How do company cars work?
A company car is a vehicle an employee uses for work, which is leased or owned under the business’ name and provided to them by their employer.
If you run or work for a business in which employees are required to travel as part of their job, a company car can be an attractive perk and a good cost-saving mechanism.
How much do company cars cost?
If you are an employee being offered a company car as part of your contract, it may cost you nothing at all! That is, of course, except for Company Car tax – see below for more on this.
If you are a business owner looking to take out a lease on company vehicles, it can often be cheaper than leasing the equivalent vehicles on a personal lease. This is because BCH (business contract hire) you can claim back 50% of the VAT on the rentals and 100% VAT on maintenance costs (as long as your company is VAT registered).
Which company cars are tax free?
Cars on a business lease can be completely exempt from any extra tax – but this is only the case with what is called a pool car. A Pool car is a behicle that is kept at a place of work, even after business hours. Pool cars are therefore exempt from company car tax because they aren’t used for commuting or any personal journeys.
How are company cars taxed?
If you want to use a car leased on a business contract to commute to and from work, or for any other personal reasons, you will have to pay Company Car tax. This is because receipt and use of a company car is seen as a Benefit in Kind, as gov.uk explain here.
Find out more about how company car tax is calculated here.
What are the best company cars?
As an employer and employee, you want your company car to be reliable. Here are three cars that Leasing Options consider to be among the most reliable and cost-effective on the market.
- The Skoda Fabia, a favourite among customers looking for a good value, trusty vehicle that is larger than most in the same price range. It is currently on a top deal with Leasing Options. Check it out here.
- The Renault Clio, though a slight step up in price from the Fabia, it has a much more luxurious interior and technical spec, including smartphone connectivity, which could be good for a business looking to impress.
- The Ford Fiesta 1.0 Eco-boost is an eco-friendly option that could be great for employers looking to put their money where their mouth is and invest wisely in more sustainable business practice. There is another benefit to this – the more fuel-efficient your vehicle, the less company car tax you will pay!
Find even more vehicle suggestions and a full guide on how to lease a company car here.