Car allowance

[Space Mountain]

Hello all:

What do you think about a company offering a new employee .585 per mile- the going IRS rate for car allownace. Keep in mind, ALL other associated expenses would be covered by the employee.

Is this common for sales reps? Is it a fair deal?

There are only 6-8 reps in the company therefore occupying a fleet of cars seems not to make financial sense to the company.

Thanks.

 

[kcowan]

The only issue with the IRS rate is that it does not cover the expectation that your reps drive a Lexus or BMW. If they do not take clients out in their cars then the choice of model is personal. Is parking provided or is that an added claimed expense? How much driving would they be claiming in any month.

I have been on both sides of this one and know the issues well.

 

[Space Mountain]

The only issue with the IRS rate is that it does not cover the expectation that your reps drive a Lexus or BMW. If they do not take clients out in their cars then the choice of model is personal. Is parking provided or is that an added claimed expense? How much driving would they be claiming in any month.

I have been on both sides of this one and know the issues well.

Hi kcowan:

Thanks for your quick response.

I drive a Honda Accord. Cars don't mean too much to me.

Parking, tolls, etc.. would be covered by the company. I don't think gas is covered.

I just personally feel if a company does not provide a company owned car, then they should reimburse the rep as if they WERE driving a company owned car meaning a few hundred dollars per month for vehicle usage IN ADDITION to the .585 per mile rate.

Perhaps, I am a bit naive?

 

[kcowan]

Any reimbursement over the IRS rate would become a taxable benefit. But the key element is the number of miles claimed per week. If it is low, then the straight mileage rate is unfair. But they can cover all parking expenses without tax liability.

If a Honda Accord is acceptable then the IRS rate is fair.

 

[lazygood4nothinbum]

i went from corporate cars for most of my career to irs-limited reimbursement (plus parking & tolls of course). losing the car was a huge decrease in effective wages.

another key to consider is gas price fluxuation during the year in which you are reimbursed. that $0.585 is gonna look a lot different depending on whether you pay $1.99/gallon as i saw at two pilot fuel stations returning from my recent roadtrip or the typical $3.60/gal i budgeted when first planning this trip.

 

[youbet]

A few back of the envelope calculations seems to show, to me anyway, that the $0.585 should cover an approximate breakeven deal for you. If you're satisified with your job otherwise, I'd grin and bear it. Otherwise, demand the extra money you referenced but be prepared to walk if they don't go along with it.

 

[kcowan]

...
they should reimburse the rep as if they WERE driving a company owned car meaning a few hundred dollars per month for vehicle usage IN ADDITION to the .585 per mile rate.

Perhaps, I am a bit naive?

Usually rates with a fixed monthly allowance offer much less cost per mile because they are already covering some of the depreciation and insurance in the fixed cost.