April 19, 2023
Things to Consider with a Company Car
There are a few questions that we recommend you ask yourself and your fleet manager and these answers will help you decide on whether the company car being offered is the right option for you. These are:
- Can you use the company car for personal trips?
- How long are you committed to the vehicle?
- What will you do with your current vehicle?
- Do you expect your vehicle needs to change during the commitment? If so, what flexibility is there?
- Are there any conditions on you accepting the vehicle?
- Is there a mileage allowance?
- What maintenance expectations are there?
- What is expected of me as the driver?
- What financial implications are there?
Personal Use of a Company Car
Almost all employers will allow you to use your company car as a personal vehicle as well, but it’s important that you ask and get an answer to this question so that you know what you can and cannot do.
If the vehicle is available to you for personal journeys then there will usually be additional information you want to get. If you’re going to use it as a personal vehicle then you will probably want to check if your spouse or children are able to drive it as well.
Another factor you might want to consider is whether you are able to travel in the vehicle. A lot of UK drivers will drive their car when travelling to France as it’s a relatively short and easy journey. If this is you then you’ll want to check with your employer that you can travel in the car and if there are any requirements for you to do so.
If you do decide to take a company car then once you reach the point of choosing the specific car you should think about your requirements for a car now and over the next few years. Depending on how your company car is funded / your business’ process you may be committed to the car for a couple of years and changing it because your needs have changed can be a little more complicated than it can be with a personal vehicle.
Conditions of Taking a Company Car
There may be some conditions that are attached to the offer of a company car and you want to make sure you fully understand what these are and what the process is if you do not meet them.
The most common condition we see on a company car offer is it being tied to the employee meeting and maintaining performance targets, for example, a salesperson making a set number of sales.
It’s not just the conditions on which the car is offered that you want to consider but also the responsibilities that you agree to when you accept the vehicle. Most employees will expect a certain level of care for the vehicle, maintenance and responsible driving and these will usually be explained in a contract for you but we recommend getting this information before you agree to accept the car to make sure you’re able to complete these checks. On the whole, it will not be anything that you would not be doing with your own vehicle with things like checking the tyre pressure, keeping the fluids topped up etc.
What to Do with Your Current Vehicle when You Take a Company Car
If you are going to take a company car you’ll want to think about what you are going to do with your personal vehicle. The main decision is whether you will keep this or not, but there are a few factors that can influence your choice.
Firstly, you want to consider the conditions of accepting the car (if there are any) and what you will do if you don’t meet these and no longer have the company car benefit.
We know that a lot of drivers are choosing leasing and contract purchase agreements to make driving a new car a more affordable choice, and if you have either of these agreements then you’ll want to consider the cost of leaving it early or waiting until you reach the end of the contract to take a company car. The cost of leaving a PCP or PCH agreement can be quite expensive and it’s unlike your business will help with this so you can take a company car which means there will be a cost to you. On the other hand, if you continue with your personal contract then it would be beneficial to wait until this is completed before taking a company-provided car to avoid paying for two vehicles (contract payments and BIK deductions).
Having two cars will be more expensive no matter how your personal vehicle is funded, as even if you own the car outright you will likely have the associated costs to pay still. These include; servicing and maintenance, MOTs, road tax, and insurance to name a few. You may be able to mitigate some of these costs if you can keep the vehicle off public roads and have it SORN, but this does mean you cannot drive it.
If you do decide to keep two cars, then you’ll need to think about how you’ll store and use them. If you plan on using one vehicle as your primary vehicle and having the other on hand just in case, then you’ll need to think about regularly running the second vehicle to avoid damage due to lack of use for example brakes seizing. You’ll also want to consider where you store it. Do you have the space on your property, will you need additional parking permits and is it in a safe location if you’re not regularly using it are all questions you need to answer.
Financial Implications of a Company Car
One of the biggest considerations you’ll need to make when deciding if you should take a company car, or similar benefit, is the financial impact it will have on you.
With most company cars you will be taxed via a benefit-in-kind tax and this will usually be shown as a deduction on your payslip and paid before you receive your take-home wage.
One aspect of company car tax to be aware of when choosing your company car is that part of the calculation used to determine the amount you pay is based on the vehicle’s emission levels. This means that drivers in electric and hybrid cars will pay less.
Your company may offer you alternatives to taking a company car, such as a car allowance or enrolment in a salary sacrifice scheme. These also have financial implications, though they are different so you’ll want to compare the impact they could have and then decide on the right option for you.
The other financial implications can include:
- Reduced take-home pay
- Increased income tax due to income rising (car allowance is usually added to your monthly pay package)
- Benefit in kind tax
Any changes to your income can have an impact on the rest of your life and it’s important to consider these realistically and whether you have any other upcoming lifestyle changes that could make taking a company car a less viable option for you.
We hope this article has helped guide you in what you need to think about when deciding if a company car is the right choice for you. If you have any questions or doubts about taking a company car then we recommend taking your time with the decision and talking it through with your fleet manager to ensure you make an informed decision.
Enjoyed this article? Read more of our latest blogs below:
- Reducing the Cost of Fleet Damage
- Know the Difference - Hybrid Edition
- How to Make Your Fleet More Sustainable
- Travelling in a Company Car
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