Company Business Vehicles: The Pros and Cons
Sometimes, you may need your employees to go mobile; company business vehicles can be your solution. Business on wheels can be beneficial, as your business is not confined inside your building. Giving your employees company business vehicle can also be an excellent way to show gratitude for their enthusiasm and hard work. However, it’s not always a practical choice to show them how much you appreciate them with a company car.
If you decide to get company business vehicles, it’s essential that you think things through and know what considerations to make before investing in a fleet of company cars. To help you, let’s go over the different pros and cons of them:
The Advantages of Company Business Vehicles
Providing your employees with vehicles comes with probable benefits. Here are some advantages that you may savor as an employer:
- You have full control.
Giving your employees a company business vehicle gives you more control over the situation rather than depending on your employees to provide cars on their own. For the most part, you are able to control when and how they can use the car.
This can also be very helpful if your company need specialty vehicles, as you no longer need to rent drivers and cars from another company.
- You can increase awareness.
Since technically, you’re the owner of the car, you can put your company’s logo on it. You can choose to put your logo on the vehicle or wrap it with advertisements. Doing this, you’ll be able to extend the awareness of your brand in every mile the car travels.
It can also be beneficial to your company’s image. You don’t want your employees meeting up with a high-end client in a beat-up car. The vehicle your employee is driving it reflects your business, like how a company uniform does.
- Letting your employees experience perks.
Giving company business vehicles to your employees can be an excellent benefit for them, even with the tax implications.
For your employees, it can eliminate:
- Their need to purchase their own cars
- Worries of commuting to and from your company
Your employees will also feel that they’re appreciated and valued at work, thus, boosting their morale.
- You’ll have accurate information.
When you own the car that your employees utilize, you’ll be informed of all the details of each trip.
You don’t have to ponder about the:
- Vehicles’ specifications
- Care of the cars
- How much mileage the car has accumulated
- If the refunds are efficient and fair
This gives you the capacity to keep tabs on everything about the car.
The Disadvantages of Company Business Vehicles
Giving vehicles to your employees comes with some possible challenges. Here are some disadvantages that you may encounter as an employer:
- You need to shell out an expensive upfront investment.
Buying and caring for company business vehicles can be expensive. It would require a significant upfront venture from you, which can cost you thousands of dollars or more for each car.
You may write off the costs as a necessary investment during tax time. However, you still need to shell out money so you can buy the vehicle. This can be hard especially if you’re not able to shell out the whole amount and there are more pressing things you need to pay for.
- You’ll be facing costly maintenance.
The company business vehicle needs to be cared for from the time it’s purchased until the time that it can no longer be used.
The expenses of caring for it includes:
- Routine maintenance
Most of these expenses can be deductible during the tax period, but they can still be difficult on your company’s cash flow.
- Your liability would be increased.
Giving a company car can increase your company’s risk, especially if your employees have unlimited access to the company business vehicle. Your insurance company will need you to pay more for the vehicle’s coverage.
You’re also liable when your employee gets involved in an accident using the vehicle you’ve given. This is why you should get in touch with a lawyer, and ask him/her what you can do in case one of the cars you let your employees use becomes involved in a vehicle accident. Your lawyer will be able to advise you as to how to handle the situation.
- There would be more reporting requirements.
If you want to get reimbursement for the money you’ve spent on purchasing the car, you and your employees need to keep track. This is essential, especially if your employees are given unlimited access to the vehicles, and they’re able to use them for personal needs. The IRS treats this as a fringe benefit, and you’ll experience tax implications. Thus, your employee should keep a mileage log book.
Weighing Your Choices
Providing company business vehicles has its benefits and challenges that you need to consider. The more unique the kind of vehicle your employees require or the more power you want, the more reason to provide employees with cars. On the other end, if you’re going to minimize the risk involved or give your employees more freedom, refunding your employees for personal vehicles might be a better choice. Regardless of which option will work for you, it’s essential that you provide a company policy to maximize the advantages you’ll get from the cars while minimizing the disadvantages. Doing this, you’ll be able to monitor your employees’ driving behaviors and achieve a more cost-effective scheme for you and your employees. If you’re having trouble with your options, especially with their legal implications, click here for more information on how a lawyer can help.
Joanne Reed has been writing about law and business for almost a decade, and is currently writing her next big law project. She is an avid sports fan and loves watching games if she has free time.