company car
By Alison Stanton

As a small-business owner, you might be tempted to invest in a company car or fleet to benefit your employees. The appeal of showing up to an off-site meeting with clients or making deliveries on the company’s behalf via a shiny, new sedan resonates with you. Moreover, it spells brand appeal and a carefully-crafted identity.

But, like many things in life, there are definitely pros and cons in splurging for a company car. Before you go shopping for a vehicle, consider the following points:

Taxes Can Get Complicated

As The Balance notes, there are a number of complicated tax rulesassociated with company cars that not make this benefit a reality. In some cases, these regulations may force you to reconsider this investment altogether, as the hoops to jump through may create more of a hassle than it’s worth.

More specifically, you’re only allowed to declare a tax deduction if the vehicle or fleet is used solely for business purposes. This means you and/or your employees must keep strict and careful records, including when the vehicle was driven, by whom and to where.

If employees ever use the car for personal use, the IRS considers this to be a “non-cash fringe benefit,” meaning a portion of the car’s value will be thought of as taxable compensation. But if your employees drive their own vehicles to work and then use the company car while on the clock, it might make financial sense to offer one as a perk. Still a bit on the fence? You may want to consult with an accountant before making a purchase.

Company Cars Require Regular Upkeep

Another important consideration when deciding whether to buy a company car or fleet is maintaining regular upkeep of these vehicles. After all, the last thing you want is for one of your employees to be stranded on the side of the road due to neglected maintenance issues. Of course, just like your personal vehicle, company cars need regular oil changes, repairs and new tires.

Fortunately, it’s possible to find great deals on necessary equipment like tires. For example, online retailers like offer a wide selection of tires at a number of different price points. Better yet, your new set of tires can be delivered directly to your company or to a local tire shop for installation.

The Selection of Suitable Vehicles May be Limited

The addition of a company car to any business facility will likely be seen as a terrific perk, but you may find some employees aren’t as enthusiastic about this new investment. As Bizfluent notes, depending on what type of business you own and your budget, you may have limited options as to which type of vehicle you can purchase and offer your team.

In fact, if you’re considering buying a couple of super affordable, bare-bones compact cars without many bells or whistles, you may find your team actually prefers to drive their own vehicles that are equipped with XM radio, heated seats and other luxury features.

Weigh the Plusses and Minuses

After looking into the pros and cons of owning a company car, you may determine that it makes sense for your business to have at least one vehicle for employee use.

If not, you can certainly maintain the status quo, at least for now. Either way, conducting company car research ahead of time can be beneficial when you decide to look into investing in one at a later date.

Alison Stanton has been a freelance writer for the past 18 years. Based in Phoenix, Arizona, Alison thoroughly enjoys writing about a wide variety of people and topics. When she is not writing, Alison can be found hanging out with her family—which includes three wonderful rescue dogs—and sipping a caffeinated beverage from Starbucks.