Can A Company Buy A Car For A Director

Available Options When Buying A Company Car

Running a company involves various expenses as well as investments. When it comes to buying a car for a director, there are a few options available to the company.
The most common option is to buy the car outright with the company’s own funds. However, this represents a large expense to the company and could impact the company’s cash flow. In addition, the company will have to bear the expenses associated with the insurance, licensing, taxes and maintenance of the car.
Another option is to lease the car with a lease arrangement. This approach provides the company with more flexibility as the car can be replaced more easily than if it was bought outright. The lease payments are typically lower than the cost of buying the car outright, and the company is able to deduce the lease payments as an expense on their tax returns.
A third option is to enter into a loan arrangement. This involves the company taking out a loan to purchase the car, with the payments becoming an ongoing expense for the company. The advantage of this approach is that the company has greater flexibility in terms of how much it can pay for the car. However, this approach carries a greater risk than the other two options, as the interest payments will be higher.
These are the main options available when it comes to purchasing a car for a director. Each approach carries its own advantages and disadvantages and which approach will be most beneficial for the company will depend on its individual circumstances.

Tax Implications of Company Cars

When a company buys a car for a director, there are certain tax implications which need to be taken into consideration. If the car is being used for business purposes, then the company will be able to deduct this expense as an allowable business expense on its tax return.
However, if the car is being used for personal purposes as well, then the company will need to assess the extent of the personal use of the car. In this case, the company will need to pay tax on the benefit-in-kind which is calculated as the difference between the car’s purchase price and the running costs of the car. This cost is calculated using a complex formula which takes into account the fuel, insurance, maintenance, repairs and depreciation of the car.
The director will then have to pay income tax on the benefit-in-kind and, depending on the situation, may also be liable for contributory national insurance on the benefit-in-kind. All of these costs can quickly add up and need to be considered when deciding whether to purchase a company car for a director.

Insuring A Company Car

When buying a car for a director, the company will need to take out insurance for the car. This will typically involve taking out a comprehensive policy which covers the car for any damages caused in an accident. The company will also need to make sure that the company’s name appears on the policy as this will be required by the insurers to provide cover.
In addition to the insurance, the company will also need to ensure that the car is licensed, taxed and meets all legal requirements. Failing to meet these requirements could result in the company being subject to hefty fines by the relevant authorities.

The Benefits of Buying A Company Car

Despite the costs associated with buying a car for a director, there can be many benefits which should be taken into consideration. Perhaps most importantly, having a car available to the director can have a positive effect on their productivity as they will be able to travel to various locations for business purposes more quickly.
In addition, having a company car can also help to improve a director’s job satisfaction and provide better job security. This is because having a car available to them shows them that their employer is taking care of their needs and is willing to invest in them.
Moreover, an up-to-date car can help to enhance the image of the company. By having a car with a sleek design and of the latest model, the company will appear more sophisticated and professional to potential customers, partners and investors.

Making the Decision to Buy

Deciding whether to buy a car for a director or not is a complex decision which needs to take into account several different factors. These include the financial and tax implications, the cost of insurance, the potential benefits and the legal requirements. Ultimately, the decision will also depend on the individual circumstances of the company and what it is able to afford.
It is important to remember that buying a car for a director is an investment which has the potential to bring many benefits. However, it is also a large expense which needs to be carefully weighed up before taking the plunge.

Shopping Around for A Car

Once the decision has been made to purchase a car for a director, it is essential to take the time to shop around. Due to the large expense involved, it is important to explore different options to find the right car at the right price. This can be done by visiting car dealerships, searching online and comparing car prices across different models.
It is important to bear in mind that the initial cost of the car is only the first cost which needs to be taken into account. The ongoing costs of insurance, maintenance, repairs and fuel should also be taken into consideration when making the final decision.

Maintenance & Repairs

When buying a car for a director, it is important to consider the cost of repairs and maintenance. This is typically not a one-off cost, as cars will generally require regular servicing and occasional repairs in order to keep running efficiently.
It may be beneficial for the company to set aside a budget for these costs, as this will help to ensure that the director is able to use the car with as few interruptions as possible. There are also several different maintenance plans available which can be used to spread the cost of this expense.

Driving Safety & Liability

When a company buys a car for a director, it is responsible for any accidents which may occur while the car is being used. This means that the company may be held liable for any damages or injuries which may result, regardless of who is actually at fault.
Therefore, it is important to ensure that the driver of the car is always aware of all relevant safety regulations, as this could help to reduce the likelihood of an accident occurring. The company may also want to consider taking out a specific insurance policy to cover the risks associated with having a car on the road.


Buying a car for a director is a large expense and the company will need to carefully weigh up the various options and implications for buying a car for the director. Every company’s situation is different, so the decision will ultimately depend on the individual circumstances of the company. However, there are many potential benefits and having a car available to the director may provide significant benefits to the company in the long run if the decision is made to purchase one.

Marjorie Turcios is a seasoned leader and management expert with over 25 years of experience. She has held various leadership positions in private industry, government, and education. She is an advocate for creating win-win solutions and has worked to create successful, lasting change in corporations and organizations. Marjorie is an award-winning author of several books on leadership, mentoring and coaching, and effective communication skills. Her passion is to help others discover their potential and reach new heights in their professional life through her writings. Marjorie resides in Dallas, Texas where she enjoys spending time with her family, traveling to different places around the world, and speaking at conferences about her areas of expertise.

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