At one time, company cars were seen as a standard perk for employees. However, over the years, tax changes have made the cost of running a company car a lot more expensive. This has led to many businesses questioning whether or not providing them is worthwhile.
If you’re considering offering your employees a company car, it’s important to understand all of the costs involved. Here, we’ll look at the real cost of having a company car to help you make the best decision for your business.
The cost of buying a car
The most obvious cost of a company car is the purchase amount. If you’re looking to buy a car, you’re going to need a large lump sum at your disposal. Another option is to lease the car or purchase one on finance from a company such as Imperial Car Supermarket.
You could also save by choosing a used car, rather than a new one. However, you will need to factor in reliability and maintenance costs.
Running costs
It’s not just the purchase costs you have to prepare for. It’s really important to factor in the running costs of the car too. With company cars, the employer is responsible for running and maintaining the vehicle. Therefore, you need to factor in the following:
- Fuel costs
- Tax
- Insurance
When providing company cars, the business will be taxed on the models chosen. So, if you want to benefit from tax relief, you’ll need to make sure the car is fuel efficient. Similarly, it’s worth looking at cars which offer cheaper insurance policies.
Costs of maintaining the vehicle
As well as paying for the car itself and at least part of the running costs involved, you’ll also be responsible for maintaining the vehicle. This means taking care of the annual MOT, servicing and any repairs which may crop up.
It’s a good idea to have a sum of money saved up for any potential repairs which may need doing. However, if you’ve bought a new car, it should come with some kind of a warranty for the first three years.
When choosing a company car for your employees, there are a lot of costs you need to consider. The above is some of the main costs to take into account. As long as you factor in the true costs of company cars, you won’t face any nasty surprises further down the line.
