Company Cars Explained: How to Choose the Best Company Car

Whether you're an executive needing to navigate city centres, or a dedicated employee on cross-country missions, choosing the best company car can help more than you think. But with so many options, tax considerations and similar plans, how do you ensure you're steering in the right direction? From the allure of tax breaks and fuel benefits to our range of the best company cars, join us as we delve into this intricate world to help your next decision.

Table of Contents

1. What is a Company Car?
2. What is the Difference Between Company Car, Pool Car, and Car Allowance?
3. Pros and Cons of Choosing a Company Car
4. Company Car Taxing and Incentives Explained
5. Government incentives
6. How to Choose the Best Company Car
7. What is the Best Company Car? Our Top Picks for 2023
8. Hyundai IONIQ 5
9. Vauxhall Insignia
10. Peugeot 308
11. Peugeot 508 SW

What is a Company Car?

Company cars play a pivotal role in the world of modern business, serving as vehicles provided by employers to employees for both professional and personal use. It's essential to distinguish between company cars, pool cars, and car allowances, as each option carries distinct benefits and considerations.

When a company car is employed for personal reasons, record-keeping becomes a must. Employees are required to track mileage and report these figures to their employers. Employees are subject to taxation on the benefit derived from the company car. This calculation is influenced by the car's P11D value and CO2 emissions. The nuances of company car tax will be covered in more detail below…

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What is the Difference Between Company Car, Pool Car, and Car Allowance?

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A company car is a vehicle given to an employee by their employer, intended for a dual purpose—business-related activities and personal usage. Unlike pool cars, which are communal vehicles available for exclusive business use among multiple employees, company cars are individually assigned, giving convenience and accessibility to a certain person within a company. A car allowance, on the other hand, is a financial package given to an employee to flexibly seek a car to finance/purchase within an assisted budget range.

Let’s delve into these differences further with the table and bullet points below:

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• Company cars, though often costing more than pool cars, are an enticing perk of employment which attracts talent and enforces employee retention.
• Pool cars are optimal for businesses with smaller fleets or with budget control requirements, giving efficient staff mobility without insurance or parking concerns.
• Car allowances grant employees flexibility in car selection and can translate into cost savings, making them appealing to those who value choice and financial autonomy.​​

Pros and Cons of Choosing a Company Car

You may have already figured out some great benefits of company cars, but below we’ll cover all the bonuses and advantages that might convince your next decision even more. This doesn’t mean they don’t come with their downsides – these will be covered just below too.

Benefits of Having a Company Car:

1. Tax Advantages: A significant allure lies in tax breaks associated with company cars, such as BiK tax – this is covered in the next section.
2. Fuel Coverage: Employers may extend a fuel allowance for a company car to cover business-related travel expenses.
3. Servicing and Maintenance: Employers typically take care of servicing and maintenance expenses.
4. Depreciation Coverage: Since you never own the vehicle, and in some cases neither will your employer, there is no need to worry about the company car depreciating – just a simple transition to a new lease after the contract ends.
5. Financial Freedom: Leasing a company car absolves you from personal financial commitments associated with ownership. The business can assume responsibility for monthly payments, maintenance, servicing, and MOT requirements.
6. Talent Magnet: If you're a business owner, a company car scheme can entice valuable prospective employees and retain them due to their benefits.
7. New Vehicle Class: New cars in brands like Hyundai, Peugeot and more often offer discounts through company car leasing. Choosing an electric vehicle, like the Hyundai IONIQ 6, can have an even lower tax rate due to reduced emissions.
8. Stream of New Cars: Driving a company car means a continuous cycle of driving the latest vehicle models, often refreshed every two to four years.

Drawbacks of Having a Company Car:

1. Limited Personalization and Use: Company cars may offer fewer options for personalization or choice compared to a privately-owned vehicle, and some employer may not allow their convenience for non-work activities.
2. Tax Implications: Although tax rates are lower, the taxable benefit of a company car contributes to your overall tax liability. Company car ownership might also entail higher road tax payments than in a personal car. higher earners or those opting for pricier vehicles with elevated CO2 emissions could face steeper Benefit-in-Kind (BIK) tax rates. When fuel forms part of your company car package, you may be subject to fuel benefit tax.
3. Insurance Premium: It's worth noting that insuring a company car may cost more than a personal vehicle, and although tax rates are lower, the taxable benefit of a company car contributes to your overall tax liability.
4. Mileage Restrictions: Employers could place limitations on the miles you're permitted to drive for personal purposes using the company car.
5. Lack of Vehicle Ownership: An essential consideration is the fact that, in the scenario of changing employment, the company car does not transition with you. It remains the property of the employer, who may not offer an option to purchase.
6. You May Still Be Liable: If using a company car for personal use and an accident occurs, you could assume full responsibility for the company vehicle.

Company Car Taxing and Incentives Explained

Understanding company car taxation and incentives is essential for businesses to optimize their financial strategies. Let's delve into the key concepts that surround the world of company cars.

- Benefit in Kind (BiK): This is a significant part of company car taxation. BiK is a tax set by employers for certain employee benefits, including company cars. The BiK rate for company cars is dependent on the vehicle's carbon dioxide (CO2) emissions, which influences tax liability. The calculation of Benefit-in-Kind costs for a car involves multiplying the car's 'P11D' value (tied closely to its list price) by its BiK rate and your applicable income tax rate (20%, 40%, or 45%, determined by your earnings). The BiK rate for emission-free vehicles is 2% for cars with a range of over 130 miles on a single charge. This is significantly lower than the BiK rate for petrol or diesel cars, which can be as high as 37% (please note that these values may have changed since the time of publication). 

- National Insurance Contributions (NIC): This tax, shared between employees and employers, funds the National Health Service (NHS), the state pension, and other government services. The amount of NICs that the employee pays on a company car is calculated as a percentage of the car's P11D value. The P11D value is the list price of the car, plus any additional costs that the employer has incurred, such as delivery and registration fees.

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Government Incentives

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- Plug-in Car Grant: Designed to promote the adoption of electric vehicles, the Plug-in Car Grant extends a subsidy towards the purchase of electric cars.

- Low Emission Vehicle (LEV) Scrappage Scheme: The Mayor of London has allocated £110 million for a scrappage scheme, allowing support for London residents to scrap their non-compliant vehicles. This is to assist the transition and expansion of the Ultra-Low Emission Zone (ULEZ) that will encompass all London boroughs starting August 29, 2023.

- Salary Sacrifice Scheme: Empowering employees with flexibility, this scheme permits the exchange of a portion of one's salary for the privilege of a company car. This can effectively mitigate the impact of company car tax and other ownership burdens.

How to Choose the Best Company Car

The perfect company car is out there for you, and whether you’re an employer looking for the biggest benefits or an employee with unique needs and preferences, with these quick considerations below you will be one step closer to reaching the perfect company car.

• Know the needs as an employer – Do you need a practical vehicle for cargo, or would a stylish car and fuel-efficient car better represent the company/employee needs?
• What is the budget? Establish a clear budget for your company car endeavours. While purchase or lease costs are pivotal, remember to account for company car tax and ongoing expenses.
• Know the company. Familiarize yourself with your company's car policy, as it may discount certain perks you were hoping for. Some companies opt for electric cars or set mileage thresholds for their fleet.
• Know the Incentives. Investigate the possible schemes above or even delve further into local incentives that may support your decision.
• What are the employees’ preferences? Assess the significance of style, comfort, and technological features in your (the employee's) decision-making process. Determine whether you prioritize driving experience or a more serene and relaxing journey.

What is the Best Company Car? Our Top Picks for 2023

Let’s look at four standout models that have earned their awards in excellence for surpassing the expectations of company drivers:

Hyundai IONIQ 5

Vauxhall Insignia

Setting a remarkable standard for electric vehicles, the Hyundai IONIQ 5 shines as a stylish and capacious option for company drivers. With an impressive range of up to 300 miles on a single charge, it seamlessly blends efficiency with convenience. The IONIQ 5 is a strong company car candidate due to its low BiK rate and quick-charge nature.​

Catering to the pragmatic demands of company drivers seeking space, comfort and economy, the Vauxhall Insignia emerges as an ideal choice. Its generous interior and expansive boot make it an optimal companion for accommodating both passengers and luggage. The Insignia is a classically reliable company car that might be what originally comes to mind when we picture company cars – there’s a reason why is called upon by companies so often… browse our used Insignia stock here.

Peugeot 308

Peugeot 508 SW

For those who value driving pleasure and fuel efficiency, the Peugeot 308 stands as a striking and efficient hatchback. Its harmonious blend of a comfortable ride and responsive engine delivers an enjoyable journey for both short commutes and lengthy travels. Anchored by a touchscreen infotainment system and a hands-free parking system, the Peugeot 308 seamlessly aligns with the demands of modern company life with sleek styling and handling in one seamlessly alluring package.​

Love the Peugeot style but need a little more space? The Peugeot 508 SW presents a lavish and spacious estate car, perfect for company drivers seeking refined versatility. Complementing its comfortable ride and robust engine, the vehicle boasts a panorama sunroof and a head-up display, exemplifying a commitment to both style and functionality.

These are just a few best company cars for 2023, and if you have more specific desires then you can browse our stock here. When choosing a company car, it is important to consider your needs and budget. If you are looking for an electric car, the Hyundai IONIQ 5 is a great option. If you need a spacious and practical family car, the Vauxhall Insignia is a good choice. And if you are looking for a stylish and fuel-efficient hatchback, the Peugeot 308 is a great option. Still need help to decide? Hop on a call with or visit one of our experts below, they’ll take you through every step of the process to reach your next best company car decision.

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