Retention Period
Quick definition
Retention period is the number of years a FAVR calculation assumes the standard vehicle will be used before being replaced.
Full definition
In a FAVR program, the retention period is the expected length of time the standard vehicle will be driven for work before it is replaced.
Employers use this period to estimate ownership costs, including depreciation, and spread those costs across fixed payments. For example, a four-year retention period bases those calculations on four years of vehicle use.
The IRS requires a retention period of at least two calendar years.
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