The differences for a company car vs car allowance
There are differences between providing a company car to your employee and giving them a car allowance. Which one is more beneficial or cost-effective?
It’s a question of responsibility. For car allowance, it’s the employee’s responsibility to find a vehicle and take care of its maintenance. In the case of a company car, the employer is responsible.
With a car allowance, the purchased car doesn’t belong to the company, whereas a company car does. There are pros and cons to each and it’s up to you to determine which option is best for your business needs.
For example, if you give your employee a company car and they no longer need it, there’s then the task of either finding someone else in the company who needs it or selling it. On the other hand, a car allowance means the employer can limit their involvement in finding and maintaining the car.
There’s also taxes to consider. Company cars can incur heavier tax payments than car allowances. It’s certainly worth calculating before you make a decision. .
So, is a company car or car allowance the best fit? Ultimately, it’s up to the company to decide what’s best for business. Company cars may be best when solely used for business, whereas a car allowance may be more suitable for those who will use the car privately too.