The classic company car model is an attractive benefit for many companies and employees. Flexibility in mobility is one of the big plus points here. Nevertheless, negative aspects such as the high cost of company cars and taxation should also be taken into account.
Whether the investment in a company car actually pays off depends heavily on the individual case. In addition to the type of use – i.e. whether it is mainly used for business or private journeys – the choice of taxation method plays a key role. Another decisive factor for companies is how high the proportion of vehicle use is for business purposes and whether the model can be integrated into the existing fleet in the long term.
In this article, we would like to clarify the question of whether a company car is worthwhile for both employees and employers and how they can save considerable costs through digitalization.
Contents
What is a company car?
A company car is a vehicle provided by the company that is generally used for business purposes. This includes, for example, customer visits or trips as part of deliveries. They are not only common in sales and field service professions, but are also frequently used as an incentive in management positions. Employees are also often allowed to use company vehicles for private purposes.
Is a company car worthwhile for employers?
For employers, a company car concept offers secure mobility and employee loyalty and motivation. However, whether the model is economically viable depends heavily on the utilization, administration and total cost of ownership(TCO) of the vehicle fleet.
Advantages of company cars for employers
Company cars bring a number of important advantages for employers. In certain areas, the use of company cars by the company is even indispensable. We have listed some of the most important advantages for you:
- Securing mobility: A company car is often necessary, especially in the field or for many customer appointments. Employees can use the vehicle flexibly as required and thus meet the company’s mobility requirements.
- Employee motivation and loyalty: A company car can be perceived as a valuable additional benefit and helps to retain skilled workers or attract new employees.
- Image factor: A well-maintained and uniform vehicle fleet conveys professionalism, prestige and strengthens the corporate image. By using electromobility , companies can build up their image of innovation and sustainability and thus achieve a positive public image.
- Tax advantages: Leasing rates and operating costs of company cars can often be claimed for tax purposes. This can reduce the company’s overall tax burden.
- Calculable cost structure: Monthly vehicle costs can be planned using leasing models. This makes budgeting easier and enables efficient fleet management.
- Transparency through digital administration: Digital tools can be used to precisely document vehicle use, costs, business trips and the private share – an important basis for tax calculations and the decision between a logbook and the 1 percent rule.
Disadvantages of company cars for employers
In addition to the advantages mentioned above, the classic company car model can also have disadvantages for the employer or the company. Here are some aspects that you should bear in mind:
- High costs: Acquisition, leasing, insurance, maintenance and taxes can be expensive – especially if there are many vehicles in the fleet. Fleet managers should keep an eye on both acquisition costs and running costs, such as fuel costs, and optimize their fleet accordingly. Fleet software can be well worthwhile for a transparent overview of all costs.
- Administrative effort: Managing a vehicle fleet requires time and resources – especially for larger companies. In order to significantly reduce the administrative workload, the use of powerful fleet management software can also pay off here.
- Lack of flexibility and idle time: If every employee is assigned a company car, this often results in high idle times. At the same time, employees have to wait for a replacement if a vehicle breaks down. This organization is inefficient for many fleets and leads to delays in operations.
Alternatives to company cars in the company
As not only employees, but increasingly also companies, want more and more flexibility, there are now numerous sustainable alternatives to the classic company car model.
A comparison of mobility models - more than just the classic company car
Not every company still relies exclusively on the classic company car. More and more employers are offering their employees alternative mobility models – either as a supplement or as a replacement. Mobility budgets are popular, for example, where employees can choose flexibly between public transport, sharing offers, e-bikes or leasing solutions. Company bicycles are also frequently used and tax-privileged.
- Corporate car sharing: instead of providing each employee with their own vehicle, several employees can share the vehicles in the fleet. This not only saves costs, but also parking spaces. This solution can also be particularly attractive for companies with changing field service appointments or several locations. With a large number of pool vehicles , appropriate fleet software for corporate car sharing can be very helpful in terms of organization and administration.
- Mobility budget: Employees receive a fixed mobility budget that can be used flexibly for public transport, car sharing or rental cars.
- Company bikes: Many companies rely on the use of company bikes for short distances. With this environmentally friendly alternative, employers ensure flexibility and promote the company’s sustainable image.
- Use of private journeys through reimbursement: Some companies allow employees to use their private vehicles for business purposes. Reimbursement is then based on kilometers driven or flat rates. The amount, place of work and purpose should be clearly documented in order to meet tax requirements.
Such models fit particularly well into modern fleet strategies: they reduce costs, are more sustainable and enable more individualized mobility in everyday working life. Companies that want to make their vehicle fleets future-proof and attractive are therefore increasingly turning to digital solutions and more flexibility – for employees and the entire company.
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Is a company car worthwhile for employees?
For employees, a company car can seem very attractive at first glance – especially if it is used intensively for private purposes. However, whether the vehicle is financially worthwhile depends on individual driving behavior and the taxation of the non-cash benefit.
Advantages of a company car for employees
- No own acquisition costs: The company car is provided by the employer – leasing rate, insurance and often also maintenance and repairs are included. This eliminates the need to purchase a car yourself.
- Private use often possible: Many employers allow private use of the company car. Those who can often use the vehicle privately benefit in particular.
- Predictable costs: the monthly costs are transparent thanks to deferred compensation or flat-rate taxation. There are no unexpected costs as with your own vehicle.
- Tax advantages for regular use: Those who use the company car for both business and private trips often benefit from the 1 percent rule or can use the logbook method if they have complete documentation. In this way, the taxation of the non-cash benefit remains transparent and comprehensible.
- Digital trip recording and clear rules: Digital tools for recording journeys simplify the management of business and private journeys. This is not only helpful for tax accounting, but also for employees who want to document their vehicle information in a structured and legally compliant manner.
Disadvantages of a company car for employees
- Taxation of the non-cash benefit: Employees must pay attention to company car taxation. The private use of a company car is considered an additional component of the salary for tax purposes and is taxed using the 1% rule or the logbook. The higher the list price, the more expensive the monthly deduction can be – even with low private use.
- Limited choice: Many employers specify models, brands or leasing providers. Personal preferences or the desire for special features may not be taken into account.
- No ownership, no flexibility: the vehicle belongs to the company. Conversions, sale or free choice of model are not possible. If you change jobs, the car usually has to be returned.
Saving company car costs through digitalization
As the administration costs of company cars are a decisive factor for employers, the use of digital software to save costs can be particularly worthwhile. Customizable fleet software can significantly reduce the administrative workload for fleet managers. It provides a transparent overview of all vehicles in the fleet and helps to quickly identify cost drivers. In this way, fleet software can make a significant contribution to a company’s profitability.
Another advantage of digital solutions lies in the automated documentation of journeys. This allows companies to make a well-founded decision between the 1 percent rule and the logbook method. The digital logbook can often be used to calculate a lower non-cash benefit, especially if the proportion of private use is low, thus significantly reducing the tax burden for employees.
Smart tools also facilitate compliant taxation and the central management of leasing contracts, insurance rates and maintenance intervals. Companies not only benefit from increased transparency, but also from automated reminders, which supports compliance with legal deadlines and avoids additional costs.
By continuously analyzing vehicle data, the utilization, mileage and operational use of the vehicles can be precisely evaluated. On this basis, the vehicle fleet can not only be downsized, but also strategically optimized – for example by specifically calculating costs per kilometer or adjusting the vehicle mix.
All company cars at a glance with fleet software
Company cars and gross list price - why the price on paper counts
For the tax valuation of a company car, it is not the actual purchase price that is decisive, but the official gross list price. This also applies if the vehicle was leased more cheaply or purchased with a discount. Why is this important? The amount of the non-cash benefit that you have to pay tax on is based directly on this list price. The higher it is, the higher the taxable amount under the 1% rule – regardless of the actual value or usage.
This can lead to a significantly higher tax burden, especially for high-quality vehicles. It is therefore worth comparing different models and list prices – especially if the car is rarely used for private journeys or you only use the company car for commuting.
Tax relief for electric vehicles in the fleet: when the switch pays off
More and more companies are examining whether a switch to electric vehicles is worthwhile – not only in terms of sustainability, but also with regard to tax aspects. If an electric company vehicle is provided for private use, generous regulations currently apply. If the gross list price is below the current threshold, the non-cash benefit for private use is only taxed at 0.25% – a flat-rate calculation that is attractive to many employees.
Companies that integrate several company cars into their fleet also benefit from lower operating costs, tax incentives and a modern image. Employees not only appreciate the quiet driving comfort, but also the transparent deductions on their payslip. Taxation is based on the gross list value and – depending on the amount and usage – can be significantly cheaper than with classic vehicles.
It is also important for financial planning to decide whether to use the logbook or the 1% method. Particularly in the case of regular commuting to the workplace, the logbook can enable more precise recording and help to ensure that private use is taxed correctly.
Conclusion
- A company car brings advantages for both employers and employees, but also tax and financial challenges. The decision should always be made on the basis of usage, costs and alternatives.
- By using fleet software, companies can significantly reduce administrative costs, identify cost drivers and organize their fleet more efficiently.
- Instead of traditional company car models, more and more companies are turning to modern mobility concepts. Whether company bikes, mobility budgets or pool vehicles: the future lies in flexible, digital and sustainable solutions.
Whether a company vehicle is worthwhile depends largely on driving behavior and the taxation of the non-cash benefit – be it via the 1 percent rule or the logbook method. Digital fleet software helps to manage private shares transparently and map them correctly for tax purposes – especially in the case of pool vehicles or mobility budgets.
Flexible solutions such as company bicycles and mobility budgets offer companies modern alternatives that can be better adapted to individual requirements – economically, future-oriented and sustainable.
FAQ - Important questions about company cars
A company car ensures the mobility of employees and at the same time increases the attractiveness of the company as an employer. In addition, leasing rates and operating costs can be claimed for tax purposes.
A company car is worthwhile if it is economical, reliable and tailored to the intended use. Electric or hybrid vehicles offer additional tax advantages and underline a sustainable corporate image.
Leasing is ideal if companies want to protect their liquidity and have regular access to modern vehicles. The predictable installments and maintenance options also make fleet management easier.
A company car is not worthwhile if it is rarely used or the tax burden of private use is too high. In such cases, alternatives such as car sharing or a mobility budget can be more economical.
Yes, the private use of a company car is considered a non-cash benefit for tax purposes. This means that if an employee also uses the company car privately – for example for shopping, vacation trips or commuting to work – this benefit must be taxed. Taxation can be carried out using either the flat-rate 1 percent rule or the logbook method. Both methods determine the non-cash benefit based on the gross list price or the actual kilometers driven.
Yes, a company car can generally also be used by several employees – for example as a so-called pool vehicle. In this case, private use is generally excluded and the car is provided exclusively for business trips. This has the advantage that there is no taxation of a non-cash benefit. What is important here is that the employer must clearly document the use and regulate it organizationally, for example via booking systems and regular driver’s license checks.
Whether private journeys with a company car are permitted depends on the employment contract or the company car policy. Many companies expressly permit private use – in this case, a non-cash benefit arises that is taxable for the employee. Those who use the car exclusively for business purposes, on the other hand, avoid an additional tax burden. It is important to note that journeys between home and work also count as private use and must be taken into account accordingly.
Other useful articles on the topic of company cars
Employer Driving License Check: Legal Regulations and Tips for Implementation
Driver’s license check form: Free download template
Driver instruction according to UVV: Download template as PDF
UVV inspection in the vehicle fleet: definition and importance in the vehicle fleet
10 Tips for Successful and Efficient Fleet Management
Mobility Budget Instead of Company Car: Flexible Mobility for Employees
Bicycles in the company: A sustainable alternative for employee mobility
E-mobility in the Company: 5 Important Points of the Fleet Analysis
Vehicle management: efficient processes for a modern vehicle fleet
