How to calculate the total cost of ownership (TCO) of the mobility in Belgium

This article is the second part of a two-article series about the TCO of the mobility budget. In the first article, we broke down what TCO means, why it's essential, and which cost variables are part of the bigger picture.Here, we go from understanding to calculation. We will provide you with two formulas to calculate the TCO of the mobility budget.

Getting to the actual calculation is where most companies face challenges. A traditional company car comes with predictable and fixed costs. The mobility budget, on the other hand, spreads spending across several categories. Think about different transport modes, mobility providers, tax rules, and reimbursement flows.As a result, the TCO calculation becomes less straightforward and more dependent on individual employee choices. To simplify the complexity, employers often use two complementary TCO formulas.

• Formula 1 follows the structure of traditional fleet management in Belgium. It makes it easy to compare mobility budget options with company car alternatives on a level playing field.
• Formula 2 focuses specifically on the 3-pillar structure of the mobility budget. It calculates the actual employer cost of the mobility budget. Calculations include tax exemptions, VAT recovery, and payout requirements.

Each formula is valid, but serves different purposes. Use them together and you have a powerful setup for obtaining the most accurate financial picture. Before using the formulas, you need a clear view of the items that go into the full TCO calculation.

The two formulas for calculating the TCO of the mobility budget #

No single way exists to calculate the total cost of ownership of the mobility budget. Instead, companies often use two complementary formulas.

Formula 1: The traditional fleet management calculation #

This formula follows the structure fleet managers apply to a conventional company car. Often, it's the easiest way to check whether a mobility budget is cost-neutral.

TCO = direct costs + indirect costs + fiscal impact

Direct costs include leasing, fuel or charging, insurance, maintenance, and road taxes. Indirect costs cover admin work, reporting, mobility tools, and reimbursement. Fiscal impact involves, among others, benefit-in-kind, tax deduction rules, and lost VAT.

When to apply Formula 1

• To compare the mobility budget with a company car on equal footing.
• To evaluate whether the mobility budget is cost-neutral.
• To design fleet strategies or model different profiles or job levels.
• To ensure fair compensation across employees choosing different mobility options.

Formula 1 maintains a consistent structure across all mobility types. That way, comparisons remain straightforward and transparent.

Formula 2: The mobility-budget-specific employer cost calculation #

The second formula is ideal for calculating the actual employer cost of the mobility budget. It adapts to the legal and fiscal structure of the Belgian mobility budget, taking into account tax exemptions, VAT recovery, and the cash payout option.

TCO mobility budget = allocated budgets - fiscal advantages + operational costs + social contributions on cash payout

Here, the allocated budgets cover the annual mobility budget amount set forth by the employer. Fiscal advantages include tax-exempt spending in pilar 2 and VAT recovery where possible. Operational costs encompass a range of expenses, including administrative time and reimbursement processes, as well as software and vendor management. Finally, social contributions apply only to the unused budget paid at the end of the year (pillar 3).

When to apply Formula 2

• To model the actual employer cost of the mobility budget.
• To forecast the financial impact of different usage patterns.
• To check if mobility budgets adhere to the intended financial allocation.
• To correctly account for VAT recovery and tax exemptions.

When applied on its own, Formula 2 helps define the actual employer costs of the mobility budget. And if used in conjunction with Formula 1, it provides companies with a full comparison across mobility options.

Short example: How both formulas work together #

The two TCO formulas interact, offering distinct insights. We start with a simplified scenario, using the same mobility budget allocation as earlier.

Assume an employer allocates €600 per month (€7,200 per year) for the mobility budget. Throughout the year, the employee splits the costs like this:

• Pillar 1: €4,800 goes to an electric vehicle, including lease and charging
• Pillar 2: €1,800 is used for sustainable mobility, like train passes and shared mobility
• Pilar 3: €600 is left and paid out at the end of the year

Applying Formula 1, the employer compares this to a similar company car.

When you include direct, indirect, and fiscal costs, the mobility budget is often cheaper. At the very least, it is cost-neutral, depending on the administrative workload and deductibility.

Using Formula 2, the employer calculates the actual cost of the mobility budget.

Most expenses from pillar 2 are tax-free. Some can be partly recovered from VAT. Only the unused €600 cash payout is subject to social contributions. Finally, EV costs from pillar 1 benefit from favourable deductibility.

As a result, the real employer cost is typically lower than the original €7,200 budget. This is especially true when employees opt for more sustainable mobility options.

Following this brief example, it's clear that both formulas are relevant. Formula 1 compares mobility types while Formula 2 reveals the actual employer cost. And it's in conjunction that they give the most complete financial picture.

Time to turn TCO calculation into a strategic advantage #

Calculating the TCO of the mobility budget is not an accounting exercise. Think of it as a strategic process that helps HR, finance, and fleet teams create cost-effective and future-ready mobility plans.

The mobility budget introduces much greater variety, spanning different transport modes, tax rules, and employee behaviours. Calculating the TCO is not as straightforward as it is for a traditional company car. To counter this complexity, companies must employ two complementary approaches to achieve a more accurate financial overview.

In short, Formula 1 offers a clear comparison with company car alternatives. Formula 2 is excellent for calculating the actual employer cost within the three-pillar system. As such, using both formulas, you have a powerful setup that will

1. Deliver transparency
2. Support more accurate financial planning
3. Facilitate better decision-making for modelling employee scenarios, validating costs, or designing a broader fleet management strategy.

Despite being a powerful setup, the best formulas rely on accurate and centralised mobility data. Naturally, it isn't easy to calculate total costs accurately by hand. This is especially true when costs come from different leasing providers, fuel cards, and mobility apps.

Muto helps you calculate TCO more accurately. It achieves this by consolidating spending, tax information, and employee usage patterns in one location. You will reduce administrative overhead and develop mobility policies that deliver real value to employees. Let’s talk!