When setting up a fixed and variable rate (FAVR) reimbursement program, one of your first decisions is choosing a standard vehicle. That choice helps determine how much employees receive and whether their personal vehicles meet the program’s requirements.
It sounds like you’re choosing a car for everyone to drive, but employees can use different qualifying vehicles. The standard vehicle gives your company a consistent starting point for calculating reimbursement.
Here’s how to choose one that fits your team.
What Is a FAVR Standard Vehicle?
A FAVR standard vehicle, called a “standard automobile” by the IRS, is the vehicle your company selects as the basis for a FAVR allowance.
With FAVR reimbursement, employees receive a fixed payment for ownership costs, such as depreciation and insurance, plus a variable payment for operating costs, such as fuel and maintenance. The standard vehicle helps establish those costs.
For example, a company might select a particular midsize sedan as the benchmark for its sales team. Its depreciation, fuel economy, and maintenance costs help shape the reimbursement calculation, alongside local cost data and mileage assumptions.
An employee driving a different qualifying sedan can still participate. Buying a more expensive car doesn’t automatically increase their reimbursement, because the calculation remains based on the program’s standard vehicle.
Related: How to Calculate a FAVR Allowance (2026)
How to Choose a Standard Vehicle for Your FAVR Program
A useful standard vehicle reflects the work employees actually do. Before choosing a make and model, review the needs of each group of drivers and the vehicles they already use.
Choosing a Standard Vehicle #1: Start With the Requirements of the Job
Someone driving between client meetings may only need a reliable sedan. A field technician carrying tools and equipment may need a pickup truck or larger SUV.
Consider cargo space, passenger capacity, driving conditions, and any equipment employees transport. Then choose a vehicle that reasonably meets those needs.
Different roles can justify different standard vehicles. You could use a sedan benchmark for sales representatives and a truck benchmark for technicians. For heavily modified or specialized vehicles, compare fleet vehicles and FAVR before deciding which arrangement fits.
Choosing a Standard Vehicle #2: Review Your Employees’ Current Vehicles
Collect vehicle information before finalizing your program, including make, model, model year, and cost when new.
This helps you see how your proposed benchmark would affect the people joining the program. An unnecessarily expensive standard vehicle can raise reimbursement costs and leave employees with less expensive cars below the 90% threshold explained below.
Choosing the cheapest possible benchmark can create a different problem: it may fail to reflect the vehicle employees reasonably need for work. Compare a few suitable options before settling on one.
Choosing a Standard Vehicle #3: Build Out the Vehicle Profile
The standard vehicle is one part of a broader vehicle profile. You’ll also need assumptions about annual mileage, business use, insurance, local costs, and how long the vehicle is expected to remain in use.
That last assumption is the retention period. It affects depreciation calculations and the model-year requirement applied to employees’ vehicles. IRS rules require a retention period of at least two calendar years.
Related: FAVR IRS Vehicle Age Requirements (2026)
How Does the FAVR 90% Rule Work?
Under IRS Revenue Procedure 2019-46, an employee’s vehicle must have had a cost when new equal to at least 90% of the applicable standard automobile cost. The comparison uses the standard automobile cost from the first calendar year the employee receives a FAVR allowance for that vehicle.
Here are three examples:
For a program with a $35,000 standard automobile cost, a vehicle that cost $38,000 when new meets the 90% requirement. A vehicle that cost $29,000 when new does not.
The employee’s used-car purchase price doesn’t decide this test. If that $38,000 vehicle was purchased used for $24,000, its cost when new is still the relevant figure.
This is why reviewing employee vehicles before launch matters. Raising the benchmark also raises the minimum qualifying cost, potentially excluding vehicles that are otherwise suitable for the job.
Meeting the 90% rule is only one requirement. Vehicle age, insurance coverage, mileage, and other IRS FAVR guidelines still apply.
What Is the FAVR Standard Vehicle Cost Limit for 2026?
For 2026, the IRS maximum standard automobile cost is $61,700, including trucks and vans. IRS Notice 2026-10 sets this limit.
There’s also a separate calculation rule: the standard automobile cost cannot exceed 95% of the combined retail dealer invoice cost in the applicable locality and state and local sales or use taxes.
Your program must satisfy both limits. Simply finding a vehicle with a sticker price below $61,700 isn’t the whole calculation.
The annual maximum is a ceiling, not a suggested budget. Choose a vehicle that fits the role, then confirm the allowable cost with your FAVR provider.
FAVR Standard Vehicle FAQs
Can Employees Drive a More Expensive Vehicle?
Yes, provided they meet the other applicable requirements. The standard vehicle determines the reimbursement benchmark, so an employee choosing a higher-priced vehicle generally covers the additional cost themselves.
Does Everyone Using the Same Standard Vehicle Receive the Same Payment?
No. Employees can share a vehicle benchmark while receiving different amounts based on their business mileage and location-specific costs. Local fuel prices, insurance costs, and other inputs can affect the calculation.
What If an Employee’s Vehicle Doesn’t Qualify?
Review the employee’s reimbursement arrangement before treating payments as tax-free FAVR reimbursements. Depending on the circumstances, cents-per-mile reimbursement may be a better fit. Companies can use different reimbursement methods for different driver groups.
Setting Up Your FAVR Program With TripLog
Choosing a standard vehicle involves several connected decisions, but your team doesn’t need to build the calculations and manage every input manually.
TripLog’s FAVR solution helps businesses evaluate driver eligibility, establish reimbursement rates using vehicle and location-based cost data, and manage mileage submissions and approvals. Companies can organize drivers by role, mileage, location, and vehicle type, with FAVR and CPM managed through the same app and dashboard.
You can explore sample payments with TripLog’s FAVR calculator, then work with its team to select suitable vehicle benchmarks and build a program around your employees’ actual driving needs.
