Should You Provide Company Cars to Employees? A Business Owner's Guide                    

Should You Provide Company Cars to Employees? A Business Owner’s Guide

Should You Provide Company Cars to Employees? A Business Owner’s Guide

Every boss wants to provide for their employees and make their lives as easy as possible. One flashy way to accomplish this goal is by providing your team with company cars. When considering whether providing your employees with company cars is a wise decision, you might have visions of draining bank accounts as you think about tax burdens and legal liabilities or ask yourself, “How much does it cost to ship a car if it needs transporting?” 

Ultimately, there are many factors at play, and only when these are weighed up together can a proper decision become possible. 

What does this look like?

There are two ways in which people make use of company cars. The first is when the vehicle is integral to the operation of the business itself. For example, ambulance companies, utility providers, and mail services are all business models that require the employer to supply company-bought vehicles called fleets. 

Alternatively, many companies will lease out a car to employees, often purchasing them in bulk to save money, primarily as an employee benefit or hiring perk.  

In either scenario, the tax considerations will be the same, but in the latter, it can be harder to regulate a company car for tax purposes properly. A company car is a deductible expense, but any personal use with it would not be eligible. Limited Liability Companies are considered the most common and popular form of business entity. They offer a variety of benefits, but forming them can be tricky. Learn more about how to start an LLC.

Tax considerations 

In the latter case, the company buys a car and leases it to an employee, who will have to keep careful records of how much is used for business or personal use. If this record-keeping is not done, the employee can face fraud charges. 

The lease and any other expenses that go into the company car can be deductible, though this rule does not apply to personal use. Driving the car to work or to meet clients counts, but Uncle Sam won’t appreciate any weekend outings or road trips making their way onto the tax forms. 

There may be associated problems, like wear and tear from personal use, that doesn’t benefit the company. There are some ways around this problem, like considering it a working condition benefit, but you should consult an accountant if making this claim.  

That said, it may limit mileage fraud because it is easier to keep records, knowing the cars in the first place.

Incentives to buy company cars

Companies aren’t just trying to throw money away with company cars. There are plenty of reasons company cars can be an investment. 

These cars can be cheaper if bought in bulk and give the company more certainty about insurance fees, fuel mileage, and other management expenses.

Even if not bought in a large batch, these purchases can make it much easier over time to regulate expenses if driving is an integral part of the job. Moreover, driving is much easier for the employee when it is necessary for specific work. 

It may be harder to measure quantitatively, but owning a company car can be great for employee confidence. In terms of hiring and retaining staff, providing an incentive, like a bonus, is a smart way to stand out against the competition. Moreover, it projects a sense of endurance and legacy for the business. 

While it is not necessarily beneficial to the employee driving the car, including branding of some form on the side of the vehicle might also be an excellent way to advertise to the employer. It is essentially free marketing if there are already company cars, but few would do it of their own accord.   


Keep in mind also that company cars are not a one-time expense. Beyond just fuel, there are many insurance and maintenance costs over the years. This cost will surely rack up over time and should ideally be budgeted ahead of purchasing any vehicle.

You should not only be mindful of standard car insurance. For example, a company may be liable for accidents associated with the company car. Many of these accidents will occur during weekends or non-work-related drives, which is added risk without reward.


When an employee needs a car shipped, whether that is from a new hire who is moving in or someone is relocating to another corporate branch, that may mean enlisting a car shipping company. 

Shipping can be done in two ways, either terminal to terminal, or door to door, the latter of which will cost more but will be easier for the employee who is leasing the car. 

Thankfully, there are dedicated companies who do this work as it can be logistically complicated. 

Final thoughts

Buying a company car to lease out to employees can be an ideal tool for business. It projects confidence in the company, attracts and potentially helps retain workers, and, when done right, may lead to some cost savings. 

For larger companies, this may be a good option. Likewise, this process may be cheaper and more manageable when driving is necessary for the job and not just for the commutes. 

It is sometimes a bit of a risk for all of the benefits, such as additional liability or more taxes, not to mention the cost of cars themselves, so any decision should be weighed out carefully.