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?
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.
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.
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).
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 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.
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 1m[sup]2[/sup] 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.
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.
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.
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.
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.
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.