Is a company car worth it? What you should know about it

by Johannes

Whether a company car is worthwhile or not depends on different factors. In fact, a company car is not always the better choice.

When a company car is worthwhile: Two accounting options

A company car is often highly touted by companies and “sold” as an attractive extra. In fact, a company car does not always make sense and is sometimes associated with significant additional expense and financial limitations.

  • Whoever is provided with a company car by their employer usually has the choice between two options: the one percent flat rate or the driver’s logbook.
  • With the one per cent flat rate, the so-called imputed income for the company car is set at one per cent of the domestic list price. Example: The list price of a vehicle is 40,000 euros. In this case, the imputed income is 400 euros per month. The amount is then added to the monthly income.
  • In addition, travel between home and work is calculated and taxed at 0.03 per cent for each kilometre. If the employee contributes to the costs for private use, the value of the imputed income can be reduced.
  • Another possibility is the driver’s logbook. Here, the journeys with the company car are precisely recorded and divided into business and private journeys. For business trips, the date, destination and mileage are noted at the beginning and end of the business trip. For a private trip, it is sufficient to write down the respective mileage. The value for a private trip must be taxed by the employee.

For frequent business and private drivers, a company car is worthwhile

Which variant is more worthwhile depends on the commute. This more or less determines which company car regulation is more advantageous for the employee.

    • On the other hand, if the car is only used a little for private purposes, it is better to use the driver’s logbook.
    • Another question that the employee should clarify is whether a company car is necessary at all. Compared to a salary increase, the company car usually comes off worse because it entails an additional expense.
    • A company car is only worthwhile if the employee uses the vehicle a lot for work. If the vehicle is really used, this option is worthwhile. If, on the other hand, the company car is just standing around, you should decide against it.
    • But: Often the employer covers the costs of purchase, insurance, registration, repairs, inspections, summer and winter tyres, MOT and exhaust emission tests, as well as fuel. Such special benefits should be taken into account when it comes to choosing a company car or negotiating a higher salary during job interviews or salary negotiations.

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