Who Should Buy a Business Car: The Company or the Employee?
Are you thinking of buying a company car for your small business? Having a dedicated car can be an asset, especially if a lot of travel is involved in the work you do.
There has been an increase in the number of company car drivers in recent years, revealing that more businesses see this as a priority. If you’re yet to get a business car, there is a lot to consider.
Namely, have you thought about who should own it? While it may seem obvious that the business should buy the car, there are certain circumstances where it makes more sense for your employees to do the purchasing. Here’s a look at why this is the case.
Tax and Credit
From a tax perspective, there have always been certain advantages for whoever owns the company car. However, these benefits have changed in the last year or so, so this is potentially less of a draw for business car owners. Time will tell if these benefits return.
Meanwhile, there are also benefits to owning a business car when it comes to your credit score. This applies if you buy the car on finance or your purchase requires other types of regular monthly payments. By keeping up with the payments, on a personal level, you could see your credit score go up.
As a business owner, you may prefer to buy the car and use the business finances to cover the payments. This would then give your business credit a boost and potentially help towards attracting lenders later down the line when you may wish to upgrade offices or expand the company.
As well as financial benefits, there are some practical reasons why it may be more beneficial for business owners to purchase the car. One of these is that it’s easier to keep track of who is using the car for business purposes and formal permission must be granted. By giving employees the opportunity to use the car, you are effectively displaying your trust in them and this can boost morale.
If you are considering buying a company car, it’s worth taking the time to assess what the best steps are for your business. Whether you want your employee to buy the car or you would prefer to as a business owner largely depends on how you operate and what your car is needed for.