Should You Invest in a Company Car?

Should You Invest in a Company Car?

Investing in a Company Car

As the owner of a small business, it is tempting to invest in a company vehicle to benefit your employees. The appeal of going to off-site meetings and projects with clients in a company car may resonate with you. Like most things, the company car has its advantages and disadvantages. Before buying a vehicle for your business, take your time to consider the following points.

What Would It Be Used for?

Depending on your business, the need for a company car or fleet may be undeniable. If you provide products and services that need your employees to be in constant motion, then purchasing a company vehicle is a no-brainer. In other cases, the company car may turn out to be an unnecessary expense that is associated with a ton of liabilities. In these circumstances, it will be prudent for your employees to use their vehicles, and then you reimburse them for the cost of gas.


Another vital consideration before buying a company car is the regular maintenance that it will require. You wouldn’t want one of your employees to be stranded on the side of the road. Like personal cars, the company vehicle would require constant repairs and oil changes. The maintenance at the time might be an insignificant cost if the car will be serving the company in deliveries and branding. But sometimes, the maintenance cost of the vehicle might be high due to an initial problem during the time of the purchase, and it can be considered a lemon. In most states, lemon laws can apply to business vehicles as well, though they have different limitations. The two common determiners for a car to be a lemon is when it has a substantial defect, and the defect continues to be an issue.


You also need to know that there are numerous complicated laws associated with company cars. The rules may not be beneficial and may force you to reconsider the investment. First, you are only allowed to declare a tax deduction if the company car is only used for business purposes. Your employees will be expected to keep careful records regarding who used the car, when it was used, and where. If an employee uses the vehicle for personal endeavors, then this may be considered a non-cash fringe benefit, and a portion of the car’s value becomes taxable compensation.

Buying a company car may sound good on paper, but is it the right decision for your business? Once you have really researched the pros and cons, you can determine whether to invest in a company car. Make certain the investment is beneficial to your company and your employees.

Buying a company car is a large investment. Consider taking out a business loan to pay for the expense.

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