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A company car allowance is a predetermined sum paid to an employee as compensation for driving her own vehicle for business reasons. Companies use car allowances to minimize accounting costs. Once an employee has been allocated a car allowance, that amount is simply added to the employee's paycheck. For example, if the car allowance is $500 per month, this sum is paid to the employee via her paycheck.
The cost of a car in 2004 varies depending on the make and model. On average, a mid-size car cost around 10,000 dollars. You must consider insurance, gas mileage and depreciation costs. 2  Purchasing a car with minimal upkeep and maintenaâ¦. 3  Understanding Relevant Costs As Bill Murray says in the classic film, Meatballs, sometimes [it just doesn't matter.](http://youtu.be/-TogGxzlfhM) This principle holds true in managerial accounting.