A company car is often a tempting offer from employers, but is this option really still worthwhile in this day and age? The regulations surrounding the private use and taxation of company cars always raise questions. And the sustainability of company cars is more than questionable, especially when you consider that vehicles are getting bigger and bigger and therefore more harmful to the climate. The fact is that employees now also have attractive tax alternatives to company cars.
We analyse the advantages and disadvantages and provide an insight into the costs. Let's take a look together at the latest developments and decisions in the area of company car use.
For a long time, a company car was a status symbol and tax advantage for many employees. But in times of increasing environmental awareness and the desire for more flexibility, the question arises: is the use of a company car still appropriate today?
The tax advantages, such as the favourable taxation of the non-cash benefit, the so-called company car privilege, are undoubtedly attractive. However, the impact on the climate and environment due to CO2 emissions, resource and space consumption must also be taken into account.
The social status that a company car conveys is also under scrutiny - is it still relevant or is it outdated? In an era of new mobility concepts, companies should rethink mobility and consider alternatives to the classic company car.
Acquisition and maintenance costs
In principle, companies with a company car initially have costs for the purchase. There are also other costs that employers have to bear: Depreciation, financing costs, vehicle taxes, repairs and other variable costs. These costs are not a one-off burden for the company, but a permanent one.
Reduction in gross salary and tax relief
However, the one-off purchase of a company car can be more favourable than a permanent increase in gross salary. Offering a company car with private use is attractive for employers, as they can reduce the employee's gross salary including non-wage labour costs by the amount of the non-cash benefit. Employers also receive a VAT refund on the purchase of a new car and have the option of writing off the acquisition and maintenance costs for the purchase of the car as operating expenses. From a financial perspective, the purchase of a company car is therefore more favourable for many companies than a comparable salary increase.
Employee retention and recruitment
In many sectors, a company car is still perceived as an employee benefit that can be the decisive criterion for choosing an employer when competing for qualified specialists. However, there are now numerous alternative offers that are much more effective and can be of interest to a wider range of employees.
Admin and taxes
Even if they are happy about this employee benefit, employees generally have more work to do with a company car. This is because private use of the vehicle is a non-cash benefit that employees must pay tax on. This also applies if the company car is used exclusively for work, but the employer generally allows private use.
Employees can pay tax on the non-cash benefit of a company car using either the 1 per cent rule or the logbook. The lower the proportion of private journeys and the cheaper the company car, the lower the tax burden for employees.
Nevertheless: For a mid-range car costing 40,000 euros and an average commute of 10 to 25 kilometres, the monthly salary quickly increases by 600 euros gross, for which income tax and social security contributions are due.
Maintenance costs
A major advantage of the company car is that the employer covers the costs of purchase and usually the running costs such as repairs, inspections, summer and winter tyres, MOT and emissions tests and often also fuel.
If the costs of a company car are compared with the loss in value after the purchase of a new private car, the latter would already have a loss in value of around 50 per cent after four years. For a vehicle with a value of 40,000 euros, this would already be a loss of 20,000 euros, which corresponds to just under 420 euros per month.
Frequency of use
A decisive factor in whether a company car is worthwhile for employees is how often it is used for business and private purposes. If employees use the company car infrequently, which can happen especially in times of working from home, it is hardly worthwhile, especially with the 1 per cent rule, as the cost benefits are not utilised.
At a time when sustainability and climate protection, dealing with transport and mobility as well as demographic change are omnipresent, companies must also face up to the associated challenges. In terms of employee retention and mobility, this also puts the question of the environmental impact of company cars increasingly at the centre of attention.
Many companies are already realising that owning a car or even a company car is no longer necessarily the same priority as it was 10 or 20 years ago. This is particularly true for employees in large cities. The company car as a status symbol is playing less and less of a role for them. This is also shown by a recent study by SAP Concur among German employees: 35% state that they would do without a company car and instead welcome a car-sharing service from their employer.
Sustainable transport and flexibility are therefore taking centre stage when it comes to choosing a means of transport. This trend is not only having a positive impact on companies' carbon footprint, but is also making itself felt financially. Company cars currently have average list prices of 50,000 euros per vehicle and corresponding leasing instalments. Although the proportion of purchased company vehicles is still 40 per cent today, as a pure employee retention tool, this is a costly investment at current prices.
Last but not least, the so-called company car privilege - companies can deduct taxes as business expenses and company car users receive tax relief - costs the state billions every year and torpedoes climate protection and the transport transition.
Many companies have already started to look for alternative employee benefits in their efforts to attract skilled labour. In addition to work-life balance, well-qualified employees are now demanding more flexibility in terms of where they work and their working hours, as well as smart tools and benefits that make their day-to-day work easier.
In view of rapidly changing framework conditions, employers must be increasingly open to sustainability issues and sustainable mobility is also becoming increasingly important. The younger generation in particular is increasingly in favour of climate protection and wants more alternatives to company cars. In large cities, a car is no longer even necessary thanks to well-developed public transport connections or cycle paths and only brings frustration and annoyance when looking for a parking space. Employees increasingly want their employer to include sustainable alternatives such as car sharing, job tickets, e-bikes or company bikes in their mobility concept. A flexible mobility budget is a solution that can combine all of these options and allows employees to decide flexibly which mobility options they use.
