The Benefits and Drawbacks of Company Cars for Both the Business and Employees

Posted on 30th March 2023

Company cars are often recognised as a desirable job perk, providing staff an incentive to stay committed and work hard at the business. However, company cars aren’t always the best option for everyone.

What is a company car?

Company cars are vehicles provided to the employee by their employer, designed to be used for business travel. To be eligible for a company car, the employee must travel a significant amount as part of their primary role.

Many company cars are also offered for use as work vehicles and for private use. When using the car for private use the mileage is calculated separately and a tax is paid on this by the employee.

A car allowance is a flexible alternative. Money is provided to the employee on starting their new job and is on top of their annual salary, the employee then uses this to buy or lease a car.

The benefits of a company car policy as a business

As a business owner, having a company car scheme in place is a great way to attract and retain staff. It provides the opportunity to show your employees your appreciation for their hard work, setting an example for new and prospective employees.

Transportation can often be a barrier to some people. Offering a company car eliminates that problem, meaning your staff won’t need to rely on public transport and can get to work easier.

The drawbacks of a company car policy as a business

Company vehicles come with a large upfront expense. You’ll likely be responsible for any damages to the car if your employee were to cause an accident whilst driving it.

The cost of insurance premiums can be expensive for company vehicles, too. Running costs for fuel, maintenance and servicing will certainly add up.

The benefits of a company car as an employee

Receiving a company car is an ideal option for many. You’ll have no financial ties to the vehicle, as it’s the company’s responsibility to pay running costs and any monthly payments, although you may have to pay tax if you use the car for private use as the car is seen as a company benefit, so it’s best to check before signing up.

Companies will also want to make a good impression to clients, meaning you’ll likely get to drive around in a desired car, such as a used BMW. There are also no depreciation costs, meaning there’s no risk to financial wellbeing.

The drawbacks of a company car as an employee

Companies usually offer a limited range of car options, so you may have to compromise on the car you want to drive.

You also don’t own the car, meaning you’ll have to return it if you want to find a job elsewhere. Your liability for the car will vary too, depending on your agreement with your company.