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Is a company car worth it?

Company cars have long since been a staple for many lucrative jobs and it has even been proven that offering a company car can attract some of the best and brightest.

But, is a company car worth it?

After all, changes to company car tax mean you could end up paying more and it could end up becoming less tax efficient that you once thought.

Or, is a company car still a viable option for many?

In this article, we have a look at why you might want to get a company car, and reasons why you might not.

What are the advantages of having a company car?

Firstly, let’s have a look at the reasons why somebody may want to get a company car;

 

  • You could drive a nicer car for less money
    • Some of the most popular company cars are the likes of Mercedes’ Audi’s and BMW’s. This means that there tends to be a lot of discount on them particularly if you are going through a business. So, you could end up driving a brand new Mercedes for cheaper than you might think.
  • It looks professional and raises moral
    • If you are meeting clients in a brand new shiny BMW then you look even more professional than you already are. Plus, if you own a business giving your clients company cars raises moral and makes them more likely to stay with your company. It’s a win-win.
Man filling up his car with fuel hose spelling eco - is an electric car worth it?
  • There are business benefits to leasing a car
    • If you are leasing through a VAT registered company, then you can claim 50% of the VAT back on the monthly payments. If you are leasing a van, you can claim 100% of the VAT back.
    • Also, if you go for a business contract hire then the finance commitments can be “off balance sheet” so the liability of the finance doesn’t appear on the company accounts.

So there are some reasons as to why you might want to get a company car.

Changes to Company Car Tax 2017

Now comes the reason people might be put off getting a company car.

As of April 2017 there will be changes to company car tax. These changes will affect the BIK rates and will see to increase the amount you have to pay depending on your CO2 emissions.

Let me go into a bit more detail.

The current BIK rates were introduced back in 2002. Back then (though it seems like yesterday) there weren’t that many low emission cars on the roads. In fact, there were barely any.

Greenery shaped like a car - is a company car worth it?

So, to encourage employers and employees to invest in low emission cars and to help out our environment, they made it so the BIK rates were considerably lower for low emission cars. They also distributed the BIK rates so there weren’t that many for the low emission cars. You could argue that it was hugely uneven but if it was to encourage people to go green then it’s hard to complain.

And it worked! And Mother Nature thanked us for it. The government didn’t though, as they realised that there were quite a few people paying very little in company car tax. This is because the more people bought low emission cars the more low emission cars were launched and then more people opted for low emission cars and you get my point. Essentially, there were way more low emission cars on the roads being driven by employers and employees alike, meaning they were paying very little in company car tax.

To fix this, the government have now introduced more BIK bands on the lower end of the scale. This, they claim, makes it more evenly distributed. While that may be the case, it means you could end up paying more for your company car than you would have done before.

In which case you could be thinking ‘so if I’m going to pay more I might as well just go privately’ and you would be justified in thinking that. However, there are other changes that you should probably know about.

VED Changes 2017

Changes to company car tax weren’t the only tax changes announced last year. There are also changes to road tax.

Along a similar vein to the company car tax changes, these VED (vehicle excise duty) changes will impact those with lower emission cars.

When the current VED rates were introduced there weren’t that many low emission cars on the roads. You can probably tell where this is going. The government tried to incentivise people to opt for low emission cars so they wouldn’t have to pay as much car tax. However, this went a little too well and now there are more and more people paying very little road tax.

So they have introduced more bands, and a different way of doing things. 

As you can see, there will be changes to company car tax and road tax meaning that you could end up paying more either way.

Should I get a company car?

After all that, should you get a company car?

There are obvious benefits to getting a company car, as we’ve listed above. While the new changes to company car tax might put people off the idea, it’s important to remember that there are also changes to road tax that will affect personal drivers as well. So while you’re avoiding one tax change, you’ll be running into another.

Plus, you do have other tax benefits to a company car, as we also mentioned above, and you don’t get those with a personal car.

There are, however, some alternatives that you might want to consider.  

You do not have to pay company car tax if you do not use your vehicle for personal journeys. This includes driving it to and from work. If you keep your car at your place of work overnight and on weekends and use it strictly for business (going to meetings, making deliveries etc) then you do not have to pay company car tax. For more information, you can read our article on exemptions to company car tax.

Alternatively, you could look at a van. Vans are taxed via a fixed BIK rate which means that their CO2 emissions are irrelevant. Instead you will pay a fixed amount which can be reduced if you meet a certain criteria. You can read all about that here in our article about company car tax for vans.

And if you don’t want a van as your next company vehicle (we understand, they aren’t suitable for everyone) then perhaps a pickup? They are also taxed as vans, and you can get some seriously luxurious ones nowadays. 

So hopefully this has given you some guidance as to whether a company car is worth it. While the company car tax changes may put you off, the VED changes will still impact you. Therefore, it’s ultimately down to your personal preference.

car vs. van which is best for company car tax

Holly Martin

Content Co-ordinator at OSV Ltd
Holly enjoys: Reading, music and spending time with friends.

Within a week of Holly starting work at OSV she became an indispensable part of the marketing team. She's very intuitive and gets on with the whole office effortlessly.
Holly Martin

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