Everything You Need To Know About Buying A Company Car

Making sure employees are taken care of is good for them and for business. When an employee feels like they are being cared for they are more productive and will stick around longer. More productivity for a business is an obvious benefit, but also not having to replace employees frequently saves a lot of money.

One way to do this is to give them a company car. They are able to save money and wear and tear on their own cars so appreciate having one given to them. There is more to the story than just handing the keys over, however.

Buying A Company Car

The ins and outs of a company car needs to be understood so that it is a benefit and doesn’t become a burden on the employee or the company. In this article, we will go over what needs to be understood when it comes to getting a company car for an employee.

Leasing vs owning 

There are only a few circumstances in which leasing a car makes more sense than buying one. Luckily, one of those cases is when buying a car for use as a company vehicle for employees. Many dealers, like ​​Waxahachie cars for sale, offer leases as well as purchasing so there are many options.

That isn’t to say it is a slam dunk and should be the first choice. Buying a car also makes sense from many standpoints. It makes sense to look at both options and decide which one is right for the company.

A leased vehicle is usually less money up front as it doesn’t need as big a downpayment. Even during the course of the lease, it costs less. Lease payments for the same car that is bought are usually lower. And a lot of the routine maintenance is less costly since the car is new and doesn’t usually have any mechanical issues.

Owning a vehicle, however, is a good idea when the plan is to keep the car beyond the financing period or the warranty. Although costs are higher in the beginning since a big downpayment is required and monthly payments are high, the long term costs are lower. But, only when keeping the car.

How the cars are used is going to be a big factor in which one is better. If the car is only going to be used to commute to work and can’t be driven outside of work hours then a lease is going to be alright. Leases have mileage limitations and going over the limit incurs extra costs.

Owning a car is going to be better initially if it needs to be driven throughout the day and the miles rack up. Then again, if it has high miles then keeping it past the warranty is going to be costly in repairs and regular maintenance like changing the timing belt. Reflect on how the car will be used and what the budget is as it will likely come out that leasing is the better option.

Determine the type of car 

How the car will be used isn’t just going to affect the mileage. It also determines what kind of vehicle will be used and what the insurance on it will be.

For instance, if the vehicle is going to be used to deliver packages or other items around town then it needs to have enough space for that and a van should be the choice. If it is going to be used by an employee to commute to work and basically sit in the parking lot all day then a compact car with good gas mileage is the best bet.

As far as insurance goes, the way the vehicle is used will also determine the coverage. A vehicle used during business hours to deliver packages can be covered by commercial car insurance and save the company money. The coverage is also beyond what a typical personal insurance policy would provide. Cars that are in accidents doing work related matters should have a commercial policy coverage.

Do a cost to benefit analysis 

At the end of the day, the vehicle should be a way to give an extra benefit to an employee if the car is not being used for work purposes. However, it should still make sense from a financial perspective for the company to do so. A cost to benefit analysis will paint a picture that can help determine if this is a smart financial move or not.

Calculate how much the car will cost the company yearly. This includes the payments plus interest if it is being financed. Then, there is the maintenance and even depreciation of the vehicle that comes into play. Will the employee be responsible for fueling up the car or will the company take on the expense?

Take this number and ask if it is worth the kind of expense or if it makes more sense to give the employee a car allowance every month.

Car allowance vs company car 

Both car allowances and company cars are fantastic perks for employees. Which one is better depends on what is meant to be accomplished.

There are times when it makes more sense to issue a car allowance rather than have a company car. For instance, an employee may not have the space at home for a company car that can only be used during work hours and not personal use. Or, the upkeep on a new car is going to cost far more than just giving an employee an allowance to spend on their own car.

Decide what the allowance should include and then calculate what a fair number is for reimbursement. The amount should also be determined based on the role of the employee. New employees should not get as much as a middle manager for instance.


Whatever you decide to do to benefit your employee will be well received. As long as it makes sense from a financial perspective, that is. With so many options available the best choice will present itself and make it a no brainer.