Company car: advantages and disadvantages

Company car
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A company car is a vehicle that an employer makes available to an employee so that the latter can travel during the performance of his duties. The employee who is entitled to it is granted a certain number of advantages. However, there are some constraints. Before getting to these two points, it is interesting to see in more detail what exactly the company car is.

What is the company car?

Also called a service car, the company car is a vehicle that can only be used during working hours and for trips related to professional missions. Most often, these types of cars are delivery or technical vehicles parked in the company’s parking lot. In addition, they must be returned to the workplace at the end of the day.

Thus, unlike the company car, the company car cannot be used for private travel. This also applies to journeys such as the employee’s home to work or vice versa. However, the employer may authorize his employee to derogate from this rule by specifying this explicitly in writing.

Good to know

If a company car is used outside the professional framework, its driver must declare it as a benefit in kind to the tax office. In the event of non-compliance with this rule, the tax services will reclassify the vehicle and the employee will be fined.

The advantages of the company car

The advantages of the company car go mainly to its driver. Among other things, the latter will no longer have to pay direct costs related to the use of the vehicle.

Indeed, expenses such as insurance, maintenance, repair and especially fuel will be paid by the company. A godsend when you know that the total of these expenses amounts to several hundred euros per month. Which is not negligible.

If the employee obtains the agreement of his boss to drive the vehicle between his home and his place of work, this will also save him from having to use public transport or his own car. What’s more, the one at his disposal is often (but not always) of higher quality.

The employee also does not have to pay the fines corresponding to the infringement on the technical control. Since he is not the owner of the vehicle, it is not up to him to carry out the technical inspection and maintenance visits. This role is effectively up to the employer and it is therefore up to him to pay the fine.

Good to know

In the event of a violation of the Highway Code, it is the driver, ie the employee, who is criminally and financially liable for the fine. If the company refuses to communicate the name of the employee responsible for the violation, it is liable to a fine that can range from a few hundred to several thousand euros.

The disadvantages of the company car

The first drawback that comes to mind regarding the company car is that it does not in any way lead to the modification of the employment contract. Indeed, it is not considered as a benefit in kind so the employer can withdraw it at any time from the hands of his employee. This withdrawal nevertheless entails an indemnity to compensate for professional travel expenses.

Even if the employer authorizes the employee to use the company car to make the home-work journey, the latter will still not be able to use it for his private trips. He will therefore have to use his own vehicle.

The other disadvantages mainly affect society. Already, the purchase of a company vehicle is subject to a fairly costly tax treatment. The depreciation of such a vehicle is tax deductible from the results of the company. You should know that this depreciation is still limited by the CO2 emissions produced by the car. For emissions less than or equal to 155 g of CO2/km, the tax deduction is capped at 18,300 euros. It is capped at 9,900 euros for emissions greater than 155 g of CO2/km.

The company is also required to pay the tax on company vehicles or TVS for private vehicles registered in its name. This tax is also calculated on the basis of CO2 emissions. VAT is also not applicable except in the case of the purchase of certain fuels such as liquefied petroleum gas, diesel or super ethanol.

Which mode of financing should you choose for your company car?

There are several possibilities for financing a company vehicle: using cash, taking out a loan or taking out a rental contract .

Call on your cash

This method of financing has the advantage of only committing the company for a short term. The latter also immediately becomes the owner of his vehicle. Without forgetting that it can make savings on the additional costs that the rental and the interest on a loan can generate.

However, a cash outflow can significantly affect the business, limiting its ability to finance other projects.

Taking out a car loan to finance the acquisition of a service car also allows the company to become the owner. In addition, it avoids the impact on the cash flow, so it remains stable.

The other side of the coin is that this method increases the debt of the company. In the event of resale, the funds received will be used to settle the loan. Having also already subscribed to a request for financing from a banking institution, any other requests from the company will be more limited.

Rent your company car

A rental contract for its company car allows the company not to have to deal with maintenance costs or insurance. The vehicle is used for a period clearly shorter than its lifespan, even in the context of a Long-Term Car Leasing .

At the end of an LLD or LMD contract, the company manager will return the vehicle and can choose a newer one. Another possibility to acquire it for good: a Leasing with option to buy (LOA).

The disadvantage of leasing is that the company does not own the vehicle. The cost can be spread over several years. In addition, the company is forced to complete the contract even if it no longer needs the vehicle.

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