What Are Common Car Allowance Policies?

Common car allowance policies allow for either fuel or mileage reimbursement, discount or subsidy. Many policies include parking passes or reimbursement for any parking fees incurred. It is common for a company to either lease and provide a vehicle, allow the employee to use one from their fleet or offer reimbursement for employee-owned vehicle purchases. Additionally, many companies also outright pay or reimburse the driver for the cost of the vehicle’s insurance and routine maintenance.

Reimbursements for fuel and mileage are more common in car allowance packages than allowing employees to use company cars. This is, in part, due to the large cost incurred by a company when building its own fleet, which includes both the purchase and regular maintenance of all cars. Offering a car allowance for fuel and mileage is also less time consuming than searching for the best deals when building a company car fleet.

Car allowances are issued monthly and can range anywhere between $500 and $1,000. While this is an attractive sum, there are some downsides to these programs, particularly if the employee services a rural area that requires long distance drives in order to meet with clients. Additionally, the allowance does not fluctuate with rising fuel prices and insurance costs, and the employee using it is less likely to continue driving if the costs exceed the monthly car allowance. These allowances are also taxable, which discourages those driving long distances.