Company Cars Vs Car Allowance

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Company Cars Vs Car Allowance

Company cars are still considered a desirable perk of a job and can often persuade new employees to join your company. However, some businesses are now offering company car allowance as an alternative.

We’ve put together an article to explain the differences between the two to help you decide which option would be the best choice for your business.

What are the benefits of a company car?

Looking at this from an employee perspective, there are many reasons for an individual to accept the offer of a company car from their place of work. These include:

The employee doesn’t own the vehicle, nor are they tied into any contracts
More often than not, businesses will replace the vehicles every few years to keep their workforce up-to-date with the latest models
Typically, the insurance, servicing and maintenance up-keep are usually covered by the employer

While businesses may see this as a big financial burden, it can bring new employees through the door and keep existing employees happy and achieving business targets. If an employee were to leave your business, the car would remain in your hands, so it’s something you wouldn’t lose along with the employee.

What is company car allowance?

Company car allowance is a sum of cash added to an employee’s salary for them to put towards buying or leasing a vehicle privately. The allowance is becoming more and more popular as it frees the business of managing a car fleet and gives the employee the freedom to choose their own vehicle.

However, from the employee’s perspective, a company car may be the more favourable option as with a car allowance everything is in their name, they will be responsible for the insurance and upkeep of the vehicle, unlike a business owned company car. Car allowance is also subject to personal income tax and if the employee has a high mileage, private schemes can become expensive.

Company car or car allowance?

There is not a right or wrong answer when it comes to making this decision. It is important to consider your businesses situation and the various circumstances you may encounter. Before jumping into making a choice, it is important to consider both options and weigh out the pros and cons of both.

If you’re considering company car leasing, we’ve put together a handy guide with more information. Read our Business Car Leasing Guide to find out more.

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