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Company Car Vs. Private Car

by Brendan Malloney ; Updated September 26, 2017
Companies often either provide cars to employee or reimburse employees for the use of their own car.

Employers attract potential employees by offering certain perks, including company cars. These company cars typically require additional cost and record keeping for the company. Many companies choose to reimburse employees for using their private car to reduce cost and simplify logistics.

Cost

While company cars allow businesses to convey a desired image to the public, costs to provide and maintain those vehicles can be considerable. The MoreBusiness website estimates up to $10,000 is spent per car annually in lease payments and maintenance, not including employee misuse. Although car fleets grow as companies expand, associated maintenance costs also rise, causing many large companies to outsource fleet management at great expense.

Employee Requirements

Businesses require strict records be kept by employees to ensure company vehicles are used only for work purposes. When employees use these cars or car phones for personal use, businesses may deduct those costs from paychecks. Copious records are also required by the IRS to deduct business expenses employees incur.

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Private Car Reimbursement

As an alternative to leasing expensive cars for employees' use, companies may pay employees fixed amounts to lease or buy cars for work use. Nothing would prevent employees from purchasing or leasing used or inexpensive cars and saving the rest of the cash. Businesses also can opt to reimburse employees for mileage driven and other associated costs incurred by employees while driving their own car for business purposes.

About the Author

As a professional pilot, Brendan Malloney began writing technical publications in 2006 for flight students at Embry-Riddle Aeronautical University. Some of his works include "Aerodynamics for Student Pilots" and "Understanding Federal Regulations." Brendan holds a Bachelor of Science in aeronautical science from Embry-Riddle Aeronautical University.

Photo Credits

  • cars parking in parking area image by L. Shat from Fotolia.com
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