Fixed reimbursements are one of the two main components of FAVR reimbursements. A fixed reimbursement is a flat dollar amount that is paid to drivers each month, regardless of business mileage. Fixed reimbursements are calculated using vehicle profiles and are designed to cover the fixed costs of owning a vehicle and making it available for use. This includes things like depreciation, insurance, registration, and taxes.
FAVR (Fixed and Variable Rate) programs take into account both stable monthly expenses and variable expenses that depend on mileage, like fuel and maintenance. Because FAVR reimbursements include both a fixed component and a per mile rate, they tend to model costs more accurately than alternatives like a flat allowance or a CPM program.
Fixed reimbursements are based on expense data collected by FAVR providers like Cardata. They are affected by a variety of factors, including a driver’s assigned vehicle profile, retention cycle, and mileage band as well as their location.
Learn more about how fixed expenses work in a FAVR program, and learn more about IRS FAVR rules (as of 2019). If you’re curious whether fixed reimbursements are a good option for your business as part of a FAVR program, consider speaking with a Cardata expert to learn how vehicle reimbursement software can support your company.