How to Turn Your Car Allowance into an Engine for Sales Productivity

Written by mBurse Team Member   |   Apr 8, 2024 7:00:00 AM
2 min read

Many sales reps receive a car allowance to cover their vehicle travel costs. By adopting a FAVR car allowance and adding a mileage app, you can turn that monthly payment into a source of productivity.

Sales Productivity and Car Allowances

A car allowance is a useful benefit for employees who drive a lot for the company. You might not immediately associate it with a sales rep's effectiveness, but the car allowance can impact an employee's success.

If, for instance, the allowance does not cover vehicle costs, they might choose to drive less. Driving less may over time limit that employee's productivity. Even worse, an insufficient car allowance could lead to attrition. And if valuable members of your sales team leave, then recouping that lost revenue will be difficult.

Taxes, inflation, and monthly car allowances

Two contributors to insufficient car allowances are taxes and inflation. It is normal for taxes to eat up 30 to 40% of a car allowance. And when you add inflation into the mix, a monthly payment of $600 may be worth half of what it was intended to be worth when it was calculated a few years ago. 

Can you say for sure that, after taxes, your sales reps receive a car allowance that covers their vehicle costs? (Fuel, maintenance, depreciation, insurance, etc.) Have you increased the amount in the last three years? If not, then, due to inflation, that allowance is worth about 18% less than it was three years ago.

Supporting sales productivity with FAVR

Switching from a taxable car allowance to a non-taxable FAVR plan can be a great solution. A FAVR car allowance is an IRS-approved plan that ensures that your reps get exactly how much they need to cover their costs. The algorithms used to generate rates for FAVR plans take into account localized cost data as well as how much each rep drives per month.

By eliminating the taxes on the payments, you free up space in the budget to not only fully provide for employees but also invest in business goals. With your reps fully taken care of, they can focus on doing their jobs and not worrying about whether they need to conserve their vehicle costs. You have evolved a basic benefit into a business productivity tool.

Mileage tracking apps for sales teams

Because a FAVR plan is non-taxable, drivers are required by the IRS to keep track of their business mileage each month to substantiate payments. This new task does not need to be time-consuming. In fact, it can become another way of supporting and increasing the effectiveness of your sales team.

Today's GPS-based mileage tracking apps allow for automated recording of mileage during business hours. These miles are then automatically uploaded into a cloud-based system that feeds into the reimbursement portal for easy payment generation. The best of these apps also can record trip location and route information that can be used to generate reports about mileage and productivity.

A typical app comes with an administrative dashboard used not only for approving mileage but also for harvesting useful data that can be analyzed and used to train teams. Depending on which app you use, this data may also be integrated with existing CRM software to boost the business analytics data needed to manage sales teams and customer relations.

mBurse FAVR plans and mileage apps

mBurse offers FAVR plans that can be customized to any organization. You just need at least five drivers in the program who drive at least 5,000 miles per year for business purposes. We offer two different versions of our mileage app, including one that integrates with most of the major CRMs.

To learn more about our FAVR plans, try getting a cost comparison between what it currently costs to pay your reps a taxable allowance and what it would cost to give them a benefit that better supports sales productivity.

Compare your vehicle program to a FAVR Plan

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