How Much Does A Company Car Cost The Employer

One of the most popular employee benefits for employers today is providing a company car to employees. It can provide an impressive perk to attract and retain top talent, and it can help an employee’s productivity. However, in addition to the perceived benefits, employers should also consider the cost of providing this type of benefit.

The cost of providing a company car varies depending on the type of vehicle, special features and even the employee’s tax bracket. Generally, the employer pays the full cost of the vehicle plus any insurance, maintenance, and/or registration fees. Employees can benefit from this arrangement because the value of the car is not subject to income tax.

However, employers need to consider the “total cost of ownership” when offering company cars. According to experts, a company should consider what the car will cost over its lifetime—not just the sticker price. This includes gasoline and maintenance costs, depreciation, insurance, and more. Depending on the type of vehicle, these costs can add up quickly. Employers should look for ways to maximize the value of their investment, such as choosing fuel-efficient cars and buying cars that are not too costly to insure.

In addition, employers should also consider the cost of providing fringe benefits. If an employee is using the company car for personal use, they may be eligible for certain tax deductions. This can increase the cost to the employer by increasing the employee’s taxable income. Similarly, an employer may be liable for parking, tolls, and other fees associated with the car.

Providing company cars is an attractive benefit, but it can be expensive. Employers should carefully consider the total cost of ownership and fringe benefits before making a decision. With the right approach, companies can still benefit from this perk and have some extra money in their pocket.

Pros and Cons

The pros and cons of providing a company car to employees should be carefully evaluated by employers. One of the main benefits is that it can help attract and retain top talent. By providing a car, employers are communicating that they value their employees. Similarly, the car can make it easier for employees to reach the office and job sites.

Another pro is that providing a company car can create a sense of company unity. A company car acts as a status symbol and can help strengthen the organization’s branding. Furthermore, it can be used as a tool for marketing, such as placing logos or special messages on the car.

On the other hand, there are several potential drawbacks to providing a company car. The costs of owning a car—including maintenance, gas, and insurance—can add up quickly. Moreover, the tax implications for providing a car as a benefit must be considered. Finally, employers should be aware that if an employee uses the car for personal purposes, they may be liable for certain fees and taxes.


Providing a company car isn’t the only way employers can offer transportation benefits to employees. One alternative is to offer a car allowance. This type of arrangement offers employees a set amount of money each month to help with car-related expenses. Alternatively, employers could offer a pre-tax commuter benefit program. Employees would receive money to use for public transit or parking fees.

Another option is to offer a ride-sharing or carpooling program. Employers can partner with a ridesharing provider, such as Lyft or Uber, to offer employees discounted fares. Alternatively, employers can work with a carpooling provider to organize carpooling opportunities for their employees. This type of program can be beneficial for both the employer and the employee.

Finally, employers should also consider other forms of transportation, such as bike-sharing or providing discounts for public transit passes. These types of programs can help reduce employee transportation costs and can improve employee wellbeing.

Impact on Employees

Providing a company car can have a positive impact on employee engagement and morale. Employees may feel valued and appreciated when they’re given a company car, which can lead to increased loyalty and productivity. Similarly, the car can make it easier for employees to get to work and be productive. Furthermore, having a car can also reduce stress-related absenteeism.

It’s important to note that some employees may be at an advantage or disadvantage based on their home location. A company based in a large city may find that providing a car is more beneficial than a company located in a rural area. Moreover, an employee’s ability to afford a car and related costs should be taken into consideration when offering this perk.

Providing a company car can be a beneficial perk for both employers and employees. However, employers need to consider the costs and potential tax implications before making a decision. By weighing the pros and cons and researching alternative options, employers can decide if a company car is the right fit for their organization.


When budgeting for a company car program, employers should consider the long-term costs. While purchasing the car is the most significant cost, there are other factors to consider. Employers should factor in insurance costs, as well as fuel and maintenance expenses. Employers should also set aside money for potential unforeseen repairs.

In addition, employers need to consider the costs of selling or replacing the car. Vehicles depreciate over time, so employers should be prepared for a potential loss in value when reselling the vehicle. Employees may be able to purchase the car after the lease period is over, but employers must be prepared for this potential expense.

Finally, employers should also consider the tax implications. Depending on the type of vehicle and how it’s used, an employee may be subject to certain taxes or fees. Employers need to be aware of these implications and work with a tax professional to ensure they’re in compliance.

When it comes to budgeting for a company car program, employers should take a long-term approach. Careful planning and due diligence can help ensure that the program is cost-effective and compliant with all applicable laws and regulations.


Insuring a company car can be a complex process, so employers should research the various types of insurance that are available. Generally, employers can choose from two types: liability and collision. Liability insurance covers damage to other people and property, as well as legal fees in the event of an accident. Collision insurance, on the other hand, covers damage to the car caused by an accident.

Employers should also consider supplementary insurance options, such as comprehensive and uninsured/underinsured motorist coverage. Comprehensive insurance covers damage to the car that is the result of something other than an accident, such as fire, theft, or vandalism. Uninsured/underinsured motorist coverage protects employees if they’re injured in an accident caused by an uninsured or underinsured driver.

When selecting an insurance policy, employers should take into consideration the type of car and the region in which they operate. In some states, employers may be required to carry certain types of insurance, so they should check their local laws. Employers should also consider their risk tolerance and budget when selecting a policy.

Insuring a company car is a critical step for employers. By researching their options and selecting the right policy, employers can ensure that their employees are protected in the event of an accident.

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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