Driving the Dream: Understanding Fully Financed Company Cars

A fully financed company car is a perk offered by some employers, providing employees with a vehicle for both work and personal use. Unlike traditional car allowances or mileage reimbursements, the company assumes complete financial responsibility for the vehicle, encompassing not just the purchase price, but also ongoing expenses like insurance, maintenance, and fuel.

What’s Included in “Fully Financed”?

The “fully financed” aspect is crucial. Typically, it means the company covers:

• Vehicle Purchase or Lease Costs: The company either buys the car outright or leases it.
• Insurance: Comprehensive insurance coverage is provided, often with the employee named as a driver.
• Maintenance and Repairs: Routine servicing, repairs, and tire replacements are handled by the company.
• Fuel: Sometimes, fuel costs are included, often managed through a company-issued fuel card.
• Registration and Taxes: Vehicle registration fees and any applicable taxes are covered.

Benefits for the Employee

The allure of a fully financed company car is significant:

• Financial Savings: Employees avoid the hefty upfront costs of buying a car, monthly loan payments, and ongoing maintenance expenses. This frees up personal finances for other priorities.
• Convenience: The company handles all aspects of car ownership, eliminating the hassle of dealing with insurance claims, repairs, and registration renewals.
• Newer, Safer Vehicle: Companies often cycle vehicles every few years, meaning employees drive newer, more reliable, and safer cars than they might otherwise be able to afford.

Potential Downsides and Considerations

While attractive, there are potential drawbacks:

• Benefit Taxation: A fully financed company car is considered a taxable benefit. The employee will have to pay income tax on the value of the personal use of the vehicle. The specific calculation varies depending on tax laws and usage patterns.
• Limited Choice: The company usually dictates the make and model of the car offered, limiting the employee’s personal preferences.
• Usage Restrictions: Some companies impose restrictions on personal usage, such as mileage limits or geographic boundaries.
• Loss of Vehicle Upon Termination: The car remains the property of the company and must be returned if the employee leaves their job.

Making an Informed Decision

Before accepting a fully financed company car, carefully consider the tax implications, usage restrictions, and overall fit with your lifestyle. Weigh the financial benefits against the potential limitations to determine if it’s the right choice for you. Consult with a tax advisor to understand the specific tax implications in your jurisdiction.