Should you give your employee a company car?

buy a carIf you are a business owner who employs staff who need to drive around to do their job, you’ve likely asked yourself this question. Many small business owners will offer their staff members a petrol card to cover the costs of fuel. After all, fuel is the immediate expense when a vehicle is in constant use. But is a petrol card enough? What about wear and tear? Maintenance costs? If the employee decides to trade in their vehicle and purchase something bigger, will you still happily cover the fuel costs? Or perhaps, they purchase a smaller car that costs half the amount of their previous vehicle’s fuel costs – will you use that saved money as a bonus or reward?

 

These are tricky questions to ask. Often, business owners provide their staff with company vehicles when driving is expected as this way the company will cover the fuel, maintenance, insurance and so on. But this means that the staff member can expect a slightly lower salary as they use a company vehicle for their transport needs.

 

These stipulations can be a challenge to figure out. There really isn’t a blanket idea on how to deal with the company vehicle situation. It’s about what the business can afford and what the employee is happy to accept. Often times, companies offer a cost-to-company (CTC) package which will include things such as a company vehicle, a petrol card, a cellphone allowance, medical aid and a pension fund. If the employee accepts the CTC package then they have no say in the matter of what vehicle they drive. Things become extremely challenging when the company wants the employee to use their private vehicle for work purposes. After all, maintaining a vehicle, the tyres, the fuel and so on costs a lot of money.

 

Employees can appreciate a company car more than you think

 

In the case of an employee who doesn’t own their own private vehicle, the setup of having a company car can change their world. Even those who rely on only one car for the family to use for personal needs will find a second car extremely beneficial. In the case of those who earn in the lower income bracket and do manual labour, making use of the work truck to take their kids to school might be the very best benefit they can imagine receiving from their job.

 

But as a business owner, you need to make sure that you can afford the vehicles. The outlay of capital needed is enormous. Even when the car has been financed by the bank, it’s a couple of thousand out of the profits each month plus insurance, plus fuel. What’s more, if your staff are driving often or long distances, you will need to replace tyres more often than on your normal car. Also, you won’t be able to get away with anything less than comprehensive insurance considering you won’t be able to control how your staff drive the vehicle.

 

The tax man is on your side

 

On the positive side, you’ll be able to claim from the tax man off the company vehicles, the fuel costs and a portion of the maintenance too. Which means that tax season sees the business receive a hefty chunk of change, which can be used for something like a major service on all vehicles. What’s more, by offering the vehicles to your employees, you can include this benefit in the CTC package as mentioned earlier, which means their salary expectations are lowered.

 

Do as much research as possible

 

When looking into buying company vehicles, you should do your research before you simply purchase. Have a look online at what the resale value of the vehicle is. This is vitally important as you will likely want to trade in your company vehicles once they’re paid off, or even beforehand. You can do your research by playing around with a car book value calculator which will churn out results of different types of vehicles with a variety of different weaknesses or problems. In fact, if you see a vehicle you like for a good price, you can do a price comparison by using a car book value calculator. It’s best you make use of one that’s a feature on a reputable financial institution’s website so that you can rest assured of accurate results.
You see, vehicles are depreciating assets. Now, while a business could do well to have some company vehicles (they can work as branding and advertising opportunities too), they’re not going to bring in any concrete income. You need to put this down to basic company infrastructure that you believe is a must and not a nice-to-have.