Fixed Reimbursement

Fixed reimbursement is the monthly portion of a Fixed and Variable Rate (FAVR) program that covers the fixed costs of owning a vehicle, regardless of how many miles are driven.

FAVR reimburses employees for the real, business-required cost of owning and operating a personal vehicle for work. The fixed portion is designed to account for expenses that stay relatively consistent month to month, including:

• Depreciation
• Insurance
• Registration and taxes

This amount is calculated using a standardized vehicle profile, which reflects the typical cost of owning a vehicle in a specific location. It can also be influenced by factors like the vehicle’s retention cycle and assumed business use.

In a FAVR program, fixed reimbursement works alongside a variable, per-mile rate. While the fixed portion covers ownership costs, the variable rate accounts for operating expenses like fuel and maintenance.

Together, these two components provide a more complete and accurate view of driving costs than mileage-only or flat allowance programs.

Fixed reimbursement also ensures that drivers are compensated for keeping a vehicle available for business use, even in months when their mileage is lower.