by Sarah Boisvert
Company cars are one of the benefits of business ownership that you may want to consider for your own company. These are cars the business owns or leases, but they are operated by an employee or employees for reasons outlined in the employee’s contract. Most uses of company vehicles deemed acceptable by the Internal Revenue Service include transportation to meetings with clients, deliveries, and commuting to and from home to work.
Here are some reasons why you may want to consider getting a company car for yourself – or a fleet of them for the entire company!
Win-Win Tax Benefit
Typically, companies can write off the whole cost of company vehicle ownership, operation, and upkeep as a business expense. The employer can keep track of all ways the vehicle is used for business and can count all business use as tax write-offs. This includes filling up the gas tank, buying oil, paying insurance premiums, and more.
Many companies prefer leasing, as the entire monthly fee is expensed, whereas ownership is a capital expense and instead depreciation schedules are used to calculate deductions.
Will your employees be using the car for personal uses? That’s not a problem, as long as they pay taxes on the personal use of that company vehicle. If this is done, then the car can still be considered a total business expense. The tax system actually rewards companies that use company cars instead of monetary compensation since there is no social security or employment tax on benefits, only direct cash compensation.
Of course, your tax advisor or accountant can give you precise information for your locality. It’s always best to get estimates from a professional before embarking on a major expense.
More Cost-Effective Employee Retention Strategy
Company cars can also be an effective employee retention policy. Besides creating visible status and standing in the company, a company car may also ensure that a valued employee will feel indebted to the company for its generosity.
Since most company-car leasing agreements allow companies to return the car to the leasing company at the end of a two- to three-year leasing contract, the lure of a new and improved vehicle is also just around the corner.
Company cars can also carry signage such as the company logo and contact information on the vehicle. This kind of advertising gives the company a presence in the area and helps to generate local business, if that is applicable to the company’s geographic market. However, even eCommerce businesses can benefit from web addresses on company cars or trucks in this age of online shopping.
Company cars can serve a multitude of purposes in a small business, and you may want to consider getting a company car to take advantage of these benefits.