How firms can save money using company cars

A company car helps employees go about their work and can also act as an excellent way to boost motivation or reward good work. There is the function element for builders, contractors and couriers and the more high-end executive BMW and Mercedes for senior staff.

For some thriving businesses, having the company’s branding on the side of the vehicle has acted as an effective promotional tool such as Foxtons, Carey’s and Eddie Stobart.

Company cars can be great for certain companies, especially if you need to travel a long way from office to office every week. Investing into fleet management software could also help you organize the cars.

But looking after a fleet of company vehicles can also be very costly. There are, however, some very effective ways to save money and make running company cars worthwhile.

Benefitting from tax relief

There are tax breaks available for those using company cars including:

Whether you have the car full-time or part-time, the latter will see you a tax reduction.

You are actively paying towards the upkeep of the car. The vehicle will be taxed separately if the employer pays for things like petrol and personal trips.

Further reductions cane be made on the company car tax if:

  • A Partner of Limited Liability Partnership
  • Your company car has been adapted for mobility reasons
  • You are the proprietor of your own business
  • The car is not used for personal use
  • The car has low CO2 emissions e.g Toyota Prius

Lease instead of buying

An option to help save money is to lease the company cars rather than buying them outright. There are specific leasing agreements available to businesses only which are not available to individuals.

When leasing a car through a registered company, you will be able to claim 50% VAT back on the monthly payments. If you lease a ‘company van’, you will actually be able to claim back 100% of the VAT back.

However, you cannot claim back the VAT if your vehicle is used for personal use or reasons unrelated to work.

At the end of the business contract hire, you will hand the car back with nothing additional to pay (in most cases). Essentially, this means you do not have any cash tied up in depreciating assets, which is very attractive for businesses.

The type of vehicle you use

As mentioned, those cars with low CO2 emissions are subject to tax relief, hence the popularity of the Toyota Prius or G Wiz. In addition, the type of petrol your vehicle consumes will also have an impact, with diesel having a 3% surcharge over regular petrol. To find out your car fuel benefit, the HMRC have provided a useful calculator here.

Saving on insurance

One of the costliest things of offering a company car for your staff is the insurance. If the vehicle is also used in the individual’s personal time, these costs can be shared. But on the road, during work hours, you are responsible to pay for vehicle insurance, public liability, goods in transit (if application), employers liability and more.

One option is to apply for fleet insurance, which is the business equivalent of multi car – allowing multiple vehicles to be under one policy and it provides a discount for buying cover in bulk. There is also the option for any driver extension so that your staff can share vehicles. This is handy for couriers, making deliveries, taxi drivers and more. (Source: Fleet Insurance)