Company Car or Car Allowance: What’s Best for Your Business?

Offering a company car to employees has always been a major perk. However, the costs of company cars have gradually started to rise, making many businesses question whether or not they’re worth investing in.

There are a number of alternatives to providing a company car these days. A car allowance is one of the most popular alternatives. So, which is better for you and your employees? Here, we’ll look at the pros and cons of company cars and car allowances.

Company car pros and cons

When it comes to company cars, you have a few options available. You can either buy one, lease one, or offer one as part of an employee ownership scheme. Buying one is the most expensive option, while employee ownership schemes can also prove tricky for smaller businesses. For this reason, many business owner choose to lease company cars or buy one on finance from a provider such as Imperial Cars Supermarket.

Whichever way you choose to acquire them, company cars present the following benefits:

  • You have control over every aspect of the car
  • It’s a fantastic perk for employees
  • Can prove the least expensive option

As you’ll be buying or leasing the car, you have total control over the model used for business. This means you can choose a car with lower emissions for tax relief purposes, as well as ensure the car is safe and reliable. It’s seen as a great perk for employees too, encouraging more talent into the business.

The cons of providing a company car include the fact you’ll be responsible for maintenance and running costs. There’s also a lot of admin work involved.

Car allowance pros and cons

With a car allowance, you’ll give your employee a cash sum to either purchase a car or help with running costs towards their own car. The benefits of this include:

  • It provides flexibility to your employees
  • Less admin
  • More flexibility for you

Car allowance schemes provide flexibility to both the employer and employee. It can be cheaper for both parties, and the employer won’t be stuck with a car if the employee leaves. However, you do need to have the money to provide a lump sum in the first place. You also have less control over the reliability and safety of the vehicle chosen.

Overall, there are pros and cons to both options. It’s important to take both the advantages and disadvantages of each option into account when choosing the right one to fit your business.

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