Company cars can prove to be a very useful way of getting to drive a vehicle if you happen to work for a business that has a strong fleet of employees. It brings the company in as something of a third-party within the finance deal, though ultimately the vehicle is the property of the organisation at the end of the day. As for whether this is beneficial for the client in the long run? Well, that is what we will be discussing as part of an in-depth article detailing the definition, positives and negatives of purchasing a company car on a finance plan.
What Is A Company Car?
A company car is a vehicle that has been arranged on a finance plan for an employee by their employer. This means that the company will be footing the bill of the regular payments, as well as any deposit, interest and balloon payment depending on which type of deal that the business went for. On occasion, this might be a decision taken for one particular member of staff who has to do a lot of travelling in relation to their work, but on other occasions, the organisation in question might purchase a fairly large fleet of cars so that all of the leading employees are covered. Company cars are particularly handy for businesses which require a lot of travelling, for instance a business that trades goods across the country which would want a fleet of vans that all sport the company logo, as well as for any organisations that want their trademarks to stand out visually, which could even mean repainting their chosen vehicles to match the colour scheme of their company’s branding. However, there is also the option for an employee who is seriously looking at buying a car for themselves and is seeking to balance their finances to pose the question to their employer about the possibility of them footing the bill as a third party; it is ultimately their decision as to whether they will go ahead with that, but it is certainly an option for them to take.
How Are Company Cars Financed?
The way in which company cars are financed depends on whether the business plans to retain the vehicles for the long run or merely for a limited number of months or years, just like how a standard customer would need to determine how long they wished to keep their car. The business will cover the main finances of the vehicle, but the employee would need to pay an increased level of tax in order to use the car. If the business was planning to retain the car for years to come, then a Hire Purchase is the more feasible option to consider based on the possibility that the employee could potentially leave the business at some point, or that the company’s finances may require a restructuring further down the line which would remove the possibility of buying the vehicle outright, or perhaps the car will be proven over time to be unsuitable for the company’s needs, especially in great numbers for a fleet. This would still open the door for a potential purchase, but it would give the company the chance to move away from buying the vehicle if necessary, and with lower monthly payments and no required balloon payment at the end of the agreement to boot. If the company knew that it was only planning to hire the vehicle all along, however, then a Car Leasing agreement might be the more desirable path because this would bring the regular monthly payments down even further, enhanced by the total cost being based on the vehicle’s presumed depreciating value as opposed to its original worth.
Benefits Of Company Cars
For the organisation, there is an important benefit of having a fleet of multiple company cars because it allows the business to demonstrate its growth and increase its awareness, especially if the exterior designs of the vehicles are worked upon to ensure that they stand out amongst other vehicles on the road. It also enhances their commitment to the employees in question, which in turn should lead to a greater commitment in return towards their work as a way of positively reacting to this major favour provided for them by the business. This also allows the company to be seen across a greater stretch of the city, the country and maybe even the continent because there is a greater likelihood of the business’ branding being seen in a variety of locations. For the employee, the benefit is that a potential major purchase for them and their work travels is being handled by their organisation, which has a major boost on their financial situation because they are not having to find quite as much money in order to pay for their vehicle. What’s more, they could find that they end up driving a better car than they would have previously been able to afford and/or consider because of the third party role being played the business.
Downsides Of Company Cars
First of all, a company car will be owned by the organisation, meaning that though the vehicle will be driven around by a particular employee, it never officially belongs to them. This will prove to be particularly important should their employment at the company ever come to an end for any reason, because no matter how far into the finance plan that they might be, once the employee is no longer working for the business, the company will either transfer the vehicle onto another member of the team or they will simply return the car to the dealership as they would no longer require the model. Even if the member of staff were to remain on the workforce, though, it is always up to the organisation as to whether or not they wish to retain the vehicle beyond the end of the finance plan, so at that stage, the employee might have to go down an alternative path and arrange their own new vehicle purchase anyway, especially if the company happens to be trimming down its financial expenditure at that stage. In addition, it should be noted that the company car should only be really used for any business-related travels, especially if the employee is travelling to the office from a fairly far distance, so it could create problems if the company car is seen out and about on the road in seemingly innocuous situations because, officially, the employee should not be using a company car for leisure-based travels, and this is particularly the case if the fleet of company vehicles have been painted to represent the organisation’s branding.
Company cars are only a possibility if the organisation has a big enough budget to cater for this, and also if the nature of the business would require its employees to be travelling on a regular basis in relation to work. Of course, there is also the possibility of a sole trader buying a car for business reasons which would give the employer/employee greater control over where the car goes, what the car is used for, and also a greater level of management over the finances of the vehicle, though this is not a necessity when you consider that a sole trader could just use their own car to get around. Nevertheless, if we assume that company cars would be used for a team of a dozen or so employees with one or more vehicles bought for the workforce, it definitely represents a sign of the organisation’s growth and long-term commitment to the skills of its staff if it were to accept this possibility, and for the employee, this is a source of great motivation, as well as providing a way for the member of staff to end up with a car at a lower overall price since the company would be taking on a greater role in covering the payments of the vehicle. And as we noted, if there is ever a sudden or even a planned severing of the employee’s contract, amongst the fall-out would be the employee no longer having access to their car; even if they remained at the business, the company could decide to change course at any time, likely for financial reasons, which would leave the employee at square one when it comes to buying a vehicle. On the whole, though, company cars are an option worth considering for any organisation that has a strong enough budget and a strong enough presence nationally and perhaps internationally too. And for an employee who works at such a company, it is definitely worth at least posing the question about whether their organisation would be interested in covering a vehicular purchase before going ahead with a finance plan of their own control.
Learn more about how to get a company car on a finance plan by visiting our blog section or call us on 01925 599079. to speak to our finance team.
As part of our services, we deliver the car to your premises of choice within the UK. Lately we have delivered cars in most major towns including the Southern cities & midlands: (London, Birmingham, Leicester), Northern cities (Manchester, Liverpool, Sheffield, Leeds, Newcastle), and Scottish cities (Edinburgh, Glasgow).
** As with all financing option, car finance comes with risks. If you cannot keep up with repayments your car is at risk of being repossessed and this will affect your file and lower your credit score.