The company car is a vehicle that an employer makes available to an employee so that he can move around during the performance of his duties. The employee who is entitled to them is granted a certain number of advantages. However, there are a few constraints. Before getting to these two points, it is interesting to see in more detail what exactly the company car is.
Rental car is also an excellent option for companies. To rent a car in Islamabad, contact Carlay Car Rental, It is a well-reputed car rental company.
What is the company car?
Also called a service car, the company car is a vehicle that can only be used during working hours and for trips that are part of professional missions. Most often, this type of car is the delivery or technical vehicles parked in the parking lot of the company. In addition, they must be returned to the workplace at the end of the day.
Thus, unlike the company car, the company car cannot be used for private travel. This also concerns journeys such as the employee's home to his place of work or vice versa. However, the employer can authorize his employee to derogate from this rule by specifying it explicitly in writing.
Good to know
If a company car is used outside the professional framework, its driver must declare it as a benefit in kind to the tax office. In the event of non-compliance with this rule, the tax services will reclassify the vehicle, and the employee will be fined.
The advantages of the company car
The benefits of the company car mainly accrue to its driver. Among other things, the latter will no longer have to pay the direct costs related to the use of the vehicle.
Indeed, expenses such as insurance, maintenance, repair, and especially fuel will be paid by the company. A godsend when we know that the total of these expenses amounts to several hundred dollars per month. Which is not insignificant.
If the employee obtains the agreement of his boss to drive the vehicle between his home and his place of work, this will also prevent him from having to use public transport or his own car. 4.
The employee does not have to pay the fines corresponding to the violation of the technical control either. Since he is not the owner of the vehicle, it is not his responsibility to carry out technical checks and maintenance. This role effectively falls to the employer and it is therefore up to him to pay the fine.
Good to know
In the event of an infringement of the Highway Code, it is the driver, that is to say, the employee, who is criminally and financially liable for the fine. If the company refuses to disclose the name of the employee responsible for the violation, it is liable to a fine that can range from a few hundred to several thousand dollars.
The disadvantages of the company car
The first drawback that comes to mind regarding the company car is that it does not in any way lead to the modification of the employment contract. Indeed, it is not considered as a benefit in kind, so the employer can withdraw it at any time from the hands of his employee. This withdrawal nevertheless entails an indemnity to compensate for professional travel expenses.
Even if the employer authorizes the employee to use the service car to travel between home and work, the latter will still not be able to use it for his private trips. He will therefore have to use his own vehicle.
The other disadvantages mainly affect society. Already, the purchase of a company vehicle is subject to rather expensive tax treatment. The depreciation of such a vehicle is tax deductible from the company's results. You should know that this damping is still limited by the CO2 emissions produced by the car.
The company is also required to pay the tax on company vehicles or TVS for private vehicles registered in its name. This tax is also calculated on the basis of CO2 emissions. VAT is also not applicable except in the purchase of certain fuels such as liquefied petroleum gas, diesel, or super ethanol.
What type of financing to choose for your company car?
There are several possibilities for financing a company vehicle: using cash flow, taking out a loan, or taking out a rental contract.
Call on your treasury
This method of financing has the advantage of only committing the company in the short term. The latter also immediately becomes the owner of his vehicle. Not to mention that it can save on the additional costs that can be incurred by renting and borrowing interest.
However, an outflow of cash can significantly affect the business, limiting its ability to finance other projects.
Take out a loan
Making an auto loan to finance the acquisition of a service car also allows the company to become the owner. In addition, it avoids impacts on the cash flow, so it remains stable.
The other side of the coin is that this method increases the debt of the company. In the event of resale, the funds received will be used to settle the loan. Having already subscribed to a banking organization's financing request, any other requests from the company will be more limited.
Rent your company car
A rental contract for its service car saves the company the hassle of maintenance and insurance costs. The vehicle is used for a period markedly shorter than its useful life, even in the context of Long Term Car Leasing.
At the end of an LLD or LMD contract, the business manager will return the vehicle and may choose a newer one. Another possibility to acquire it for good: a Leasing with option to purchase (LOA).
The downside to leasing is that the company does not own the vehicle. The cost can be spread over several years. In addition, the company is forced to complete the contract even if it no longer needs the vehicle.
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