who want to offer a cash allowance to cover ownership costs without the compliance measures of FAVR.

Regional Reimbursement Rules and Compliance

In the U.S., no federal law requires mileage reimbursement, but certain states do. Companies operating nationwide must account for:

• California: Labor Code §2802 requires employers to reimburse all necessary business expenses, including mileage. Employers typically peg rates to or above the IRS standard to ensure compliance.[4]
• Illinois: Under the Wage Payment and Collection Act (820 ILCS 115/9.5), employers must reimburse necessary job expenses.
• Massachusetts: Although less explicit, general labor laws and Attorney General guidance reinforce the requirement to compensate for work-related costs.

Employers operating across jurisdictions often adopt a national standard policy based on the IRS mileage rate ($0.70/mi in 2025)[5] to avoid underpayment or litigation risk.

Geographic Breakdown of Retail Drivers

Retail mobility is highly concentrated in Sun Belt states and urban corridors. Texas alone accounts for nearly 1 in 5 retail drivers. Regional cost differences (e.g., gas prices, insurance premiums) underscore the value of FAVR’s localized rates.

U.S. vs. Canada Comparison

Though 98.8% of the dataset is U.S.-based, the 1.2% of Canadian retail drivers follow distinct reimbursement rules:

• The Canada Revenue Agency (CRA) sets annual tax-free per-kilometer rates. For 2025, the rate is $0.72/km for the first 5,000 km and $0.66/km thereafter.[6]
• CRA-compliant programs require:
  • Itemized mileage logs.
  • Business-only mileage.
  • Rates that do not exceed CRA caps.

Many Canadian companies avoid flat allowances due to taxation and opt for per-km reimbursement. When flat rates are used, they are taxed as employment income unless structured under CRA guidelines.

Compliance & Technology Trends

Retail has embraced digital tools to ensure compliance:

• Automated tracking tools (e.g., GPS mileage apps) are used by 95.6% of drivers.
• These tools ensure IRS and CRA compliance under “accountable plan” requirements.
• Retailers increasingly perform insurance verification and annual Motor Vehicle Record (MVR) checks to ensure safety and liability protection.[7]

Legal and Tax Compliance Considerations

Vehicle benefit programs must be designed with careful attention to tax laws and labor regulations in each country, to avoid unpleasant surprises for both employer and employee. Below is a summary of key compliance aspects for the U.S. and Canada:

United States (IRS Accountable Plans): The IRS allows businesses to reimburse employees for business vehicle use tax-free, but only if done under an “accountable plan.” The main criteria are: 

1) the expenses must have a business connection (the employee was driving for work purposes), 

2) the employee must substantiate the expenses with adequate records (usually a mileage log) in a reasonable time, and 

3) if an employee receives an allowance in excess of the substantiated amount, that excess must be returned to the employer. 

If any of these conditions aren’t met, payments become taxable wages. There are three IRS-approved methods for vehicle reimbursements: the Cents per Mile, FAVR, or Tax-Free Car Allowance – all can fall under an accountable plan if properly executed. Cents per Mile Rate (set annually, $0.70 for 2025) is straightforward: reimburse employees at or below this rate for each business mile with a mileage log, and it’s automatically deemed to be substantiated (no further proof of actual expenses needed). If an employer pays more than the standard rate, the excess per mile is taxable.

FAVR plans have additional IRS regulations spelled out in Rev. Proc. 2019-46 (and prior guidance). Notably, a FAVR program in 2025 had a maximum standard vehicle cost of $61,200 – meaning the fixed reimbursement cannot be based on a car pricier than that (to prevent over-generous payments). The employee’s personal vehicle used in FAVR must be insured and within certain age limits (often ≤5 model years old as a best practice). The IRS also requires a minimum business usage: employees should drive at least 5,000 business miles/year, otherwise a FAVR allowance would effectively overpay someone who hardly drives. If an employee falls short, the company may have to treat their reimbursement as taxable or switch them to a different method. Importantly, all reimbursements – whether via mileage logs or FAVR – require documentation. The IRS can audit and request proof that payments correspond to business travel. If a company cannot provide mileage logs or if it paid flat amounts without enforcement of an accountable plan, back taxes and penalties could ensue.

Canada (CRA Rules): The Canada Revenue Agency’s approach is more black-and-white: a car allowance must be “reasonable” and only based on kms to be non-taxable. CRA publishes prescribed per-kilometre rates each year (e.g., 2025: 72¢/km first 5,000 km, 66¢ thereafter). If an employer pays at these rates for business kilometers driven, the allowance is considered reasonable and the employee need not report it as income. The employer does not include it on the T4 (thus no source deductions). But if any part of the allowance is not tied to kilometers – for example a flat monthly amount regardless of kms, or a flat amount plus $0.20/km – then the entire allowance is taxable. The employee will see it on their T4 and must pay income tax on it. They may then claim actual vehicle expenses by filing Form T777 and having the employer sign a Form T2200 confirming that the employee was required to use their vehicle and was not fully reimbursed. This effectively allows them to deduct business-use portion of vehicle costs, but it’s an onerous process and provides relief only at the employee’s marginal tax rate. For simplicity, most Canadian employers choose one of two compliant approaches: pay a per-km allowance at CRA rates (which covers most costs for an average vehicle and is tax-free), or pay a higher taxable car allowance and let the employee handle expenses. Canadian law also requires that if an employer provides a company-owned vehicle, any personal use (including commute) is a taxable benefit calculated by a set formula (the “standby charge” and operating cost benefit). This is somewhat analogous to the IRS requiring inclusion of personal miles at a cents-per-mile rate in U.S. W-2s. From a labor standards perspective, both countries treat mileage reimbursements and allowances as part of compensation – for instance, they are generally not included in overtime calculations (being expense reimbursements, not wage premiums), and they are not considered pensionable earnings. Employers should clearly document their vehicle reimbursement policies in offer letters or employee contracts to avoid any confusion (especially in Canada, to clarify that a taxable car allowance is a benefit, not an expense reimbursement – which affects things like GST/HST treatment and eligibility for expense deduction).[11]

Cross-Border Differences: Retailers operating in both the U.S. and Canada need to be mindful that a vehicle program that is tax-advantaged in one country might not translate directly to the other. For example, a FAVR program used in the U.S. cannot be offered tax-free to Canadian employees – Canadian staff might instead be put on per-kilometre reimbursements. Likewise, a generous car allowance given in Canada will require gross-up or higher nominal values to net out the same as a U.S. tax-free allowance. One practical approach is to use a cents-per-mile (or km) reimbursement for all North American employees, using IRS rates in the U.S. and CRA rates in Canada. This ensures compliance and fairness, though it may not account for regional cost differences as well as FAVR does.

Two-Year Trends (2023–2025)

Retailers saw the following trends in their reimbursement figures in the period from 2023-2025:

Rising Reimbursement Rates

• CPM rose from $0.15 in early 2023 to $0.19 in early 2025.
• Growth reflects inflation, higher fuel/insurance costs, and increased demand for equitable reimbursement.

Fixed Rate Stability

• Fixed monthly rates remained stable, fluctuating between $365 and $395.
• This reflects careful cost control, even as variable rates rose.

Recommendations

• FAVR is ideal for retail staff driving personal vehicles over 5,000 miles per year. It ensures tax-free, accurate reimbursements based on local costs.
• TFCA is suitable for mobile teams who don’t or don’t want to comply with FAVR measures, but who want to offer a fixed allowance to cover driver ownership costs.
• CPM-only plans may under- or over-reimburse without local calibration.
• Employers must ensure programs adhere to IRS and CRA guidelines to avoid taxation.
• Automated mileage tracking is essential to maintain compliance and reduce admin burden.
• State laws require careful program design to ensure consistency across borders.

For retail organizations evaluating their vehicle programs, the following recommendations can be made based on the above analysis:

1. Leverage Tax-Free Reimbursements First: Take advantage of the available tax-free mechanisms in your country – they are a win-win, benefitting both employer and employee. In the U.S., this means implementing an IRS accountable plan for vehicle expenses. If your drivers’ mileage varies widely or costs differ regionally, strongly consider a FAVR program to maximize fairness and tax efficiency. In Canada, whenever feasible, use a per-kilometre reimbursement at CRA’s prescribed rate (or slightly above, with the excess taxed) rather than a flat taxable allowance. This ensures employees are not unduly taxed on a benefit intended for business expenses.
2. Match the Program to Driver Mileage Profiles: One size rarely fits all in vehicle programs. Analyze the mileage patterns of your retail field teams:
   • For high-mileage drivers (e.g. >5,000 business miles/year), a FAVR reimbursement is typically most cost-effective. High-mileage drivers can inadvertently become very expensive under a Cents per Mile program. FAVR will prevent overpayment by capping variable rates after fixed costs are covered. Alternatively, providing a company vehicle for these roles could be necessary where specialized vehicles are necessary.
   • For occasional drivers (e.g. under 5,000 miles/year), a standard Cents per Mile reimbursement works well. It’s simple, easy to budget (since you can forecast based on expected miles), and only pays for usage. Ensure the rate you use is up to date: for instance, use the IRS’s latest rate or a custom rate if your cost analysis justifies it. Review it annually in line with cost changes.
   • It may make sense to implement a hybrid program: you can run FAVR, TFCA, and CPM programs in the same company, and move drivers around between programs based on changing needs. 
3. Keep Compliance Documentation: Whichever program you choose, prioritize compliance and documentation. Establish a clear mileage logging system – ideally an app that timestamp-logs trips or an automated solution – and train employees on its use. This not only protects you in audits but also allows you to analyze the data (e.g. you might discover certain routes or service territories are extremely costly, prompting route optimization or territory realignment). If you offer a car allowance in the U.S. and treat it as accountable, actually perform the year-end true-up: require any excess over the IRS mileage equivalent to be returned or reported as W-2 income. These extra steps demonstrate good governance. Additionally, communicate to employees the importance of maintaining insurance (for personal car use) and a valid driver’s license; many companies include in policy that failing to do so can jeopardize their allowance/reimbursement.
4. Consider Outsourcing Complex Programs: If managing a FAVR program or a large fleet in-house is beyond your capacity, consider specialized vendors. Companies like Cardata and others can administer FAVR plans turn-key, ensuring IRS compliance and handling all the calculations and adjustments. Fleet management companies can operate your company cars (maintenance, fuel cards, accident management) often more efficiently than an internal team. The cost of these services is often offset by the savings gained (through optimized reimbursements or reduced internal overhead). They can also provide benchmarking data – for example, what the average allowance is in your region or industry (useful if you want to stay competitive). Ensure any provider you choose is familiar with CRA rules for Canada as well if you operate cross-border, so they can segregate and handle those employees properly.
5. Regularly Review and Adjust Rates: A vehicle program should not be static. Build a practice of reviewing your reimbursement rates or allowance amounts at least annually. Tie this review to objective indices: fuel price indices (e.g. U.S. Energy Information Administration gasoline price data, or Natural Resources Canada fuel averages), inflation on vehicle expenses, etc. For example, if fuel costs drop significantly, a cents-per-mile rate might be reduced or a planned increase postponed – saving the company money while still covering employees’ costs. Likewise, if costs rise (as in early 2022), don’t wait for employee complaints; proactively increase the reimbursement to maintain equity (the IRS and CRA both raised rates to respond to rising costs). This agility goes a long way in employee trust – drivers will feel the company “has their back” in volatile times. When adjusting, communicate clearly why the change is happening (e.g. “We are raising the mileage reimbursement from 58¢ to 62¢ starting next month, in line with higher fuel prices, per government guidelines”). Transparency turns the vehicle program into a positive engagement point rather than a sore spot.
6. Address Employee Preferences in Policy Design: Solicit feedback from your drivers about what they value. Some may strongly prefer a company car because they don’t want to put miles on their personal vehicle; others may much prefer using their own car for convenience. You might offer choice in some cases: for example, a senior manager could choose between a company car or a monthly allowance of equivalent value. If administratively feasible, this can boost satisfaction. Ensure your policies also account for personal use and clearly state expectations: if you give a company car, outline whether the employee can use it privately and how that will be taxed. If you reimburse mileage, clarify that commuting miles (home to office) are generally not reimbursable under tax rules (unless the home is their work base). Clarify insurance responsibilities – many companies require proof of insurance from personal car users and may even require certain minimum coverage (since the employee’s policy is primary in an accident during business use).
7. Monitor Trends and Benchmark: Stay informed with industry benchmarks and peer practices. For instance, knowing that the average car allowance in 2024 is about $600 in the U.S. provides a reference point – if you’re currently offering $300, you may be below market and risk losing talent to competitors with more generous vehicle policies. Benchmark mileage reimbursement rates as well, using, for example, reports like this one.
8. Pilot and Iterate: If you are transitioning from one program to another (say, from fleet cars to reimbursement, or from allowance to FAVR), pilot it. Choose a region or a group of drivers, implement the new approach for 3–6 months, and gather data on cost, employee satisfaction, and any administrative hiccups. This small-scale trial will expose issues and allow refinements before a wider roll-out.

By following these recommendations, retail businesses can craft a vehicle program that is compliant, cost-effective, and appreciated by employees. The right solution often involves a mix of approaches tailored to different needs within the workforce. Ultimately, the goal is to support your mobile employees in doing their jobs efficiently – whether that means putting them in a well-maintained company vehicle or ensuring they’re fairly reimbursed for using their own – while controlling costs and minimizing tax waste. A strategic, well-managed vehicle program can even become a competitive advantage, aiding in the recruitment of top retail talent who value a fair and hassle-free car benefit. The landscape of fleet and reimbursement options is evolving with technology and economic shifts, so continuous improvement and adaptation of your vehicle programs will yield dividends in both productivity and employee loyalty.

Sources

• [1] Is Your Car Allowance Taxable? | Cardata
• [2] FAVR Taxes Explained: A guide for program admins | Cardata
• [3]Rev. Proc. 2019-46 | IRS 
• [4] Division of Workers’ Compensation Factsheet
• [6] Motor vehicle provided by the employer – Canada.ca
• [7] Driver Safety | Cardata
• [9] Cox Automotive Study: Fleet Owners More Satisfied With EVs Than ICE Alternatives, Despite Higher Acquisition Costs, Frequency of Service and Maintenance 
• [10] Motor vehicle provided by the employer – Canada.ca
• [11] Employers’ Guide – Taxable Benefits and Allowances – Canada.ca 
• [12] 2025 Standard Mileage Rates Notice 2025-5 SECTION 1. PURPOSE 
• [13] Consumer Price Index for All Urban Consumers: New Vehicles in U.S. City Average (CUUR0000SETA01) | FRED