Everything You Need to Know About Company Vehicles

For many industries, company cars are a requirement. Utility companies, trucking fleets and government agencies (fire trucks, ambulances, etc.) all may need to provide vehicles to their employees at times for business purposes. 

Some companies may also choose to do this as a fringe benefit for their employees; and in this case especially, it’s critical to understand the ramifications. Organizations need to know the ins-and-outs of providing company cars for employee benefits, the tax implications, policy considerations and tips for responsibly—and safely—providing company cars to employees. 

Why do companies provide company vehicles?

As with many aspects of business, there are both benefits and drawbacks of providing company cars for employee use. If a business owner is considering providing company cars, they’ll first need to weigh the pros and cons to ascertain if it is a feasible option or not. Here’s a closer look at a few of the positives and potential pitfalls: 

Pros:

• Value-added benefit: Company cars provide employees with the added benefit of transportation flexibility. Employees with families often appreciate having access to a second car and, for those employees that do not have the means to own a personal vehicle, use of a company car provides a stable source of transportation. 

• Accessibility: For employees who live in rural areas or work for companies located far from public transportation, the personal use of a company vehicle provides an easy way for employees to commute to and from work each day.  

• Positive tax implications: Company cars can also be used as part of a compensation arrangement between organizations and their employees. This type of arrangement can have positive tax implications—such as a reduction in employees’ income tax payments—for both parties.  

• Control and oversight: Fleet vehicles give companies increased control and oversight into the employee driving the car. This includes not only the make and model, but more important things like installing safety features and GPS tracking devices that help companies monitor driving habits and quickly address any issues. In addition to gaining insight into where company cars are at all times, certain types of GPS tracking technology alerts fleet managers when business vehicles are due for service and routine maintenance.

Cons:

• Maintenance and added costs: While GPS tracking technology can make it easier to complete regular maintenance on company cars, over time the cost of maintaining a fleet of cars can be significant. It’s important to factor in business expenses related to maintenance—and eventual replacement—of company cars.

• Capital outlay: Company cars can be a large capital expense, especially for small businesses. The cost of buying multiple cars can quickly add up. It’s important to weigh the potential costs before making the decision to launch a company car fleet.  

• Potential IRS tax burden: Sometimes, driving a company car can be more of a hassle versus a benefit to employees. Employees who use company cars are subject to paying taxes based on the total value of the car and its emissions, and these taxes can cancel out any benefits or perks, especially if an employee already owns a personal car. 

Download the report to find out more about how organizations of all sizes in various industries are cutting costs, improving  productivity and getting a positive ROI with fleet management software.

Company vehicle policy considerations

Most companies will allow employees to not only take company-owned vehicles home, but also use them for personal reasons. In these cases, it’s important for companies to set limits and appropriate policies that spell out how company owned vehicles can and cannot be used.  

These policies should be comprehensive, put in writing and signed by employees. Creating personal use of company vehicles policy can seem daunting, but there are publicly available resources and templates that can simplify the task.  

Policy considerations

Whether the company uses a template or creates its own, any personal use policy should include the following components:

• Overview that defines what a company car is and who the policy applies to
• How to qualify for a company vehicle
• Disability accommodations
• Personal use regulations
• Company driver rules
• Accident procedures
• Company responsibilities
• What the company is not responsible for 

Company car rules

It is essential that all drivers of a company car understand the very specific rules they must follow. As mentioned above, these should be spelled out in a vehicle use policy. These rules should encompass the following: 

• Safe driving: always obeying traffic laws
• Proper monitoring: including fuel usage, oil, tire pressure, etc.
• Substance use: no smoking, drinking or use of other illegal substances
• Maintenance: employees must follow a set maintenance schedule and/or alert company to maintenance issues or damages
• Use: no unauthorized use of the vehicle
• Safety: always lock doors and do not use a mobile device while driving 

This is not an exhaustive list, and companies should ensure they have a well-thought out list of rules and limitations that employees must adhere to.  

Things to do if you decide to provide company cars

When it comes to providing company cars, there are many factors that must be weighed before a decision is made. If your company has made the decision to offer this benefit, here are some additional considerations to keep in mind: 

• Detailed record-keeping: In order to ensure accurate tax reporting, employers and employees must keep excellent records that track business use versus personal use. Other items such as lease payments, mileage and maintenance needs must also be tracked to ensure vehicles are in good financial standing and are operating properly. 

• GPS tracking devices: Installing GPS tracking technology in company vehicles can help monitor the efficiency, mileage, and necessary maintenance of the car. Asset tracking can also help companies keep track of where vehicles are—and how they are being used—during off-work hours.  

• Dashcams: Companies may also consider installing dashcams on company vehicles to help monitor employee vehicle driving and keep employees honest and/or determine fault in an accident. 

Providing company cars can be a great benefit for an organization and its employees, but it’s not a decision that should be taken lightly. Taking into consideration all of the potential positives and challenges can help business owners make an informed decision. 

For more insights on fleet technology adoption, view our most recent Fleet Tracking Trends Report.