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.

When an employee uses a company vehicle for personal reasons—such as commuting, weekend trips, or running errands—the business often charges the employee for this non-business usage through a process known as a personal use chargeback. This cost recovery method is meant to offset the taxable value of the fringe benefit provided by the employer. According to Automotive Fleet, the average monthly charge for such personal use was under $130 in 2024. Many businesses simplify the process by deducting the charge directly from the employee’s paycheck, making it a routine part of payroll.

These chargebacks are necessary due to IRS regulations that classify personal use of a company car as a taxable benefit. To comply, businesses must track personal mileage and ensure taxes are properly assessed. The IRS allows two main valuation methods for this purpose: the Fair Market Value (FMV) method and the Cents per Mile rule. The FMV method estimates the value of the benefit based on what the employee would pay to lease or purchase a similar vehicle independently. The Cents per Mile rule, applicable only under certain conditions (such as vehicle use exceeding 10,000 miles per year), multiplies personal mileage by a standard IRS mileage rate to determine the benefit’s value.

However, these chargebacks can be administratively burdensome and unpopular with employees. Workers may feel that paying for limited personal use of a vehicle they do not own is unfair, especially if the charges reduce their take-home pay or hinder their ability to invest in a personal vehicle. Moreover, the need to track personal and business mileage meticulously adds a layer of complexity for both employees and HR teams.

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