Car allowance

A car allowance is a fixed payment employers provide to employees who use their personal vehicles for business purposes. Instead of supplying a company car, organizations pay this allowance to cover expenses such as fuel, maintenance, insurance, and wear and tear. The exact amount provided may vary depending on job role, travel frequency, and company policy.

There are different types of car allowance. These are the main ones.

• Flat-rate allowance: A set monthly or annual payment given to all eligible employees, regardless of mileage or usage
• Mileage-based allowance: A variable payment based on distance traveled, often calculated per kilometer or mile using company or government rates

In corporate travel programs, car allowances are common for employees who frequently visit clients, attend meetings, or travel between work sites. This expense reimbursement approach offers flexibility, allowing employees to choose their preferred vehicle while reducing administrative costs for the company.

Many organizations manage these payments alongside other travel and expense (T&E) processes, often supported by T&E software for travel policy compliance and reporting.