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Fixed and Variable Rate (FAVR) & Fleet Management Glossary

The definitive source to Fixed and Variable Rate (FAVR) and fleet management terminology.

Glossary

A

Accountable Allowance

Accountable allowance is a program for business use of personal vehicles.

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Acquisition Cost | Fleet Management

The total expense required to purchase or lease a vehicle or piece of equipment. This typically includes the base price, dealership fees, upfitting costs, and taxes/registration.

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Alternative Fuels (Alt-Fuel) | Fleet Management

Non-traditional vehicle fuel that’s not petroleum-based or diesel fuel. Examples include electric, CNG, propane, hydrogen, or E-85 (ethanol). Also known as “alt-fuel.”

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Asset Tracking | Fleet Management 

Monitoring the location and status of vehicles and equipment, usually via GPS or telematics devices, to better allocate and secure fleet assets.

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Asset Utilization | Fleet Management

A measure of how actively vehicles or equipment are used. High utilization means fewer idle vehicles, which generally lowers overall fleet costs.

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Automated Vehicle Location (AVL) | Fleet Management

A system that uses GPS tracking, telecommunications technology, and software to track vehicles and other assets. It provides real-time tracking and the ability to monitor driver behavior.

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Automotive Fleet & Leasing Association (AFLA)

Professional fleet association founded in 1969 with the objective of improving communication between sellers, buyers, fleet managers, lending institutions, fleet management companies, used vehicle marketers, and allied automotive service companies.

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Auxiliary Equipment | Fleet Management

Auxiliary equipment—powered add-ons like PTO bodies, run by the vehicle's engine—boosts vehicle capability but adds compliance costs.

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B

Bailment Pool | Fleet Management

An inventory of already built vehicles on consignment at body companies waiting for sale or upfitting by dealers or leasing companies.

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Business Use Percentage

The portion of a driver's total mileage assumed to be business mileage.

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C

Cents per Mile (CPM)

A Cents per Mile (CPM) program is a simple, tax-free reimbursement program.

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Certified Automotive Fleet Manager (CAFM)

The fleet industry’s highest certification that can be attained by a fleet manager.

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Chargebacks | Fleet Management

The amount a company charges an employee for personal use of a company vehicle. Average monthly personal use charges was “less than $130 in 2024," according to Automotive Fleet. Many companies deduct personal use from an employee’s paycheck.

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Closed-End Lease | Fleet Management

Unlike an open-end lease, a closed-end lease offers fixed amounts for payment, term, and expenses. The lessor assumes risks of ownership for depreciation and funding, as well as providing an increased administrative role. Lessors can also cover licensing or registration expenses, maintenance, tire replacements, and certain forms of insurance.

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Commercial Driver’s License (CDL) | Fleet Management

A specialized license required to operate heavy or commercial vehicles (trucks, buses, and other large vehicles) in many jurisdictions.

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Commercial Fleet 

A set of vehicles owned/leased by a business for its employees, often including company cars, sales fleet vehicles, or executive vehicles.

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Commute Mileage

Commute mileage is considered personal by the IRS.

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Compliance, Safety, Accountability (CSA) | Fleet Management

A U.S. Department of Transportation program designed to help ensure that over-the-road and other heavy truck drivers adhere to various federal safety requirements and laws.

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Consignment | Fleet Management

A situation where a vehicle owned by one party (such as a leasing company), is entrusted to another party (such as an auction company) for remarketing or sale. Ownership remains with the initial party until the vehicle is sold.

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Cooperative Procurement | Fleet Management

A strategy where multiple government agencies collaborate to purchase vehicles and related equipment through a single contract, leveraging combined buying power to secure better terms and lower costs. Also known as piggybacking.

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D

Depreciation

On FAVR, depreciation refers to the depreciation component of a driver’s reimbursement.

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F

FAVR Insurance Compliance

A secondary FAVR tax rule that is rarely applied in practice. 

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Federal Rate, The

A safe harbor reimbursement rate used in place of actual business expenses.

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Five-Thousand Mile Rule

The 5,000 mile rule in Fixed and Variable Rate (FAVR) reimbursement programs.

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Fixed and Variable Rate (FAVR)

FAVR reimbursement programs, the importance of IRS compliance, tax savings potential.

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Fixed Reimbursement

Fixed expenses in Fixed and Variable Rate vehicle reimbursement programs.

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I

Insurance Requirement

The amount of coverage a required of employees to be eligible for reimbursement.

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IRS Mileage Records Defined 

IRS mileage records are logs drivers and companies use to substantiate business mileage.

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IRS Publication 463

IRS Publication 463 is a tax document relating to business travel expenses.

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IRS Standard Rate

A tax-free mileage reimbursement rate set by the IRS.

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IRS Vehicle Declaration

IRS vehicle declarations in FAVR reimbursement programs. 

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M

MACRS (Modified Accelerated Cost Recovery System)

MACRS is a system for calculating asset depreciation in the United States.

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Motor Vehicle Record

A motor vehicle record (MVR) is a formal report that outlines an individual’s driving history.

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N

Non-Taxable Limit

The non-taxable limit is the maximum reimbursement that a driver can receive without paying tax.

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O

Open-End Lease | Fleet Management

Leases with no fixed term and provisions wherein the lessee retains a high proportion of the risks of ownership, notably depreciation.

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P

Parking Reimbursements

Parking can be reimbursed tax-free using the actual expenses method.

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Personal Mileage

Mileage that does not meet IRS criteria for business mileage. 

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Personal Use

Personal use of a company car can result in taxation by the IRS.

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Q

Qualified Business Use 

Qualified business use is the business use of a vehicle that falls under IRS regulations.

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Qualified Nonpersonal Use Vehicles

Specialized vehicles designed exclusively for business-related purposes.

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R

Retention Cycle

Retention cycles and how they impact depreciation in FAVR.

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T

Taxable Income Test

The taxable income test is a simple procedure for assessing taxable income on FAVR.

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Toll Reimbursement

Tolls can be reimbursed tax free using the actual expenses method.

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V

Variable Reimbursement

Variable reimbursements are one of the two main components of FAVR reimbursements.

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Vehicle Age Compliance

Vehicle age compliance and its role in FAVR vehicle programs. 

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Vehicle Capital Cost

The amount of money that a vehicle or vehicle profile costs.

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Vehicle Cost Compliance

Vehicle cost compliance rules, one of the three main FAVR compliance rules.

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Vehicle Profile

Vehicle profiles (or program standard vehicles) and how they factor into FAVR.

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Vehicle Property Taxes

A vehicle property tax is a type of personal property tax that some state and local governments require.

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Further Reading