How to value employer car allowance?
 

I have a new job offer that includes a $500/month car allowance and am not sure how to value it. I estimate I will drive about 400 miles/month, most of which is back and forth to the airport.

My current employer reimburses me actual mileage * the US government rate (I think currently $0.56/mile). This is non-taxable.

How should I value the offer and is it better or worse than my current situation?

Next year I will purchase a $50K automobile that gets 23-25 mpg.

I’m in the 24% federal tax bracket.

If you are driving about 400 miles a month, assuming that was what you did in your old position, that would have net you $224 @ 56 cents a mile. Unless I'm missing something, this is a better offer. Unless you're driving a lot more.

Are you sure the 2 benefits are mutually exclusive? When my ultralarge employer offered the same car allowance, we also expensed mileage-based drives for business i.e. to/from airports, meetings, etc.

Maybe tax man thinks differently, but that was SOP for us. Car allowance I just thought of as cash compensation, and it was taxed as ordinary income. Allowance was issued so long as vehicle met policy standards of 4 doors, recent age and mileage, had safety equipment, and other properly insured.

Very good question. In my experience, car allowances are really a perk and taxed as income. Expensing normal business mileage has always been the norm in my experience as well, even with car allowance.

Very good point. I briefly thought about that, but dismissed it. I'll have to put it on my list of questions that include 401(k) match and the $100/month mobile phone allowance.

Not related to this topic, but see if that mobile phone allowance comes with a caveat of employer-issued spyware on your device. Many such offers do. Our company gives us a choice: accept a phone allowance and they install spyware on the phone, or accept a company-issued phone with the spyware. I took the phone. Bit of a pain to carry two phones, but I am not okay with the company having access to all of my personal information.

Granted, our allowance is a lot lower...for $100/mo, you could accept it and sign up for a new standalone service with a free iPhone and then you'd own an extra phone once the 2-yr term was up.

I can’t envisage working for an employer with an attitude like that towards its employees.

Or worse, my former employer didn't provide a phone allowance but also required us to install spyware on the phone if we wanted to access our work files / emails / etc.

Thankfully my current employer both provides a phone allowance and doesn't require any spyware on the device

​​​​​​​
$500/month can cover most if not all of a 10k/3-year lease for a $50k automobile (if timed correctly). Not to turn this into a lease vs. buy conversation but if that was something you were considering, the $500 car allowance would basically cover your lease

You can't imagine an employer securing an employer-issued device? And devices that can freely access all internal networks? Really?

Interesting. My (and my employers current and past) only paid for mileage in excess of my normal commute. Currently for me, that is 31 miles each way. The airport is around 10 miles away. Therefore, my trips to the airport were not covered. When I lived in Detroit, the airport was twice as far as my office, so I was able to expense the mileage from the office to the airport. Now, if travel occured on the weekend, I could expense that. Even when I was officially home-based (signed agreement and all), this guidance applied.

My last employer was one of the BIg 4 accounting firms. My current is a chicken finger concern. Both have the exact same guidance.

I am not challenging you, just stating my experience.

My current employer is the same as far as mobile phones are concerned. Either get a company phone which has lol the monitoring software included or get a $65/month allowance to use your personal phone and give the company access. I’ve got the second phone as well. I have only travel and productivity apps on the company phone. I expect it’s also because we’re a full Google suite user that they want to lock down phones.