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Assessing alternatives to the company car
The company car is dead. Long live the company car. Each year we have a trend towards or away from the company car. And different countries often seem to be going in different directions. So how should you assess which way you to go?
The trends are driven by two factors. First, costs to the company and the driver - with links to recruitment and retention issues. Second, duty of care and CSR issues.
In the UK, company cars exploded during "incomes & wages" policies in the late 1970s that legally controlled wage rises. Companies responded by providing lightly taxed fringe benefits, notably company cars. The trend changed later as increasing company car taxation neutralised the benefit for many drivers. Advantages in "cash for car" or ECO type schemes became obvious to companies and especially low-mileage users. So driver taxation has always been important in company car popularity.
Across the EU each country has a different taxation model for company cars. Even those that simply assess a percentage of the car value have wide variance, from 0.75 per cent per month in Portugal to 1.5 per cent in Austria & Luxembourg. Whilst in Bulgaria there is no personal taxation on a company car! Against this background is it surprising each country has a different answer to the precise validity of the company car?
And this is just driver taxation. Corporate taxation can make big differences in the financial attractiveness of some or all company cars - often depending on the acquisition method. Leasing allowances or disallowances, writing-down allowances, balance sheet treatment and VAT treatment all play a part in the ebb and flow of company car popularity.
Duty of care and CSR obligations are the other factor. Large multinationals protect their corporate reputation by ensuring they meet their moral obligations to their employees and the communities in which they operate. With millions of business kilometres driven, ensuring the car as a workplace is subject to proper management scrutiny is a vital part of any CSR policy.
Legally, much has been said of the UK's duty of care focus and it is almost certain other countries will follow. Whilst there is currently no EU directive the European Union is intent on reducing road fatalities and injuries. Cars used for business are seen as one contributor to this objective and if businesses don't police themselves then regulation will surely follow.
But whilst the company car may be seen as a contributor to compliance it is not the whole story and is perhaps a distraction in the debate between the alternatives. The company car does not have a monopoly on achieving compliance, which is more a question of good management and processes as it is choosing a specific mode of vehicle provision.
So is the company car dead, dying or rising like a phoenix from the ashes? Actually, the answer is, unusually for an international fleet issue, quite straightforward. As meeting legal and CSR obligations is a pre-requisite and this is largely about good management process, then these issues should not have significant weight in the decision. What therefore will have weight is costs.
For the foreseeable future, there will be a place for the company car, the cash allowance and ECO type schemes. The balance of those in any business, in any country, at any time will depend on many financial variables including car usage patterns, driver taxation and accounting treatment.
Your answer therefore is that good management to meet legal and CSR obligations must be ongoing irrespective of whether you choose company cars, an alternative or a mixture of solutions. And your chosen solution must be constantly monitored, in each country, to achieve the lowest possible cost.