6 Pros and Cons of Providing a Company Car

Many companies offer company cars for use by their employees. They are usually branded, so it is evident that the vehicles belong to the company and are not for personal use.

The question every business owner needs to ask themselves is whether company cars are right for their business. The answer is that it depends because there are advantages and disadvantages of providing company cars.

Cons of Providing a Company Car

The following are the cons of providing company cars to your employees:

1. Your Company May Be Responsible for Paying in the Event of an Accident:

A downside of providing company cars to employees is that it increases your liability. If your employees are involved in an accident, you will be responsible for paying damage to property or other people.

Therefore, your employees could significantly increase the cost of premiums your company pays for car insurance. According to Freeadvice.com, it could also mean high legal fees in case lawsuits are brought against your company as a result of an accident involving your company car.

2. Expensive:

Buying company cars is quite a substantial investment, especially for small to medium-sized businesses. It requires a considerable investment upfront to buy the vehicles unless you can find a suitable factoring company. There is also the cost of replacing a company car in case of an accident or theft if your insurance does not pay.

Company cars will cost your business a significant amount to maintain, taking money from your working capital and cash flow. Employees will typically not take as great care of company cars as they would their own vehicles.

You will have to include the cost of repairs, insurance, and annual service costs when providing company cars. Therefore, expect a significant increase in your company budget when you provide company cars.

3. Tax Reports:

A significant disadvantage of providing your employees with company cars is that they will be tax obligations. It is especially so if your employees use the vehicle for commuting and personal purposes.

The IRS considers company vehicles to be fringe benefits, and hence you need to pay tax on the cars. You also have to keep accurate records and report them to the IRS when you provide company cars.  

Pros of Providing a Company Car

The following are some of the pros of providing a company car:

1. Control:

When you provide your employees with company cars, you benefit from controlling the situation as opposed to if they were using their vehicles. You can control what to do with the car and what the employee can do with it. You particularly have control if your company needs specialty vehicles that you would have otherwise had to rent.

The employee driving the vehicle still presents an element of risk that diminishes your control over a company vehicle. However, it certainly beats renting cars or having employees using their personal ones.

2. Branding:

A great pro of having company vehicles is you get space for branding and promotion. Therefore, you get more branding space without paying a third party for it, as is usually the case.

You can hence increase your brand awareness whenever other people see your vehicle. Branding gives you more control over your brand image. Moving advertisements would cost you a fortune, and a company car is a great way to reduce costs.

3. Employee Performance:

Offering your employees company cars could improve your employee’s performance in various ways. One way is by ensuring that your employees always have a mode of transportation to get their work done.

A company car could also be a great perk for employees. It can eliminate the need to purchase their own vehicles despite the tax repercussions, a strong motivator.

To conclude, there are benefits and drawbacks to providing company cars to your employees. As you can see above, there are substantial ones requiring significant consideration. It is up to you to decide whether company cars are suitable for your business or not. 

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