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Old 09-13-2010, 05:49 AM
HeyHomie HeyHomie is offline
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Company Car as an Employment Perk

I just filled out several documents for my new job, and one of them was an agreement that I'd care for my company car. Now, I'm not going to get a company car - at my pay grade I might get a company bumper sticker - and I imagine that the Human Resources secretary just hands out the same packet to everyone, from CEO to janitor.

But this got me wondering: are company cars still used routinely as an employment perk these days? Somehow I had it in my head that these were a Mad Men-era artifact. But, I could see how a company car would make a great benefit in lieu of salary; not having to pay payments on a car would free up $325 per month in my monthly budget, let alone maintenance, insurance, etc.

If you get a company car, is it somehow considered a taxable event? Are you free to do with it as you please, like drive the kids to Disneyworld in it? Or is it expected that you'll only use it to get to work and back?
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  #2  
Old 09-13-2010, 05:50 AM
Wallenstein Wallenstein is offline
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In the UK company cars must be declared as a taxable benefit.

They are still very popular though - it's usually a car allowance these days, so people have a free choice over what car they get.
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Old 09-13-2010, 06:01 AM
kferr kferr is offline
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Confirming what Wallenstein said. I have a monthly car allowance of 400 and a monthly fuel allowance of 150. I drive a Smart and only spend about 50/month on fuel so it's a nice perk.
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Old 09-13-2010, 06:13 AM
UDS UDS is offline
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Depends on where you live, obviously, and what the local tax laws provide. But most countries do treat the provision of a car as a taxable benefit, with various complicated rules for valuing it, and some kind of abatement for the extent to which you do in fact use the car to perform the duties of your employment.

My guess is that the decline in popularity of the company car in the US is probably linked to a change in the tax laws which made paying compensation in cash the more attractive option.

Logic suggests that employees should value cash more than the cash value of the car, since (all other things being equal) they can then spend the cash either on a car, or on something they might value more than a car. $20,000 in cash has greater utility than a car which costs $20,000. If employees are remunerated by the provision of a car to any significant extent, this suggests a distortion (probably in the tax system) which is favouring cars over cash. That's not good, and most countries try to avoid creating such an incentive in their tax system.
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Old 09-13-2010, 06:18 AM
Pai325 Pai325 is offline
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My husband has one, and has to fill out a log each month on business miles and personal miles, and it is considered taxable income.
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  #6  
Old 09-13-2010, 06:54 AM
Balthisar Balthisar is offline
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I have had a company car on several occasions. In fact, I have one currently. However it's "for the convenience of my employer," and not as a perquisite to me. You see, we actually build cars, so that makes it cheap. And the alternative to loaning me a car that we build ourselves is to have me rent one, which is exceptionally expensive for the long term, especially given that we no longer own a car rental company.

The IRS indicates that if a job lasts for more than a year, or you go into the job with the expectation that it will last for more than a year, then all of those employer-paid travel expenses become taxable. The includes the car (among other things).
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Old 09-13-2010, 09:30 AM
Gary "Wombat" Robson Gary "Wombat" Robson is offline
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Company cars aren't necessarily perqs in lieu of salary. Employees that require a specific type of vehicle to perform their work may not want to buy one, and having the company provide such a vehicle may be the easiest way to attract people for the job. In some cases, providing company vehicles may actually be cheaper for the company that paying the mileage allowance for the employees to use their own cars.

For example, a salesman that will be routinely entertaining customers may need a large 4-door sedan for the job, but may prefer to drive a small, fuel efficient car themselves. Or forest service employees many not want to buy 4WD pickup trucks for personal use.
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  #8  
Old 09-13-2010, 10:18 AM
Balthisar Balthisar is offline
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Originally Posted by Gary "Wombat" Robson View Post
Or forest service employees many not want to buy 4WD pickup trucks for personal use.
I think that government vehicles will be "for official use only," though. So, you come to work, leave your car there, and then use the government car in the course of your job. At the end of the day, you go home in your own car again.
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  #9  
Old 09-13-2010, 10:28 AM
Acsenray Acsenray is offline
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I know a lot of cops who take their police cruisers home with them.
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Old 09-13-2010, 10:38 AM
Chronos Chronos is offline
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I think that government vehicles will be "for official use only," though. So, you come to work, leave your car there, and then use the government car in the course of your job. At the end of the day, you go home in your own car again.
I think you're right that they're official use only, but I was under the understanding that commuting to work counted as an "official use".

Another situation you can see with company cars is when the fleet requires an uncommon infrastructure that's available at the workplace. For example, NASA has a significant number of propane-fueled company cars, and propane refuelling stations at the research centers.

Oh, and an amusing example I've seen personally of "job has special requirements for a vehicle": At the National Radio Observatory in Green Bank, WV, all of the vehicles are diesels (or bicycles), because spark plugs produce unacceptable radio noise. Mostly, they're 1950s-era retired taxicabs.
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  #11  
Old 09-13-2010, 10:46 AM
Nava Nava is offline
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My brother, in Spain, has had something slightly different. In his case, he would "get assigned the use of a company-owned car". It would not be a car that the company got for him, but one that the company had and which got assigned to him, but it was on a quasi-permanent basis. For example, one of his jobs required him to take drives that could be as long as 10h on the road to go to work sites and bring some materials: thus, rather than paying him mileage and gas and having him use his car (and where the heck could he have fitted 3 1m2 marble slabs and a water pump on a Micra, by the way?), the company would assign him the use of a hutchback which had company ads on every side and the back seat ripped off so the whole back 2/3 of the cabin were set up to carry things. He could use it on weekends so long as he only had one person with him, due to the limitations of the vehicle itself (the cops could have ripped him a whole string of new ones for carrying people in a cargo space). It was not considered a benefit in the same way that a bus is not considered a benefit to its driver, although I imagine MrBusGuy's subordinates do not take their vehicles home.

Last edited by Nava; 09-13-2010 at 10:50 AM..
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  #12  
Old 09-13-2010, 10:55 AM
Kevbo Kevbo is offline
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Originally Posted by acsenray View Post
I know a lot of cops who take their police cruisers home with them.
This is still deemed "official use". Having the cars dispersed through a community is a crime deterrent, even if the cop is off duty. In areas where land is very expensive, it can save the department money as it doesn't need to provide a parking area for all the cars.
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Old 09-13-2010, 11:32 AM
Maus Magill Maus Magill is offline
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Quote:
Originally Posted by Gary "Wombat" Robson View Post
Company cars aren't necessarily perqs in lieu of salary. Employees that require a specific type of vehicle to perform their work may not want to buy one, and having the company provide such a vehicle may be the easiest way to attract people for the job. In some cases, providing company vehicles may actually be cheaper for the company that paying the mileage allowance for the employees to use their own cars.

For example, a salesman that will be routinely entertaining customers may need a large 4-door sedan for the job, but may prefer to drive a small, fuel efficient car themselves. Or forest service employees many not want to buy 4WD pickup trucks for personal use.
I father-in-law has a company car. He also drives all over the south-east making sales calls. It's much cheaper for his company to buy and maintain a minivan for him to use, than to either reimburse his mileage (he put 80K on one van in just two years), or to fly him and his truck part samples.
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  #14  
Old 09-13-2010, 11:49 AM
Mama Zappa Mama Zappa is offline
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I think it depends on the nature of the job. If your job involves doing a lot of driving (e.g. my father, who was a sales representative) then as others have noted, it can be cheaper for the company to provide a car.

IIRC, my dad had to keep track of all *personal* mileage he drove. I don't know whether this was because he had to compensate the company, or they had to declare it as taxable income. Either way, it wasn't a free ride (har har ain't I clever).

On a slightly-related note: there is periodic rumbling about how to figure out the taxable portion of a company-provided cell phone, when the employee uses this as his/her only cell phone (i.e. uses it for personal calls as well). Even if the company has a big no-time-limit contract, the IRS would like to get their cut.
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  #15  
Old 09-13-2010, 12:44 PM
Zsofia Zsofia is offline
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My dad had one until he retired in the late 90's.
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Old 09-13-2010, 01:32 PM
EmAnJ EmAnJ is offline
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Most of my coworkers in my department have company trucks (I don't, but I'm mostly in the office rather then in the field). I'd guess that probably 35% of the employees of the company I work for have company vehicles, either because of the nature of their work, or their title.

My coworkers often visit big, muddy pits, and are often on the road 8 or 10 hours of the day, so rather then paying out per the km for their personal vehicles, or having them risk bottoming out their cars, they give out company trucks.

The president of my division has a nice, luxury company car, and the VPs of each product line have their own company vehicles too. Sometimes the company will let you pick out something that suits you best too - one of the guys I work with has one of those hybrid vans with four wheel drive, and the reason he asked for it is he has kids so it's easier for him. Yup, everyone uses it for personal use too, there are very few limitations (i.e. don't take it in to Mexico - taking it to the US for personal use is fine).

Fuel is paid for as well, everyone has a company CC.
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  #17  
Old 09-13-2010, 01:48 PM
Acsenray Acsenray is offline
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Quote:
Originally Posted by EmAnJ View Post
(i.e. don't take it in to Mexico - taking it to the US for personal use is fine).
You can drive your cars to Mexico or to the United States from your workplace?
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  #18  
Old 09-13-2010, 01:48 PM
Omar Little Omar Little is offline
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In a nutshell, any personal use of a company vehicle would be considered taxable income to the employee.

I would agree that the issuance of company cars in the US for executives, etc. is a past gone perk. However, many sales persons, construction personnel, etc. may have company vehicles issued to them as it may be cheaper in the long run for the company to own the vehicle, than have the employees submit mileage reimbursements for use of the own personal vehicles.
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Old 09-13-2010, 01:56 PM
EmAnJ EmAnJ is offline
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Quote:
Originally Posted by acsenray View Post
Quote:
Originally Posted by EmAnJ View Post
(i.e. don't take it in to Mexico - taking it to the US for personal use is fine).
You can drive your cars to Mexico or to the United States from your workplace?
I live in Canada, so yes.
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  #20  
Old 09-13-2010, 02:04 PM
Acsenray Acsenray is offline
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Ah, so not just a day trip.
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Old 09-13-2010, 02:57 PM
EmAnJ EmAnJ is offline
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Ah, so not just a day trip.
Not usually, but I can make it across the border and back, with a few hours to shop, in one day.
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  #22  
Old 09-13-2010, 03:17 PM
Acsenray Acsenray is offline
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You can make it from Canada to Mexico by car and back with a few hours to shop in one day?

My confusion was that the original statement I responded to seemed to suggest that anyone in your company was as likely to drive to Mexico as they were to drive to the United States on any given day. It made it sound like your company was located somewhere between the two.
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  #23  
Old 09-13-2010, 03:31 PM
UncleFred UncleFred is offline
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Ther term 'company car", when not referring to either a vehicle with company name/advertisement, or a truck, seems to have take on two meanings in this thread;

- A car owned by the comapny that they let the employee drive.
- A car owned by the employee for which they receive a stipend.

I suspect the former is what the OP was asking about, and I also supect that is quite rare nowadays.

I happen to fall into the second category; At my employer I have always received a stipend for the cost of my owning and maintaining a car. Until last year I was able to use my company-owned/issued credit card (i.e. bills go directly to them) for gas as well as any valid employment-related expenses (equipment, entertaining clients, etc) However last year they told us we coiuldn't use the CC for gas anymore and they gave us an additional stipend that was supposed to cover the cost of gas. Whether we win or lose on the deal depends on the fluctuating price of gas and how much driving we do.

Last edited by UncleFred; 09-13-2010 at 03:32 PM..
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Old 09-13-2010, 07:42 PM
boytyperanma boytyperanma is offline
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Most people I know that have company cars now have them for work purposes only. IE they get to park the car at their house but they are only for going to and from work and/or job sites. A few of them are very strict about mileage use and there is not much leeway for personal use. The majority however mileage isn't tracked but the understanding is it is for business only but they aren't going to harass you if you use it for personal use as well. IE you could probably take it on a road trip as the company is very lax about your use but if you asked if you could the answer would be a firm no for I assume liability reasons. Vehicles in this fashion are considered business only miles and the company pays all taxes and services associated simply ignoring the fact they may have been used for personal trips.

The other form of company car which I don't think is anywhere near as common as in the past is the company simply provides a car as a perk. In which case it is personal use and only instances of actual business use are recorded. I had a friend who managed a Cheesecake Factory. Part of the compensation for all their managers was they where given a BMW. As a restaurant manager rarely needs to drive anywhere save their own restaurant it was 100% for personal use except the rare instance the managers might be required to show up at a national meeting or such then the miles could be written off as a business expense.
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Old 09-14-2010, 03:41 AM
Dereknocue67 Dereknocue67 is offline
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I drove a company car for 18 years and considered it a perk because during that time I never had a need to purchase a personal vehicle. I was taxed for personal mileage but that averaged about $30 to $40 a month. Think of the money I saved over those years by not having to buy a car or deal with the incidentals of gas, insurance, maintenance, etc.
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  #26  
Old 09-14-2010, 07:36 AM
Balthisar Balthisar is offline
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For managerial level employees, my company optionally provides "lease cars" but not everyone regards it as a perk. Cost per month depends on the vehicle that you select, and it includes all maintenance and auto insurance. (You pay for your own gasoline). In order to promote certain vehicles, the company sometimes highly discounts the lease price. All in all, they're considered a really good deal if you choose the right vehicle. The offset, though, is that if you have such a vehicle you only get reimbursed at about 20% of the federal mileage rate. (Sigh; we used to be able to buy the low-mileage, year-old cars at a substantial discount. Now only the people that lease them can choose to purchase their own vehicle off-lease.)

Last edited by Balthisar; 09-14-2010 at 07:36 AM..
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  #27  
Old 09-14-2010, 07:50 AM
md2000 md2000 is offline
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I remember reading an article about the tax regimen in the UK before Margaret Thatcher. The top tax rate was about 84% but at that time did not include perks. The article said an engineer earning about 40,000 pounds was better off getting a comapny car and full time driver than trying to pay him more cash. Ditto for perks like club memberships, etc.

Somewhere around the 80's the governments around the first world clued in that the higher paid employees were taking a large chunk of pay in untaxed perks, and so began taxing perks at fair market value. This is why we associate "company car" with the Mad Men era - nowadays, if the company gives you a car (usually leased) that would cost $10,000 a year, you'll probably end up paying the taxman a significant portion of that amount in cash for your taxes. (In Canada, probably about 1/3 or more depending on salary level). It makes more sense to give the employee the cash and let them make the arrangements - also reduces the company's liability if their name is not on the car?

In Canada.. A company car/truck used to do actual travel for company business is not included in this "benefit"; but if you typically take the car home and also use it for personal use, then the proportion of personal use is taxable. Hence the logs - how many miles did you drive, and what for? If it was, say, 30% personal miles, then 30% of car cost (or fair market value) is taxable income. As a side note, travelling to and from your regular place of employment (commuting) is something everyone has to do, and therefore not considered a "non-taxable" use of the car.

I assume the rules in the USA are similar. I assume someone with more direct experience will clarify the rules here...

Last edited by md2000; 09-14-2010 at 07:52 AM..
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  #28  
Old 09-14-2010, 08:31 AM
Balthisar Balthisar is offline
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Originally Posted by md2000 View Post
In Canada.. A company car/truck used to do actual travel for company business is not included in this "benefit"; but if you typically take the car home and also use it for personal use, then the proportion of personal use is taxable. Hence the logs - how many miles did you drive, and what for? If it was, say, 30% personal miles, then 30% of car cost (or fair market value) is taxable income. As a side note, travelling to and from your regular place of employment (commuting) is something everyone has to do, and therefore not considered a "non-taxable" use of the car.

I assume the rules in the USA are similar. I assume someone with more direct experience will clarify the rules here...
What I'm going to mention doesn't pertain to company cars assigned to a person, but rather to another special type of company car. And there's a big difference between the US and Canada.

Our salaried plant employees are entitled/encouraged to take production cars home at night. This is for the convenience of the company, because these little shakedowns can help discover production issues, like squeaks and rattles. The Canadian employees were very hesitant to take these cars, because, yes, they were taxed on their use! Apparently in Ontario, there's no distinction made "for the company's benefit." This has never been an issue at our US or Mexico facilities.
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