If your company reimburses you for driving your car on business at the standard rate of 32.5 cents per mile, you’re probably getting ripped off. That’s because Providence is one of the most expensive places in the country to operate a car, according to an analysis from the management consulting firm Runzheimer International of Rochester, Wis.
Runzheimer calculated that the cost of driving a Ford Taurus 15,000 miles in and around the Renaissance City comes to roughly $8,200 a year. Los Angeles, Philadelphia and Detroit were the only cities studied where operating a car cost more.
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By comparison, the same Ford Taurus can be driven 15,000 miles for about $7,770 in Boston and about $5,900 in Burlington, Vt., according to the study.
Runzheimer’s tally of the costs include fuel, oil, tires, maintenance, insurance, depreciation and license and registration fees.
The average annual car insurance premium in Rhode Island in 1997 was more than $865, making it the sixth most expensive state in the country, according to rankings compiled by the National Association of Insurance Commissioners in Kansas City, Mo. Massachusetts ranked 11th with an average annual car insurance premium of about $803.
But those are average costs.
“Everybody says it’s cheaper in Massachusetts, but that’s if you’re comparing Attleboro to Providence,” noted Roger Messier of the insurance agency Butler & Messier Inc. in Pawtucket.
John Paul of AAA Southern New England in Providence pointed out that fuel costs, soaring throughout the region this winter, typically are higher in Rhode Island.
“Distribution costs are a little bit more here, and Rhode Island uses reformulated fuel, which ends up being a little more expensive–a couple of cents per gallon,” Paul said, referring to the refining process of creating a cleaner-burning fuel. “And the gas tax is a little bit more expensive.”
All that apparently adds up to make Providence one of the most expensive places to drive a car, which isn’t reflected in the amount many local companies reimburse their employees for driving their personal cars on business here.
The majority of respondents to this week’s Providence Business News/Bryant College Executive Poll, an unscientific survey, said their companies reimburse 30 cents per mile or less.
The Internal Revenue Service standard rate for nontaxable mileage reimbursement was 32.5 cents per mile last year.
“If you are driving on business at that rate in Rhode Island, you’re being under- reimbursed because of the insurance and license and registration costs,” said Tom Peiffer, a Runzheimer consultant based in Portsmouth, N.H.
Of course, a company can reimburse its employees however much it deems appropriate if it’s willing to pay taxes on the mileage checks. But there’s another option.
A fixed and variable rate program, or FAVR, allows companies to pay nontaxable mileage rates that are more appropriate, within limits, for a particular area.
“That allows drivers in some higher-cost driving areas like Providence to get a fair reimbursement for the business use portion of their vehicle,” Peiffer said. “It may work out to 42 cents per mile, but that’s allowable under a FAVR plan if properly structured.”
