Great news, your new job offers a company car or a car allowance in your benefit package! Now it’s time to decide, will you take the car on offer from the company, or will you opt to source your own vehicle and use the cash allowance towards it?
The decision is not as simple as, “I love BMWs and the company offers a Ford, I’ll take the cash option, thanks.” There are a whole host of considerations you need to take into account.
Tim Warr of Warr & Co Chartered Accountants offered to write this article and help you make the right choice for you and your pocket.
What Is A Company Car
A Company Car is a vehicle offered to you to use for business purposes by your employer. The employer owns (unless they use car leasing) and maintains the vehicle and you can sometimes drive the Company Car for personal usage, but this depends on the company’s policy.
What Is The Company Car Allowance
The Company Car Allowance is a cash alternative to the traditional Company Car. While the Company Car used to be favoured, recent legislative changes have resulted in the tax-saving benefit of Company Cars being axed. This is the main reason that Company Car Allowance has gained popularity over the last few years.
Which Is Best For Companies
It’s hard to say whether offering a Company Car or the Company Car Allowance is best for a particular business without really looking into the unique circumstances. There are pros and cons that come along with offering either of these benefits, so you’ll need to decide which to offer.
Many businesses whose employees require the use of a vehicle for business purposes are offering both scheme types to their staff. While having the choice of the scheme may be popular with employees, it will inevitable increase the administrative work necessary to ensure your benefit scheme works well.
Here we’ll have brief look at the implications for businesses.
Which Is Best For Employees
As with the question of which is best for a company, Company Cars or Company Car Allowance, it’s impossible to make a blanket statement and say one is better than the other for employees. It depends highly on your personal circumstances.
For many people, switching to the Company Car Allowance or opting to choose the Company Car Allowance given both options is very tempting. Afterall, you are essentially receiving extra salary for the purpose of obtaining a vehicle for business use that can also be freely used for personal driving.
So here we’ll list the headline features of each scheme from an employee’s perspective.
While this Company Car vs Company Car Allowance table may paint a negative picture of the Company Car Allowance, it’s still the more popular choice simply because it provides you with the freedom to fund your own vehicle. Your Allowance will contribute towards an asset you own and you can use the vehicle for any purpose.
If you’re still struggling to decide if the Company Car Allowance is right for you, why not check out the pros and cons here.