The provision of a company car for employees is associated with considerable costs for the company. The cost of company cars for employers is between 150 and 800 euros per vehicle. The large difference is mainly due to different vehicle models. On average, companies have to expect to pay around 300 euros per month for a company car. Logically, a small car is cheaper than a luxury class vehicle.
But what costs are ultimately incurred by employers and employees and what advantages or disadvantages are associated with company cars are further considerations. These considerations are particularly important for budget planning and fleet management, as are precise cost analyses. Companies should also consider alternatives to company cars.
The total cost of a company car depends, among other things, on taxes, insurance, workshop and operating costs. Depending on the financing, there are also the purchase or leasing costs, which must also be factored in. As a rule, the majority of the costs are borne by the employer, who wishes to grant the company car as an employee benefit. Nevertheless, employees should also consider some aspects that are particularly relevant when using the vehicle privately.
Leasing instalments
In most cases, companies lease a company car. Leased vehicles do not become the property of the company. The leasing company remains the owner. The lessor charges the company a monthly leasing instalment for the use of the vehicle, i.e. for the opportunity to use the vehicle and for protection against the residual value risk, as well as for the vehicle leasing service.
The list price of the car is used to calculate the non-cash benefit of the car for private use. Under the 1 per cent rule, one per cent of the list price is added to the gross salary and must be taxed by the employee. In addition, employees must add 0.03 percent of the gross list price per kilometre for the one-way journey between home and work. This means that the further employees live from their place of work, the more tax and social security contributions they have to pay for the company car.
Acquisition costs
In addition to leasing, there is still a high proportion of companies that buy company cars. In this case, they have to factor acquisition costs into their calculations, which tie up a large amount of capital overall. This applies in particular to an existing fleet consisting of a large number of vehicles.
Insurance
Like private cars, company cars also require valid insurance. Companies have various options here. Motor third party liability insurance is associated with higher costs. Depending on the fleet of vehicles and their orientation, fleet insurance can also be a sensible option, but it is associated with corresponding costs. In the case of a company car, the insurance is provided by the employer.
Taxes and non-cash benefit
The employer is also responsible for vehicle tax. The amount of tax is primarily determined by the chosen vehicle model. The engine capacity and pollutant emissions are included in the calculation.
For employees, the non-cash benefit is relevant if they also use the vehicle for private journeys. Employees must pay tax on this non-cash benefit. They can either make use of the 1 per cent rule or keep a logbook.
If employees tax the non-cash benefit according to the 1 per cent rule, this corresponds to a lump sum of one per cent of the gross list price of the vehicle. This sum is independent of the journeys made, which can have a financially disadvantageous effect depending on the proportion of private journeys. In contrast, a logbook is associated with greater expense due to the obligation to keep records. However, only the journeys made are taxed and there is no lump sum.
Rapair and operating costs
When used on an ongoing basis, company cars also incur workshop and operating costs, which are borne by the employer. This cost factor applies to both leased and purchased company cars. The exact amount of this cost item varies greatly and depends primarily on successful claims management, the type of damage and the vehicle model itself. In practice, for example, it has been shown that electric cars require less maintenance than vehicles with a combustion engine.
Ongoing operating costs
Finally, the ongoing operating costs are included in the cost calculation for company cars. These are, for example, the fuel or electricity that is consumed. Ongoing operating costs also include oil changes or regular cleaning of the vehicle. Clear agreements between the employer and employee are important for ongoing operating costs, as the employer does not automatically cover these costs. Companies and employees can make fixed agreements here in the form of kilometre flat rates or other solutions and record them in writing to prevent misunderstandings later on.
The breakdown of costs shows that employers have to reckon with several different cost factors when it comes to company cars. Compared to other employee benefits and company mobility offers, it is therefore not a cost-effective option for employers. Here is an overview of the advantages and disadvantages of company cars for employers:
Advantages:
Disadvantages:
A cost breakdown shows that a company car is associated with costs and is therefore not always an attractive benefit for employees.
Even if the employer covers all the costs of the company car, employees have to accept significant deductions from their net salary. If, on the other hand, the employer provides the costs incurred for the company car, for example 600 euros, as a mobility budget, employees can decide freely and individually which means of transport they want to use when travelling.
If employees use public transport, these amounts can even be paid out completely tax-free. Monthly amounts of 300 to 800 euros, which are common for company cars, are also utilised by very few employees. Companies can therefore not only promote sustainable mobility for their employees with a mobility budget, but also save considerable costs. Employers can use these savings for other benefits, such as a meal allowance, childcare or health programmes that are used on a daily basis.
