What is a FAVR Plan Vehicle (Base Vehicle)?

FAVR programs are intended to fairly compensate employees for the costs of owning and operating a personal vehicle for work. However, it's not possible to build a personalized FAVR program for each driver based on their specific vehicle. The IRS requires that the characteristics of one current model year vehicle be used as a basis to reimburse employees.

A Company selects a Plan Vehicle, under Everlance's guidance, in order to calculate fixed and variable rates for members on a FAVR reimbursement program. Here are some examples of how that works:

• Liquor Services Inc. has two teams, A) Distributors and B) Supervisors. We need one FAVR program for each team.
• Employees in group A mostly use trucks, due to the space required for delivering products; we will base their FAVR program on a 2024 Chevrolet Silverado 1500.
• Employees in group B have to promptly attend meetings between cities and supervise several stores; a sedan is best suited for this work, so we will base their FAVR program on a 2024 Toyota Camry.

This means all employees get compensated for fixed costs (depreciation, insurance, licensure, and taxes) and variable costs (gas, oil, maintenance, etc.) as if they drove the Plan Vehicle. Yet an employee may choose to drive any vehicle they currently own. The choice of what to drive is independent of the reimbursement amount. Even when an employee purchases a new vehicle, it will not impact their reimbursement based on the Plan Vehicle.

Switching vehicles could, however, impact your mileage reimbursement taxability (click here to learn about Tax Calculation).

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