Company cars are becoming increasingly popular in the modern workplace. Not only do they provide a means of transportation, but they can be a tax advantage as well. But how much do company cars really cost in the long run? Is it really cheaper to have a company car versus paying for your own personal vehicle?
Purchasing and maintaining a car can be expensive, especially if you’re looking for a newer model. It may be more tempting to take the perk of a company car but really it depends on the size of your salary. The higher the salary, the more likely it’s going to be cheaper to pay for your own car since you’ll be getting a larger tax break than you’d receive with a company car.
If you’re expecting to not be driving your company car much and you’ll be taking advantage of generous benefits, then it can be cheaper to purchase a car on your own. With most business cars, you’d still be responsible for things like registration fees, taxes, gas, and maintenance costs. Of course, the company may provide some level of assistance with this, but you’d be primarily responsible for the expenses.
If you’re opting for a company car and you don’t expect to be driving much, you’d likely end up still paying for the expenses of owning a car, but in addition to this, you’d also be shelling out the cost of insurance on the company car. When you’re off work, the company car would still require coverage and this is an expense you might not have taken into account when you were making your decision.
When all of these expenses are taken into consideration, it’s clear that opting for a company car may not always be the cheapest option in the long run. It really depends on the amount of vehicle usage, insurance costs, and the size of your salary to see if a company car will be the last cost-effective decision for you.
Experts say that for those aiming to keep their costs low and pursue the greenest options, electric vehicles are always a great choice. They have much lower running costs, with the main expense being the upfront purchase. They are also beneficial for the environment and have no road tax or fuel costs.
Maintenance Costs
Maintenance costs can be one of the biggest expenses for car owners. That’s why it’s so important to understand what you’re getting into when it comes to the expenses of a company car. If you go with a company car, you’ll likely have to pay for annual servicing and it might be hard to predict future costs.
Company cars are usually serviced either annually or more regularly and usually the cost of servicing, repair work, and other related expenses can be itemized and claimed back through the company’s expense system. But unlike private vehicles, if a major job is needed, the cost could be extremely high and could end up being more expensive than a private option.
Therefore, it pays to consider all costs associated with servicing a company car before opting for this option. Be sure to ask your employer about what is included, what isn’t and how much the company is willing to contribute towards any additional costs.
Running Costs
Another cost to consider is the running costs. This includes things such as fuel and oil costs, road tax, insurance, and parking. Car fuel costs can add up quickly and may not be covered by your employer depending on the company policy.
Some company cars may have higher tax rates but if you work hard and rack up a lot of miles in your car, you might end up being able to claim the cost of fuel and other running expenses back. It’s important to remember that private cars can be cheaper than company cars when it comes to running costs.
Insurance can also be a significant expense when it comes to running a car. Some employers may offer additional insurance as part of a company car deal, but be sure to check if this is included before signing up. It is also important to assess the insurance costs in relation to the type of car you are looking at and make sure the cost is reasonable.
Ultimately, the cost of running your own car can vary significantly from a company car. It is important to weigh up all the pros and cons before making a decision and calculate the costs to make sure that you are making the best decision for you.
Tax Benefits
Company cars offer tax benefits that might make them more attractive. There are several different tax schemes used when it comes to company cars, such as the Benefit in Kind (BIK) scheme, which is a form of non-cash remuneration and effectively reduces the taxable income of the driver.
Under the BIK scheme, employees can benefit from tax advantages available for company cars and employers can also benefit from taxation advantages. This scheme benefits both the employer and employee and can make running a company car a much more cost-effective option than a private car. However, it is important to remember that each individual’s situation is different and tax calculations can quickly become complex.
The tax benefits of company cars should definitely be taken into consideration before making a decision and it is important to check with your employer or tax specialist to fully understand the financial implications of a company car.
Cost Comparison
When it comes to making a decision about a company car, it’s important to look at the cost versus the benefit. Generally, if you make more money, it’s worth it to get a company car since the benefit in kind can reduce your taxable income. But, if you make less money, it may be more cost effective to buy your own car, as the cost of insurance is likely to be much lower.
It’s also important to consider the running costs, such as fuel and parking, as these can quickly add up. For example, if you’re only taking short trips and you’re not making long journeys, it might be more cost effective to use public transport instead.
Additionally, when considering the cost of company cars it’s important to bear in mind the potential for increased productivity. Business cars provide an opportunity to work on the go, have meetings on the move and reduce commuting times.
Ultimately, it’s important to look at the benefits and costs of a company car versus a private car and to calculate the costs to make sure that you are making the best decision for you.
Other Considerations
Although the cost of a company car is important, it is not the only factor to consider. Employers may also be offering other benefits as part of a company car scheme, such as free breakdown cover, insurance, and breakdown assistance.
When assessing these ‘extras’, it is important to consider the value of these for your particular needs. For example, if you are planning to use the car for business trips, then insurance and breakdown protection can be a valuable addition.
It’s also worth looking at the availability of additional services. If you are likely to need to access maintenance services at a distant location, then it’s important to find out if the company car scheme offers this as part of the package.
Finally, another consideration should be the environmental impact. Company cars produce emissions and having your own vehicle may be more environmentally friendly than a company car. Think carefully about the environmental implications of your choice and make sure you are aware of any pollution laws that may apply.
Choosing the Right Company Car
When it comes to choosing the right company car, there are a few key aspects to consider. Think about the type of car you need, the features that are important to you, the running costs and the tax implications.
It is important to take everything into consideration and talk to your employer about the best option for you. Make sure you discuss the company policy and check the company’s requirements when it comes to features and options.
Be sure to do your research and compare the costs of different models and companies in order to get the best deal possible. Check out car reviews and find out what other people have had to say. Consider renting a car before you buy to get a feel for the car before you commit.
Your employer should be able to provide you with all the details and information you need to make an informed decision, but don’t hesitate to ask questions and make sure you know what you are getting into before committing to any agreement.
Final Thoughts
At the end of the day, it is important to assess the total cost and benefit of each option and decide which is the most cost-effective for you. Company cars can provide great tax advantages and convenience, but you should also take into account running costs and coverage options.
If you decide to go with a company car, make sure you weigh up all the associated costs and keep track of the additional expenses. It may take some careful calculations, but in the end, if it’s cheaper to have a company car, you’ll be glad you made the investment.
