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How do I provide company cars for my staff?

  • Blog
  • 08 December 2016

Deciding to provide an employee with a company car is not a decision that should be taken lightly. While the cars can become an asset to your business, there are still things to consider when providing these vehicles.

We explain how best to provide a company car and the issues to be aware of when doing so.

How do I provide company cars for my staff?

Purchasing a company car

There are a number of decisions that you’ll need to make when deciding to offer a company car to a member of your staff. This includes:

How will you pay for the car?

  • Outright purchase – Owning the car outright after paying full price for the vehicle
  • Leasing – Paying for the car on a monthly lease, until either paying a final lump sum or exchanging the vehicle
  • Contract hire – Paying a fee to hire the car on a fixed contract

It’s worth noting that depending on the payment option you choose, you may be able to negotiate on price.

What sort of car do you need?

This decision should be based on the daily driving and mileage your employee will need, as well as how they will use the vehicle. This could mean you need a car that is better suited to the motorway, or a vehicle of a certain size and style, such as a van to carry out specific work or hold certain equipment.

How many company cars do you need?

This can be based on how many vehicles you need to provide for your employees at the present time, but could also take into account your future business growth or new staff.  

Once you know what sort of car you need and how many, and you have negotiated on the purchase, you can assign each car to a member of staff.

This is where the next step in providing a company car comes into play – vehicle legality and maintenance.

Insurance and MOT

Ensuring your company vehicles are legally allowed on the road helps to protect your employees and your business from running foul of the law. Having systems in place to help keep on top of tax and insurance can avoid problems occurring, such as an employee driving without insurance or a valid MOT. Both these offences can see vehicles being seized or heavy fines levied at both the employee and your company.

Insurance – As the company car owner, it’s your job to ensure that the vehicle has a full and valid insurance policy associated with it. With a company car being used for business purposes, you can expect premiums to be higher due to the increased mileage and wear and tear of the vehicle.

It’s worth noting that some providers will offer specific insurance deals for company cars. It’s therefore wise to take the time to look for the best deal on your vehicle insurance when considering one to help save your business money.

MOT – Maintaining the MOT on a company vehicle is normally the responsibility of the driver. However, as the car owner, it’s up you to have records in place for when MOTs are due to remind your employees that the annual check needs to be booked and carried out successfully.

If the police stop an employee for not having a valid MOT when driving, the fine will usually be applied to them. That said, as the vehicle owner you have a responsibility to ensure your vehicles are regular serviced and are safe and roadworthy. Failure to do so could be a violation of the health and safety business policies you have in place.

It’s worth also offering employees a mileage allowance. This can cover their company vehicle expenses, such as road tax, insurance, MOTs and repairs.