Company cars are a useful asset to the company, especially when it comes to the benefit of your employees who might use them to get about their day-to-day lives or use them solely for business purposes.
With company cars, there are many pros and cons. Some companies might find it useful to have a fleet of company cars available, while others might limit them to a select few in the organisation, typically those of a senior or executive level.
With that in mind, let’s look at the importance of company cars and how to provide them for your employees if you’re considering investment in them.
What is a company car?
If you’re not familiar with the concept of a company car or you’ve heard of them but don’t know what they are, let us enlighten you. A company car is a vehicle that’s provided by the company or employer for both business and private use.Â
Justifying the cost of a company car will depend on who it is for and what they’re bringing to the table in return for this vehicle. It’s often a necessity for those who are required to travel significantly or they’re an important player in representing the company.
Company cars tend to be bought in bulk, known as a fleet and are handed out to the employees as and when they’re deemed suitable. A lot of company cars though are chosen by the employee, even with some adding their own car number plates to the vehicle.
However, a lot of these cars picked by employees need to be pre-approved by the employer. This is something to be considerate of, especially when it comes to having the right fit for branding purposes.
Pros and cons of company cars
What are the pros and cons of getting a company car? Do they benefit all businesses or are they only suitable for certain companies? How does it help employees in their day-to-day job and job satisfaction in general? Let’s take a look at the pros first.
No financial ties
When the employee chooses the car, it’s usually on a lease basis and the same goes for when the employer chooses the car. This is the best way to go rather than buying vehicles outright and risking a major loss if they get written off or damaged.Â
With a company car, there are no financial ties for the employee as the car is leased through the business. At the same time, the employee has no financial ownership of the car so if they do end up quitting, you can return the car at the end of the contract, or give the car to another employee.
The costs are clear
With a leased car, there are no unexpected costs. When you lease out a car to the employee, there’s usually a certain amount of miles that they use and this is something that you can ensure is capped unless due to unforeseen circumstances.Â
With the costs in general, you can expect fuel to need paying for and any maintenance that might be needed. All of which will be agreed upon when the employee takes out theÂ
A recruitment incentive
If you’re looking to attract top talent to your company, then offering benefits is something that will allure those you’re looking to bring into the organization.
A recruitment incentive like a company car, is a great way of securing those individuals that you need in your business.
Tax benefits
When it comes to tax benefits, it’s important to understand the opportunities that come with company cars as a form of tax benefit. Where the car is used for business purposes, you’ll be able to get a certain amount in expenses as a way to offset the tax you pay as a company on an annual basis.
So what are some of the cons that come with providing company cars for your staff? Would these potentially influence whether you choose to offer them as a benefit?
Complex administrative tasks
Employers are responsible for handling all the tax reporting and calculations needed for each car. Not to mention that the individual responsible for managing company cars, will also be responsible for sorting out leases and all the paperwork that comes with it.
It might be that you’ve not got the manpower available to handle all of these complex administrative tasks. You could outsource it, but that involves more financial burden which your business might not be able to afford.
Mileage limitations
When it comes to company cars, they’re often subject to mileage restrictions depending on how much you agree to with the lease providers. Not only that, but you’ve also got the additional costs that might be incurred if the employee ends up going over the mileage you’ve agreed with the lease.
Increased Liability
The liability that comes with leasing company cars is obviously a lot more apparent than not having a company car at all.
If the employee is using the car for personal use, then you are liable for any accidents that happen, regardless of whether or not it is the employee’s fault. That can become costly, especially if you have staff members who aren’t always careful on the road. Some people might end up being reckless when in the driving seat.
How to provide company cars for your business
If you’re looking to provide company care for your business, then it’s worth knowing exactly what you’ll need in order to get them without too much hassle.
Work out how much you can afford
How much can you afford? This is important because the cost of leasing a car can certainly ramp up, especially if you’re leasing multiple ones at once.
Look at how much you can afford and how this might impact your profits moving forward. Sometimes, it’s beneficial to invest in your business but it’s not always the right move, so consider it carefully.Â
Choose the individuals who are applicable for a company car
When it comes to picking the individuals who are applicable, consider who is best for receiving them. Whether it’s given as a reward for hard work or a necessity for the type of job they do for the company.
Every individual should be considered carefully for a company car and it’s worth making sure that they’re a careful driver, perhaps through a test lesson to assess their safety.
Discuss lease options
Lease options are something to consider carefully because each one is different and offers vary depending on the needs of the company.
It’s worth looking at how much mileage employees need in order to stay within a certain cost per month. There are some leases where certain cars are provided and others where there are broad options available. Make sure that the right decision is made when it comes to the lease option that fits your business best.
Ensure proper maintenance and upkeep is done to avoid additional costs
Finally, you’ll want to ensure you have someone on board who is responsible for checking in with the leased cars and that proper maintenance is being done. That way, additional costs can be avoided as a result.
There are great benefits to company cars so it’s worthwhile to explore this for your business in 2024. If you’re not sure whether or not it’s the best decision for your business, explore the options available online and at local car dealerships. If it’s not right for now, it might be best to wait until a later point down the line when it becomes more financially viable.