What is a company car allowance and how to negotiate it?

Description:

I’m in talks for a role that requires regular client travel and the recruiter offered three possible arrangements: a company car, a monthly car allowance, or mileage reimbursement. What exactly is a car allowance (how it is typically paid and taxed), and how should I evaluate the allowance vs a company vehicle vs per-mile reimbursement? What factors should I consider-expected annual miles, maintenance and insurance responsibilities, lease vs buy decisions, EV subsidies or charging costs, and local tax treatment—and how can I best negotiate or quantify the amount I should ask for during offer/review conversations? What are common red flags or hidden costs to watch for?

2 Answers

Sort by:

Genevieve Hernandez 12 Aug 2025

Copy answer link Report answer
Nice question, this came up for me too and I think you should also weigh parking availability and local plate or permit rules. An allowance can mess with loan approvals because banks only accept guaranteed payments as steady income. Company cars might restrict side gigs and personal branding. Also ask if they cover home EV charger installation or tolls, was that mentioned?
16
Joshua Stewart 12 Aug 2025

Copy answer link Report answer
A car allowance is a taxable cash payment companies give instead of a fleet car. Paid monthly, it hits your paycheck and is taxed as ordinary income unless the company runs an accountable reimbursement plan. Consider expected annual miles, fuel or charging, maintenance, insurance, depreciation and financing when comparing allowance to a company vehicle or per-mile reimbursement.
Do the math. Calculate true cost per mile for your situation and compare to the allowance or the IRS/local mileage rate. Ask for a tax gross-up if they insist on a taxable allowance, or for a company card for fuel and charging credits. Red flags include a low flat allowance, vague insurance or maintenance responsibility, mileage caps, or delayed reimbursements.
9