Buying a Company Car

A company car is a vehicle offered by employers to employees as a necessary work tool or fringe benefit.  The benefits of buying a company car extend beyond the convenience of an affordable vehicle for an employee. 

Common Uses For Company Cars

There are two ways that company cars are used to simplify the lives of employees.  Major corporations buy company cars for executives, high-level managers, and board members as perks for decades of service.  These company cars are typically luxury vehicles with premium amenities designed to treat experienced professionals to touches of the high life.  University presidents, retired business owners, and others use these company cars for personal and professional needs throughout their daily lives. 

The most common way in which company cars are utilized in the corporate world is in the completion of professional tasks.  Sales people who make calls to business owners and individual clients may receive sedans to carry supplies from office to office.  Regional managers and supervisors may have access to company cars for trips to distant offices.  The main purpose of this approach to buying company cars is the assurance that critical personnel have reliable vehicles. 

Effective Purchases Of Company Cars

Smaller businesses that buy company cars purchase sedans and trucks, as older vehicles fall by the wayside.  The best way to purchase company cars without spending excessive amounts of money is fleet purchasing through local dealerships.  Companies like Ford and Toyota offer fleet discounts for larger businesses that purchase dozens of vehicles at one time. 

This approach is favorable to growing companies for several reasons.  The timing of maintenance checkups and repairs at mileage intervals is synchronized when purchasing company cars at the same time.  The immediate savings of buying company cars at discounted fleet rates can be used for other long-term expenses.  Managers who have favorable experiences with specific car models can replicate this experience several times over with fleet purchases. 

Company Car Rentals And Leases

An alternative to the high price of purchasing corporate vehicles is renting a company car from a local dealership.  The immediate depreciation of a fleet car as soon as it heads off the lot means that a company’s initial investment is reduced in value.  A company renting a company car is able to save money on monthly payments without dealing with an older vehicle that has low resale value.  The best part for employees who receive rented or leased company cars is the ability to drive new vehicles on a regular basis. 

Employee Tax Deduction Aspects Of Company Cars

The Internal Revenue Service carefully observes records and other materials for company cars cited on individual income taxes.  Employees need to separate personal use and qualified non-personal use to fill out income taxes legally.  The tax on company car usage is applied when vehicles are used for personal reasons, or companies reimburse employees for vehicle expenses. 

There are several circumstances where qualified non-personal usage helps reduce taxes on company cars.  Firefighters, ambulance drivers, detectives, hearse drivers, and other operators who need company cars to fulfill job tasks are able to write off vehicle use on income taxes.  These vehicle operators need to maintain thorough records and drive vehicles outside of luxury-class provisions to claim professional necessity when claiming vehicle expenses. 

Company Car Benefits For Employers

There are several requirements that employers need to meet before claiming company cars on corporate tax returns.  An employer needs to maintain detailed accounts of daily company car usage to substantiate tax claims to state and federal agencies.  Each driver should have separate files with receipts, maintenance records, and daily logs that help employers determine proper usage of company cars.  These files help employers in corporate filings, as well as advising employees in completing individual income tax returns. 

The fringe benefit provision of company car tax rules can be eliminated by the employer.  An employer must notify employees with access to company cars that every mile driven is filed under personal instead of professional use.  This measure is important for small companies that are looking to avoid financial liability under state and federal tax rules.  The downside to removing fringe benefit provisions from company cars is the liability added to employees. 

Workplace Efficiency Benefits Of Company Cars

A company car can improve workplace efficiency for an employee connected to his home office.  The advent of global position systems (GPS) in fleet vehicles helps drivers reach sales calls, drop-off points, and meetings in the shortest amount of time possible.  Hands-free mobile phone equipment including headsets and Bluetooth technology allows workers to hold meetings in company cars.  The use of company cars in carpooling and ride-sharing schemes creates good will in the office that can lead directly to a better work environment.  It is important for managers and owners buying company cars to use uniform equipment options throughout corporate fleets to ensure efficiency from each driver. 

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