If you’re wondering how owning a company car works, it is important to understand the financial, legal, and tax implications of owning a car. Owning a car entails more than just paying a fixed amount each month to the manufacturer, looking after it, and being able to use it whenever you need. It involves certain tax and financial benefits that come with owning and using a car, but also certain legal considerations which are worth knowing and understanding. In this article, we’ll explore all aspects of owning a company car and what you should keep in mind.
Upfront Costs Of Owning A Company Car
The upfront cost of owning a company car largely depends on the type of car you decide to buy and its features. The cost can range from thousands to tens of thousands of pounds or euros. Some of the most important factors which impact the cost are the size and running cost, fuel consumption, insurance, maintenance, and warranty. Furthermore, you will also have to consider the depreciation in value of the car over time, as well as any extras or gadgets you may choose to add. For taxpayers there is one additional cost to consider, and that is company car tax.
Company Car Tax Implications
Company car tax is the tax the employer has to pay in respect of an employer-provided car. It is calculated using the vehicles list price and its associated emissions. It is an important consideration when thinking of buying a car, as it will impact the upfront cost and can significantly increase the overall cost. For example, a company car with high emissions could cost double the original price after company tax. It is important to speak to a tax advisor to help understand how much company tax you may have to pay before committing to buying a car.
The Benefits of Owning a Company Car
As well as the financial and legal implications mentioned above, owning a company car also comes with a number of benefits. Firstly, you will have complete freedom and independence to use the car as and when you need to. The car will become part of your business income, which can mean a higher level of financial security for you. Owning a company car also signals a certain status, as this is a symbol of a successful business owner. Furthermore, a company car is tax-deductible and the cost of running it is deductible as business expenditure. It also helps the environment, as owning a car means you are more likely to take more environmentally friendly public transport.
Safety Measures Associated With Owning a Company Car
As a company car owner, it is your responsibility to make sure the car is kept in a roadworthy condition and it is compliant with the necessary safety measures. It is important to check the car regularly and to keep all safety equipment in good working order, such as seatbelt, airbags, and anti-lock brake systems. You should also make sure the tread depth at the front tyres is not below the legal limit, as this could lead to an accident. It is important to remember that the cost of an accident involving a company car might be substantially higher than the cost of a car driven privately.
Insurance For Company Cars
As with any vehicle, when owning a company car you need to make sure it is properly insured. It is important to consider the type of insurance you will need when deciding to buy a car. Different types of insurance are available, including fully comprehensive insurance and third-party only insurance. Fully comprehensive insurance covers damage to the car, any damage caused to your property, and any injury to the third party involved in an accident. Third-party only insurance covers the damage caused to the third party involved in an accident, but not the damage to the car or the property. It is important to compare the different types of insurance and take into account the unique needs of your company car.
Financing Options for Company Cars
When owning a company car, it is worth considering hiring or leasing as an alternative financing option. Hiring and leasing can provide a much more cost-effective option than buying outright. Through hiring or leasing, you can access more models and makes of cars, as well as being able to choose from different packages. Furthermore, any costs associated with the car can be spread out over a certain period of time and you will not have to worry about depreciation. This option gives you more flexibility and can help you stick to a budget.
Legal Requirements When Owning a Company Car
When owning a company car, it is important to remember that you have to comply with certain legal requirements. These include registering the car with the local traffic authority, and ensuring the car meets all safety, environmental and pollution requirements. In some countries, you also need to hold a valid driving license, display proof of insurance and pass an annual roadworthiness test. If you are thinking of buying a car, it is important to check the local laws and regulations to make sure the car meets all legal requirements.
Upkeeping the Company Car
In order to keep your company car in the best condition, it is important to keep up with all servicing and repairs. A company car needs to be serviced at least once a year, depending on the make and model. It is also important to check the oil and filters regularly, to ensure the car is running efficiently and avoid any unexpected breakdowns. It is also a good idea to check the tyre pressure, brakes and suspension regularly to ensure the car is safe to drive.
The Advantages of Owning a Company Car
Owning a company car comes with a number of advantages. Not only does it free up your time and allow you to be more independent, it also has certain financial and legal benefits. Furthermore, it can provide a certain status and be a sign of a successful business. It is, however, important to consider the upfront costs, the company car tax implications, and the legal and safety requirements when owning a company car.
Impact of Owning A Company Car On Tax
When buying a car, you might need to consider the potential effects of owning a company car on tax. This is especially important if you use the car for business purposes. Depending on your business, you could be entitled to tax relief on the costs of running and maintaining the car. You can also offset some of the car costs against the business income. However, it is important to take professional tax advice on these matters and make sure all associated costs are taken into consideration.
Driving The Company Car
When driving a company car, it is important to be aware of the relevant laws and regulations of the country you are in. You should follow the laws of the country, as well as the policies of the company. It is also important to be aware of the risks and potential dangers associated with driving a company car. This includes the risk of being involved in an accident and the risk of being liable for any damage caused to the vehicle.
Cost-Saving Considerations when Owning a Company Car
When owning a company car, there are certain cost-saving considerations. For example, when purchasing fuel, it is worth looking around to find the best price and opt for more fuel-efficient vehicles. Furthermore, you should always look for ways to reduce the running costs, such as maintenance and repairs. You should also take advantage of any tax reliefs available and ensure compliance with all regulations and laws.
