What are the Benefits of a Company Car?

What are the Benefits of a Company Car?

Having a company car has long been considered a desirable perk for employees, with the offer of a company still seen as a huge incentive for potential candidates. While for employers offering a company car can be a great way to promote the success of the business, attract the best candidates and boost employee morale.

In this article, we take a look at the benefits of a company car so that you can decide whether a company car is the right option for you.

What is a company car?

A company car is a vehicle provided by a company for an employee to use for business and private use. Company cars are usually offered as a perk to employees who may be required to drive as part of their job.

Pros of a company car

A company car remains a popular incentive for employers and offers numerous benefits:

  • You are not personally tied to a financial contract.
  • Insurance, servicing and maintenance costs are usually covered by the employer, so you don’t need to worry about this.
  • There is no need to worry about depreciation as you never own the vehicle.
  • Any Benefit in Kind (BIK) you are required to pay is usually a fraction of the car’s final cost.
  • You will get a new car every three to four years.
  • You may end up driving a nicer car than you would be otherwise able to afford.
  • side view of a grey company car driving on a road with a bridge in the background

    Cons of a company car

    Despite still being seen as a perk there are some drawbacks to having a company car:

  • Your employer may impose restrictions which limit the choice of vehicles on offer.
  • Some employers may also impose restrictions on what you are able to do with the car and when.
  • BIK can be expensive on high-value and diesel vehicles, making having a company car quite costly.
  • If your employer also provides all of your fuel, you must pay fuel benefit tax on top of BIK tax.
  • You will never own the car.
  • If you leave your current job, the car will remain in the hands of your current employer.
  • What are the alternatives?

    If you are still considering whether it is worth having a company car, then why not a look at some of the alternatives to having a company car.

    side view of a silver company car driving past office buildings in a city

    Company Car Allowance

    A company car allowance is a cash allowance that is added to your annual salary to allow you to buy or lease a vehicle privately. The amount of cash you receive is usually roughly the same amount your employer would have paid to lease a car for you.

    With a company car allowance, there is no need to worry about company car tax rates because the allowance is paid as part of your salary, so is taxed at the normal income tax rate.

    The company car allowance is becoming an increasingly popular option, particularly for smaller businesses, as it allows them to offer the perk of a company car to employees without actually having to run a fleet of company vehicles.

    Company Car Allowance Pros:

  • You have complete freedom when it comes to choosing a car. You could choose a car that is less than the allowance and pocket the remaining money, or you could supplement the allowance with your own funds to get a more expensive car should you wish.
  • If you decide to use the allowance towards buying a car, instead of leasing a car, then you can sell it on in the future should your circumstances change.
  • If your annual mileage is low, then you are likely to be better off financially than if you had a company car.
  • If you already have a car, then you could use the company car allowance for other expenses such as maintenance.
  • front view of a red company driving on a road away from a city

    Company Car Allowance Cons:

  • If you use the company car allowance to lease or finance the vehicle, then the finance will be in your name and may affect your lending abilities.
  • You are responsible for the upkeep of the car and any associated maintenance costs.
  • If you are a high mileage driver, you may find that some of the lease and finance deals available can be expensive.
  • Only Use a Company Car for Business Use

    This one is really down to your employer but can offer a sensible way round employees paying BIK tax. Your employer would provide a pool car for purely business car. This car would stay on the business premises most of the time and only be used by employees for business trips.

    It is important to note that to avoid benefit in kind tax associated with a company car, there can be no personal use of a company pool vehicle, this includes an employee travelling from home to a place of work.

    Claim Business Mileage

    If you don’t travel many miles for business purposes, then the best solution for you may be claiming back business miles.

    HMRC set a fuel allowance to take into account the fuel and wear and tear costs of using a vehicle for business purposes. For 2019, this has been set at 45p a mile for the first 10,000 miles and 25p per business mile thereafter.

    Is a Company Car Right for me?

    Deciding whether a company car is right for your circumstances really is a personal choice, and it’s down to you to decide whether it is the best option for your needs. Let’s face it for most of us it will come down to the money, so a good place to start is to consider which option is the most cost-effective solution for your circumstances.

    Here at Stoneacre Leasing, the choice is easy as we have fantastic business and personal leasing offers available. So whether you are looking for a personal deal or a company car deal we’re confident you won’t be disappointed.

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