The Pros and Cons of Company Cars

A company car is among the most often requested perks for new hires. Thus, it’s a popular choice among businesses that need to attract the best available talent – especially when the cost of commuting, and other work-related transportation, is significant.

If you’re planning on investing in a company car, then there are a number of factors you’ll need to weigh. Let’s consider a few of the more important ones.

Financial Implications

There are a number of money-related issues to think about. Arguably the most important is the up-front cost of a company car. A business can offset this by buying, or leasing, large numbers of cars on a consistent basis. As a driver, you’ll need to also think about the ongoing costs associated with running a car, including fuel, insurance and maintenance.

Vehicle Selection and Flexibility

A business might set out clear rules regarding which cars are available, and how extensively they can be personalised. This applies especially in cases where a vehicle will reflect on the company providing it. Sleek, grey, executive-friendly saloons will tend to be well-received at conferences and other meeting places – but not if they’ve been kitted out with tinted windows and other trimmings.

In many cases, it’s advisable to invest in a single type of vehicle. Popular models can be bought inexpensively via the used market. A used Citroën, for example, might align with your preferences and needs.

Tax Considerations

There are also tax implications. A benefit-in-kind tax is levied on any perk you can use for both business and personal reasons. A company car often fits into this category, and thus it will be subject to extra tax in a way that other business assets are not.

Like road tax, BIK tax will depend on how clean the vehicle is. Fuel-efficient modern cars will tend to be cheaper to tax than older ones. For most drivers, it will be more tax-efficient to opt for a company car than it would be to buy one privately. To work out your obligations, you’ll need your car’s P11D value, your tax bracket, and your income tax rate.

Maintenance and Responsibility

You’ll need to determine whether the driver or the company will pay for things like servicing, insurance and maintenance. Whatever the decision, it will need to be made clear at the outset of any agreement. If you have permanent responsibility for the car, then things like fuel will tend to be your responsibility.

Environmental Impact

Firms looking to improve their public image, and drive down overall emissions, may wish to provide low-emission electric vehicles. This might help to satisfy ESG-conscious investors, lower the company’s tax bill, and stay on the right side of clean air laws and other environmental regulations.