FAQs
For the employee:
Employees like the hassle-free aspects of having a new car provided and looked after by their employer. The risk of ownership is by way of the financial burden and credit liability with the employer, who arranges appropriate insurance, servicing and repairs and finally disposes of the vehicle. Employers are often flexible in offering a considerable choice of cars. Furthermore the status associated with company cars should not be underestimated.
For the employer:
The main benefits to an employer in providing company cars are the ability to maintain an element of control over both the overall cost and the type of vehicle operated. Plus the fact that company cars have traditionally been a very useful tool in both new recruitment and employee retention.
For the employee:
The major potential disadvantage of a company car for the employee is benefit in kind taxation plus the fact that the employer will re-possess the vehicle upon employment termination leaving the employee without transport.
For the employer:
It can be expensive to administer and run a company car scheme, depending on the extent of outsourcing and the funding option used to provide the vehicles. The employer may also be at risk from "bad" drivers - traditionally claims for company car drivers have been greater than for other drivers.
For the employee:
Traditionally the provision of "free" fuel was a valuable benefit-in-kind. However with the change in tax structure, this benefit has virtually disappeared, unless the employee is a very high private mileage user. The remaining advantage is that "free" fuel makes the process of claiming fuel for business mileage very simple.
For the employer:
If a fuel card is used, it allows accurate fuel consumption reports to be produced. It simplifies the payment of business fuel expenses of employees, reducing administration.
For the employee:
High taxes on this benefit mean that employees need to complete much higher private mileage in order to justify receiving the benefit. Furthermore the provision of a fuel card may limit the employee to certain petrol stations only.
For the employer:
If private fuel is provided, this may be regarded as an environmentally unfriendly policy - encouraging drivers to complete a certain amount of private miles for the benefit to be tax efficient.
There are two criteria that usually determine whether an employee receives a company car - business need and status within the organisation.
The former is determined by annual business mileage, frequency of journeys, the need to carry tools or samples and competitor pressure.
The provision of a status car is a reflection of employment market forces and most closely correlates to salary or status in the company.
The choice of car given to employees follows one of three routes:
- Specified car for a post or job grade
- Choice from a list
- Choice of any car up to a maximum list price or monthly lease value
Generally the more senior the employee the greater the degree of freedom of choice and the higher the value of the car.
Traditionally the provision of private fuel has been a highly valued benefit. In recent years however there have been sharp rises in taxation of private fuel. This has resulted in a marked decrease in the number of employees who take the option of free fuel.