What Is the Cash Equivalent of a Company Car?

Written by kathy mair
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What Is the Cash Equivalent of a Company Car?
(car image by sasha from Fotolia.com)

When your job requires a lot of driving, as it does with sales and repair work, your company's car policy can be as important as your salary. There are several methods employers can use to determine reimbursement for car use in lieu of providing a company car.

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American Automobile Association

AAA produces an annual analysis of the true costs to drive a car. The 2009 national average per mile for sedans was 56.6 cents. This factors in operating costs such as gas and maintenance as well as ownership costs such as insurance, registration and taxes. AAA estimated the cost for driving a midsized sedan in 2009 was £6,187, on top of loan payments.

Fixed and Variable Rate

Employers may reimburse workers periodically using a fixed and variable Rate, which is actually two payments. The fixed-rate payment is based on set costs, such as insurance and depreciation value, multiplied by the percentage of time the vehicle is used for work. The variable rate payment covers costs such as gas, oil changes and other maintenance. An employer will determine the variable rate.

Internal Revenue Service

The IRS annually establishes an optional standard mileage rate that can be used in place of tracking actual costs. Based on similar variables as the AAA method, the 2010 IRS rate was 50 cents per mile, placing the reimbursement for 15,000 miles driven at £4,875.

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