Company Car vs. Car Allowance

Employers can offer flexible benefits to their employees through several perks. The most popular among employees is company cars and car allowance. If your company has not yet implemented any of these benefits, you can learn more about them and their benefits through this article.

Company cars

Company cars are usually financed through vehicle leasing companies or are bought by the company themselves. Companies provide their employees with the opportunity to drive company cars for business or non-business purposes. Conditions may vary according to the employer. As such, many companies offer company car leasing to attract new employees and reward current staff members.

  • Operating costs including fuel are usually covered by the company but the company can specify how much they will shoulder. For example, the company may only cover fuel consumed for business use.
  • Service, insurance and maintenance are covered by the vehicle leasing company; however, the employee may still be responsible for certain forms of damage.
  • Insurance is covered by the vehicle leasing company and may cover damages incurred through personal or business use.
  • Company car leasing has tax benefits for both the employer and employee.

Car allowance

Through car allowance, the company does not provide any vehicles; rather they provide additional monetary remuneration for their employee’s car-related costs such as service, maintenance and purchasing a new vehicle.

  • The employee completely owns the car and is responsible for it, thus, companies will never have to worry about what happens to the car including paying for insurance, taking it for servicing and resale. While this is a huge advantage for companies, car allowances usually have more operating costs compared to company cars.
  • The employee must track every cost along with kilometres travelled otherwise they may not be able to claim their car allowance.
  • Car allowance is taxed as part of the employee’s salary, which means they may receive less than the specified amount.

If you require company car leasing in the UK, please contact ALD Automotive. We can organise the best option for you.

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