Should I buy a company car?

As a business owner, there are going to be countless decisions you’re going to have to make. One of which is whether or not you should get yourself a company vehicle. There is a range of factors to take into consideration when making this decision and that’s what we’re going to be looking at today.


The first big consideration you’ve going to want to make relates to the cost of having a company vehicle. Whereas you won’t have to pay costs such as VAT if you’re leasing a vehicle on a business contract hire plan, you will have to pay what’s called company car tax which can make leasing a vehicle through the business more expensive than if you were to personally. However, this isn’t always the case and leasing a vehicle through the business can sometimes be cheaper if your level of company car tax is low.


You also have to take into account that either yourself or the employee within the vehicle are wholly responsible and liable for any damages or crashes that may be caused.


Company car tax consists of a few different areas and the amount of company car tax you’ll be paying takes into account a few different factors which include but are not limited to:-


  • What tax band you fall in to as a driver which is decided based upon a few different factors such as any crashes you’ve had in the past.
  • The P11D value of the car – this is made up of the list price of the car which also takes into account the VAT charged on the car and any charges for getting the car delivered to you. This excludes the registration fee for the vehicle and the costs for the annual road tax.
  • The amount of CO2 or carbon dioxide emissions that the car produces – getting an electric vehicle can bring this cost down to almost zero as well as it being cheaper to run.


Once you have taken all of the above into account you’ll then be able to roughly estimate how much you’re going to end up paying in company tax. This can then help you narrow down your budget for the company car.


Offering a company car to potential candidates can be hugely attractive and can also act as a great incentive for existing employees. On top of these cars are a great means of advertising your brands and services and is also a very cost-effective way of marketing. Plenty of automotive manufacturers have taken note of the huge surge in interest and have special deals and promotions exclusive to businesses wanting company cars.


However you can claim back up to 45p per mile for the first 10,000 miles and any over this limit will be charged at 25p per mile, if you choose to use your own vehicle. Some people have made the decision to lease/buy an electric/hybrid car themselves and charge their company mileage, which in some cases covers the entire amount of the lease due to the efficiency of the vehicle.


If you want to know more about how hiring a company car works and whether it’s a cost-effective investment for your business get in touch with the team here at D&K Accounting.


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