6 Pros and Cons of Providing a Company Car

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 a company car.

Cons of Providing a Company Car

The following are the cons of Providing a Company Car 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.

6 Pros & Cons of Providing a Company Car | The Enterprise World

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. Queensland people can refer Youi Car Insurance Queensland for more information and details about car insurance.

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.

For long-distance working trips providing group transportation services for employees can be beneficial for companies in several ways. Group transportation such as shuttle buses or vanpools can reduce parking needs and costs, lower commute times for employees by avoiding traffic congestion, and demonstrate an effort by the company to be loyal to their staff.

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 Providing a Company Car.

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.

6 Pros & Cons of Providing a Company Car | The Enterprise World

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 Providing a Company Car.  

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.

6 Pros & Cons of Providing a Company Car | The Enterprise World

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. 

An Alternative to Company Cars: Business Travel Services

Now that we have been able to establish an overhead view of the company car debate, you should have come to some sort of conclusion on whether or not they are worth it. If you subscribe to the school of thought that they are great investments, then power to you!

If you believe the cons outweigh the pros, though, you are likely searching for some type of alternative. This can be difficult when it comes to replacing company cars, as ride-share apps like Uber are unreliable and inconsistent, and public transportation may not live up to the quality offered in a company car. 

While most alternatives will not live up to the perks of owning a company car, the only option that offers just as much, if not more of an experience, is a corporate travel service. These companies offer a variety of business car services ranging from limos and sedans up to full-size SUV’s and luxury buses. These luxury services allow you to offer your employees a high-class form of transportation on the company’s dollar, without the company having to fork up the amount of money needed to buy a company car. 

These corporate car companies are a little more pricey than other options, as one would expect, but are far less expensive than actually purchasing the same caliber of vehicle. 

So if your company can avoid or be rid of its company car program without supplementing those employee offerings with an alternative, then power to you! But in most cases, there is likely a substitute needed if company cars are voted against, and in almost every case, a business transportation services will be your best bet. 

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