Whether you’re a business owner or employee, there’s usually a lot of thought that goes into deciding whether a company car or personal car is better for you to use. Both are options you have the liberty of choosing, but this ultimately depends on your preference, necessity, as well as some of the advantages you might want to take advantage of.
Company Car vs Personal Car
Should you go through with personal cars, you’ll need to be able to pay the car for out of taxed income. This basically means that you’ll be needing extra dividends and salary to pay for these expenses. On top of that, you won’t also be eligible for tax relief for the vehicle or on certain running expenses such as road tax or insurance. Nonetheless, you can still get the 45p per mile for the first ten thousand miles you cover if you use your personal car for work via the Approved Mileage Allowance Payments.
On the flip side, company cars are typically offered by an employer for both private or business use. These are also offered for employees who are generally required to travel for their role, like a regional sales manager. Luxury car leasing is also a popular option for company vehicles, given that many employers see image as a crucial part of their branding. In fact, a KIA EV6, which is the 2022 Car of the Year, is one of the most sought-after company cars due to its jack-of-all-trades trait that involves low running costs, impressive range, and spacious luggage room.
Benefits of A Company Car Over a Personal Car
But more than that, there are quite a few benefits that come with opting for company cars. For one, you get to claim a significantly lower business mileage rate compared to privately-owned cars. This is because the mileage rate doesn’t just cover the fuel costs but also the full running expenses of the vehicle.
Here are some perks that come with using a company car rather than a personal car.
1. No Financial Ties or Contracts for the Employee
As mentioned, personal cars usually require a contract for you to pay the necessary expenses. It’s also more costly than company vehicles. Since the car is leased through the business or company, the employee is not liable or personally bound to a financial contract that he or she needs to oblige. Instead, it’s the company’s responsibility to ensure that the monthly payments are delivered on time, including MOT, maintenance or servicing obligations.
2. No sudden costs or charges
With company cars, it’s the employers who are usually in charge of the maintenance, servicing, car tax rates, and insurance. Besides this, some companies or businesses might even provide a company car fuel perk, which will be significantly cheaper as opposed to filling the tank u p yourself. This means the employer will fill the fuel up for you and charge you with a fixed rate similar to the BIK tax.
3. Cheap BIK or Benefit-in-Kind rates
Speaking of BIK or Benefit-in-Kind rates, company cars have lower BIK tax rates. These usually comprise a very small percentage of the vehicle’s overall expenses. Rather, the total tax you’ll need to pay largely depends on the car’s income tax rate, CO2 emissions, and fuel type. nOn this note, hybrid vehicle and electrical vehicle’s BIK rates are significantly lower like that of a KIA EV6, Tesla, or Hyundai Kona. The rates are generally 3% for the zero-emission cars compared to diesel and petrol-fueled vehicles 15 to 37% charge.
4. Higher-Quality Vehicles
With company cars, you get the valuable opportunity to use a higher caliber of vehicle for an even less amount of money. This is because there are plenty of discounts to be found with certain brands such as BMW, Mercedes or Audi, among others. Besides this, choosing an electric vehicle such as Tesla, for example, will mean lower BIK tax rates due to the fact that these vehicles produce less amount of carbon dioxide compared to diesel and petrol cars.
5. No costs for depreciation
Leasing a company car helps you prevent the heavy burden of car depreciation since neither you or your employer own the vehicle lease hire. This means that upon the end of the contract, you can either opt to order a new lease car or simply walk away without the added stress of dealing with selling the vehicle in return.
6. New Car
Since company cars are often changed every two to three years, the most obvious benefit of a company car is that it lets you experience driving one of the latest cars on the market without the hassle of expensive costs. It also lets you take advantage of modern in-vehicle technology as well as upgrades and safety features.
About the Author
Leonard May, 30 years old was born on December 21, 1992. He is a professional recreation supervisor at Sky High Financial Advice located from Los Angeles, CA, 90017. May has been discussing his unique ideas and experiences on the issues he believes his readers will find interesting. Whether writing about finance, cars, or inspirational topics, he strives to create high-quality content that is worthwhile to read. As a married man with children, he values time and helps people like him to save time and money by writing life-changing subjects.