3 Reasons to Have a Company Car

company car

This employee benefit still makes a lot of sense, despite tax implications

There was a time when, apart from perhaps being made managing director, the chance to have a company car was almost the Holy Grail of employment. Some staff need a company car to do their job of course – roles such as a field salesman mean usually many miles on the road to discharge their duties.

For some though, a company car is a definite perk of the job – a perk some feel has gone out of fashion in the wake of tax changes and other financial considerations. Optional company car schemes have caused some employees to decide to either keep or buy their own car and take a financial allowance from their employer instead.

There are still benefits to having a company car though, and the key is to compare what you may save in having a company vehicle – maybe a fully expensed one at that – compared to taking the cash allowance. Bear in mind that if you’re switching to a company car from owning one, you’ll have some money to put away when you dispose of it. There are one or two good ways to sell your car quickly if a company car appeals.


A key consideration is financial of course, and it revolves around weighing up the tax implications compared to buying and running your own car and taking the cash allowance you’d be given if you decided not to have a company car.

The cash allowance – be aware that an allowance in lieu of your taking a company car is effectively added to your salary, so would attract tax.

Calculating BIK (Benefit in Kind) –

the tax authority (HMRC) will levy a ‘benefit charge’ based on calculations made on the company car you’re having. The factors included are:

  • P111D value – the price of the car excluding first road tax and the first registration fee.
  • CO2g/km – this is the figure based on the car’s emissions; the lower the figure, the lower the emissions and (probably) the lower your tax liability. The emissions value determines the percentage band used to calculate the BIK; naturally the higher the emissions, the higher percentage used to calculate BIK.
  • Fuel type – this is added to the calculation and currently diesel cars are being  penalised due to the backlash against diesel particulate emissions.

The above factors are calculated by HMRC (you can perform a calculation using the HMRC online calculator for the car – or cars – you’re considering) and your benefit charge is produced. This is ‘added’ to your salary and you’ll pay tax on the amount in accordance with your tax bracket.

Compare this extra tax liability compared to the allowance for not having a company car, then factor in your costs to buy and maintain your own vehicle. You’d likely find in many cases there are still financial advantages to having a company car.


You may think having a company car restricts you in that you may only be able to choose from an approved list of cars compared to the cart blanche you have when buying your own. In fact, the opposite could be the case.

Wider new car options – there was a time when one or two volume manufacturers dominated the company car market. Ford in particular reigned supreme but over the years many more different cars are run on company fleets, so your company may offer a wide selection for you to choose from.

It may even be that prestige makes, possibly out of your financial reach when buying yourself, could feature on approved company car lists. Thanks to makes like BMW, Audi and Mercedes generally holding their value better than non-prestige competitors this can be reflected in favourable leasing and contract hire rates; a major way companies finance their cars.

On the other hand, buying yourself means you could be more restricted in what car you buy than you may be able to have from your company.

Ease of running

In many ways this is the trump card for company cars; along with being providing with a new car, you won’t have to worry about servicing and maintenance costs, replacements and repairs, taxing or insurance.

It’s likely that you won’t have to worry about a car deteriorating with age or becoming outdated; your company is likely to replace it on a regular basis such as every three years. Such is the rate of change with car technology, you’ll be running an up to the minute car from new and replacing it in good time to benefit from the latest advances.

Still worth it

While it’s important to do your sums and maybe take advice if you’re still not sure, there’s a good chance a company car could be advantageous to you.

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