The differences for a company car vs car allowance
There are differences between providing a company car to your employee as opposed to giving them a car allowance. Which one is more beneficial or cost-effective?
The responsibilities when it comes to company cars vs car allowance differs. For car allowance, it’s the employee’s responsibility for sourcing the vehicle and maintenance. In the case of a company car, the employer is responsible.
With a car allowance, the car purchased doesn’t belong to the company, whereas a company car does. There are pros and cons to each and it’s up to you to determine which option is best for your business needs.
For example, if your employee is given a company car and no longer needs it, there’s then the task of finding someone else in the company or selling it. On the other hand, a car allowance means the employer can limit their involvement in finding and maintaining the car.
There’s also taxes to consider as
company cars can incur heavier tax payments than offering a car allowance. It’s certainly worth calculating the tax payments in relation to a car allowance and paying less tax.
So, is a company car or car allowance the best fit? Ultimately, it’s up to the company to decide what’s best for business. Company cars may be best when solely used for business, whereas a car allowance may be more suitable for those who will use the car privately too.