Employers have two common ways to cover an employee’s business driving — pay per-mile reimbursement, or provide and fully fund a company vehicle.
How it works
The reimbursement cost is business miles driven times the mileage rate. Comparing that against the company car’s total annual cost (lease or depreciation, insurance, fuel, and maintenance combined) shows which option costs the employer less for that level of driving.
What this does not include
This doesn’t include the administrative overhead of managing a fleet versus processing reimbursement claims, nor tax treatment differences between the two arrangements for the employee — both real factors beyond the direct cost comparison shown here.
How to use this calculator
- Enter annual business miles, the mileage rate, and the company car’s total annual cost.
Frequently asked questions
At what mileage does a company car typically become cheaper?
It depends entirely on the company car’s fixed annual cost — the higher the annual business mileage, the more a per-mile reimbursement adds up, eventually crossing over whatever the company car actually costs.
Is mileage reimbursement taxable to the employee?
Generally no, if reimbursed at or below the IRS standard mileage rate under an accountable plan — reimbursement above that rate can create taxable income for the employee.
Does a company car have tax implications for the employee?
Yes — personal use of a company vehicle is generally treated as taxable imputed income to the employee, a cost this comparison doesn’t factor into the employer’s own cost analysis.
