Understanding the Real Cost of Company Cars for Employees


by Stefan Loewer |

If you are an employee at a large firm, you might find that your company offers you a complimentary car. Many companies use cars as token gestures for their employees so that they can keep them sweet and keep them on board. If you are considering taking a company car as part of your annual package, you need to think about it for a while. Here is how you can understand the real cost of taking a company car.

The value of a company car

To an employer, a company car is a valuable entity. One of the main problems in many industries is a lack of employee loyalty. In the modern world, people want to climb the career ladder, not stick with just one company. That means that many people leave jobs after a year or two. When the job has served its purpose, in that it has given them relevant experience, they move on to bigger and better things. Company owners can use cars as incentives to keep employees in the business.

Tax on company cars

One of the main things to consider as an employee is tax. If you decide to take a company car, you will have to pay tax on it. That means that you need to work out whether your finances can take a blow. You need to work out how much tax you will pay on your company vehicle. Sometimes your employer will cover the cost of tax, but you should not rely on that. Make sure that you read the terms of your agreement before you sign anything, or you could end up paying more than you expected.

Employee contributions

You may have to make cash contributions towards the day  to day running of your company car. If you use your car outside work, you will need to pay for any fuel or maintenance that this involves. You should make sure that things between you and your employer are clear before you decide to take the car. Make sure that you have a frank discussion about the vehicle before you accept it so that there is no ambiguity there.

Consider taking a cash sum instead

Taking a cash sum of money rather than accepting a company car might be a sensible move. For many people, the lure of a ‘free’ car is all too much to handle. You must remember that nothing in life is free, least of all cars. Rather than accepting a car from your company, you can ask for a lump sum instead. The money will come as part of your annual package and should cover the cost of any vehicle you decide to get.

Other options

If you opt not to take a company car, yet still need a vehicle, you do have some options. Firstly, you might want to consider buying a secondhand vehicle. You can use your lump sum to cover the cost of the vehicle, and so you should have no issue. Secondly, you may want to consider leasing a car. When you lease a vehicle from sites like leasingoptions.uk you have some flexibility in your vehicle. That means that you can use your package to pay for the car installments in a way that suits you.


In some cases, sure, a company car is worthwhile. If your company pays for your tax and your contributions are not too large, a company car will save you money. It is vital that you look into the terms of your company car. It may make more financial sense for you to take a lump sum instead and find alternate means of transport.

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