What is FAVR vehicle reimbursement?

FAVR (Fixed and Variable Rate) is an IRS-approved vehicle reimbursement method that reimburses employees for both the fixed costs of owning a vehicle (depreciation, insurance, registration) and the variable costs of operating it (fuel, maintenance, tires). FAVR payments are tax-free for both employer and employee when administered in compliance with IRS Revenue Procedure 2019-46 and applicable annual IRS notices.

How does Kliks compare to Motus and Cardata?

Kliks offers the same IRS-compliant FAVR and CPM programs as Motus and Cardata at $24.95 per user per month — over 50% less than the typical enterprise pricing of legacy providers. Kliks also implements in 14 days vs. 3-6 months for legacy providers, provides a named compliance specialist with a < 2 hour response SLA, and includes native Salesforce integration at no additional cost.

Is Kliks enterprise-ready?

Yes. Kliks is built for enterprise reimbursement programs with security, integration, compliance, and support requirements. Kliks is trusted by Fortune 500 and mid-market teams managing 50 to 5,000+ drivers, reports 99%+ customer retention, and integrates with Salesforce, SAP Concur, Workday, ADP, and BambooHR.

How long does it take to implement a FAVR program with Kliks?

Kliks implements new FAVR and CPM programs in 14 days on average. This compares to 3-6 months for legacy enterprise providers. The implementation includes data migration, driver onboarding, integration setup, and compliance configuration.

How does Kliks help companies migrate from Motus or Cardata?

Kliks provides a vendor-ready handoff checklist for Motus, Cardata, or another incumbent provider. The checklist covers secure data transfer, file formats, field definitions, date ranges, owner contacts, validation totals, driver data, FAVR rates, workflow rules, reimbursements, documents, and audit history. Kliks then loads a sandbox so customers can compare feature to feature, complete testing and UAT, and cut over only after production readiness and stakeholder sign-off.

What is the difference between FAVR and CPM reimbursement?

FAVR (Fixed and Variable Rate) provides a personalized, location-specific reimbursement that separates fixed ownership costs from variable operating costs — resulting in more accurate, tax-free payments for each driver. CPM (Cents-Per-Mile) is a simpler flat rate per mile driven, which is easier to administer but less precise. Kliks offers both programs and can help organizations determine which is most appropriate for their driver population.

How much does Kliks cost?

Kliks is priced at $24.95 per user per month, all-inclusive. There are no setup fees, no annual rate update fees, no integration surcharges, and no hidden costs. This compares to typical enterprise FAVR platform pricing of $40-$80+ per user per month from legacy providers.

Kliks.io Blog

How to Calculate FAVR Rates: The Step-by-Step Formula

Calculating FAVR rates requires separating vehicle costs into fixed (depreciation, insurance, registration) and variable (fuel, maintenance) components, both localized to the driver's ZIP code.

Published May 10, 2026. Updated May 23, 2026. By Kliks Editorial Team.

A FAVR fixed allowance is calculated by adding annual depreciation, insurance, and registration costs, multiplying by the business use percentage, and dividing by 12. The variable rate is calculated by adding the per-mile fuel cost (local fuel price divided by MPG) to the per-mile maintenance cost.

Key takeaways

All FAVR cost inputs must be localized to the driver's specific ZIP code, not national averages.
The fixed allowance and variable rate must be recalculated whenever local economic conditions change significantly.
AI-driven platforms automate the entire rate calculation process, eliminating the need for manual spreadsheets or expensive consulting firms.

The Fixed and Variable Rate (FAVR) reimbursement method is the most precise and cost-effective way to reimburse employees for the business use of their personal vehicles. However, unlike the simple Cents-Per-Mile (CPM) method, calculating a compliant FAVR rate requires a detailed understanding of localized vehicle economics.

Under IRS Revenue Procedure 2019-46, FAVR rates must be based on data derived from the specific geographic area (ZIP code) where the employee lives and works [1]. You cannot use a national average or guess the costs.

This guide breaks down the exact formula used to calculate compliant FAVR rates and explains why automation is replacing manual rate modeling.

The Two Components of FAVR

A FAVR reimbursement consists of two distinct payments:

The Fixed Allowance: A flat monthly payment that covers the costs of owning the vehicle, regardless of how much it is driven.
The Variable Rate: A per-mile payment that covers the operating costs associated with actually driving the vehicle.

To calculate these, you must first define a Standard Automobile. This is the hypothetical vehicle that represents what the employee needs to perform their job (e.g., a 2026 Honda Accord or a Ford F-150). All calculations are based on the costs associated with this standard vehicle, not the actual car the employee chooses to drive.

Step 1: Calculating the Fixed Allowance

The fixed allowance reimburses the employee for depreciation, insurance, registration, and taxes.

A. Depreciation

Depreciation is the largest fixed cost. To calculate it:

Determine the capitalized cost (purchase price) of the standard vehicle.
Determine the retention cycle (how many years the vehicle will be kept before replacement, typically 3 to 5 years).
Determine the residual value (what the car will be worth at the end of the retention cycle).
Subtract the residual value from the capitalized cost, and divide by the retention cycle to get the annual depreciation.

B. Insurance

Insurance costs vary wildly by ZIP code. You must obtain an average insurance premium for the standard vehicle in the driver's specific location, assuming the coverage limits required by your corporate policy (e.g., 100/300/50).

C. Registration and Taxes

Calculate the annual vehicle registration fees, license fees, and personal property taxes based on the driver's state and county regulations.

The Fixed Formula

Add the annual costs of Depreciation, Insurance, and Registration/Taxes. Multiply this total by the Business Use Percentage (the percentage of total annual miles that are driven for business, typically 60-70%). Finally, divide by 12 to get the monthly fixed allowance.

Example Fixed Calculation:

Annual Depreciation: $4,000
Annual Insurance: $1,500
Annual Registration/Taxes: $500
Total Annual Fixed Costs: $6,000
Business Use Percentage: 65%
Monthly Fixed Allowance: ($6,000 × 0.65) ÷ 12 = $325.00/month

Step 2: Calculating the Variable Rate

The variable rate reimburses the employee for fuel, maintenance, tires, and oil.

A. Fuel

Fuel is the largest variable cost and must be localized.

Determine the fuel efficiency (MPG) of the standard vehicle.
Determine the average cost of fuel in the driver's specific territory or ZIP code.
Divide the fuel cost by the MPG to get the per-mile fuel rate.

B. Maintenance, Tires, and Oil

Calculate the expected lifecycle costs for routine maintenance, tire replacement, and oil changes over the retention cycle of the standard vehicle. Divide this total by the expected lifecycle mileage to get a per-mile rate.

The Variable Formula

Add the per-mile fuel rate to the per-mile maintenance/tire/oil rate to get the total variable rate.

Example Variable Calculation:

Local Fuel Cost: $3.50/gallon
Standard Vehicle MPG: 25 MPG
Fuel Rate: $0.14/mile
Maintenance/Tire/Oil Rate: $0.08/mile
Total Variable Rate: $0.14 + $0.08 = $0.22/mile

Step 3: The Total Reimbursement

Once the rates are calculated, the actual monthly reimbursement is simply the fixed allowance plus the variable rate multiplied by the business miles driven that month.

If our example driver logged 1,000 business miles in a month:

Fixed Allowance: $325.00
Variable Reimbursement: 1,000 miles × $0.22 = $220.00
Total Tax-Free Reimbursement: $545.00

Why Manual Calculation is No Longer Feasible

Historically, companies hired consulting firms to manually calculate these rates using massive databases of localized costs. If fuel prices spiked or insurance rates changed, the company had to pay for a "rate refresh" to keep the program accurate and compliant.

For a company with 500 drivers spread across 40 different states, manually calculating and updating 500 localized FAVR profiles is an administrative nightmare.

The AI Advantage

Modern platforms like Kliks have automated this entire formula. Kliks's AI engine ingests real-time data feeds for localized fuel prices, insurance premiums, and depreciation curves. It automatically calculates the exact fixed and variable rates for every driver based on their ZIP code and standard vehicle profile.

More importantly, Kliks acts as an intelligent "Rate Advisor." It continuously monitors local economic conditions and automatically recommends rate adjustments when fuel prices or insurance premiums shift significantly, ensuring your drivers are always reimbursed fairly and your program remains IRS-compliant.

By eliminating the manual labor of rate calculation, Kliks is able to offer enterprise-grade FAVR software for just $24.95 per user-less than half the cost of legacy providers who still rely on manual rate modeling.

Editorial note

This article was prepared for finance, HR, and operations leaders evaluating vehicle reimbursement programs. It is educational content, not tax or legal advice; confirm policy changes with qualified advisors.