Company cars play a central role in many companies. The number of cars used for commercial purposes is large. They account for a total of 11.6 percent of all cars in Germany . Nevertheless, there are a number of factors to consider, particularly with regard to the cost of company cars for employers . Whether acquisition costs or leasing rates, ongoing operating costs or insurance costs – all of these aspects should be taken into account with a company car. In this article, we explain which company car costs employers should consider, the advantages and disadvantages of the classic company car model and the areas in which costs can also arise for employees.
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What is a company car?
A company car, also known as a company car, is a vehicle that companies make available to employees for business purposes. The company car can be used both for work-related tasks and, depending on the agreement, for private journeys. The exact conditions of use depend on the respective regulations in the company and its car policy.
Costs of company cars for employers: leasing vs. buying
Leasing a company car involves monthly installments, while purchasing a vehicle requires a high initial investment. Both models have a different impact on the long-term budget and financial planning of the vehicle fleet.
Leasing rates for company cars:
Leasing costs vary depending on the vehicle model, term and service package. It is important to note that higher-quality vehicles or longer leasing periods can increase the monthly installments. Additional services such as maintenance or insurance costs can also affect the price.
Calculating leasing costs is often time-consuming and cost-intensive for the employer. With the Easy+ company car configurator, you can simplify this process and speed up the entire leasing procedure. Thanks to the stored car policy and the subsequent suitability check, time-consuming ordering processes are no longer necessary.
Acquisition costs for company cars:
Buying a company car makes sense if the company wants to use the vehicle in the long term and has sufficient financial resources. Buying a vehicle can be economically more advantageous than leasing, especially if the annual mileage is low and the vehicle is used for a long period of time.
In 2024, there were 5.7 million cars with commercial owners in Germany.
Ongoing operating costs of a company car
Calculating the costs of a company car is essential for fleet managers. A key cost factor for company cars is the ongoing operating costs. They are made up of several items:
- Fuel (gasoline, diesel, alternative fuels)
- Insurances
- Vehicle tax
- Maintenance and repairs (inspections, wearing parts)
- Cleaning
- Administrative expenses
- Parking fees
The amount of the ongoing operating costs depends on the vehicle model and the type of use of the company car. In most cases, employers bear the costs of the company car. However, in the case of private use by the employee, the employee can also make additional payments towards the operating costs.
Fleet managers should also not underestimate the cost of administration. The larger the fleet, the higher the costs for vehicle management. Digital fleet management with the help of software can optimize processes, save time and thus reduce costs.
Digital vehicle management with Fleet+
With Fleet+, you can manage your fleet digitally, ensure efficiency and transparency in your fleet and save costs.
Insurance costs for company cars
Company car insurance is an important aspect of fleet management and includes several necessary policies:
- Motor vehicle liability insurance is required by law and covers damage caused by the company car to other vehicles or persons. Commercial vehicle insurance should also be taken out, as this covers specific risks for companies.
- A fleet insurance can be useful if a company has several vehicles in use. It can be more cost-effective than taking out individual policies and makes it easier to manage the vehicles. It also offers the option of covering additional risks such as breakdown assistance or driver protection.
- Comprehensive insurance (partial or fully comprehensive) is not required by law, but is often recommended to cover damage to company vehicles, especially those with a high value or frequent use.
These insurance costs are covered by the employer.
Taxes as a cost factor
The tax aspects should not be underestimated either. The employer often pays both vehicle tax and VAT for the company car in question. If private use is permitted for employees, these private journeys and journeys to the workplace must also be taxed in relation to the gross list price. Employees can use either the 1 percent method or a logbook to tax the non-cash benefit of private journeys. The amount of the non-cash benefit is determined on the basis of the list price of the vehicle. In the case of low usage, the logbook can offer advantages when calculating the non-cash benefit. In the case of high private use, employees often benefit from the 1 percent rule.
Workshop costs of a company car
In addition to the purchase costs, company cars also incur regular workshop costs, which are usually borne in full by the employer. The workshop costs of a company car are made up of various items and can vary greatly depending on use:
- Regular inspections: Manufacturer-mandated maintenance includes oil changes or brake checks, for example. Electric vehicles often have lower maintenance costs as there are fewer wearing parts.
- Repair of wearing parts: Brakes, tires and batteries are among the parts with high wear and tear and must be checked and repaired regularly.
- TÜV and statutory inspections: The main inspection (TÜV) is due every two years. Any defects that arise may require additional repairs and lead to further costs for the employer.
- Accident and damage repairs: Minor damage such as scratches or dents often result in lower costs. In the case of larger accidents, repairs can quickly amount to several thousand euros.
What tax advantages does a company car offer employers?
Company cars canincur high costs for the employer , but the associated taxes can be deducted. This applies, for example, to the VAT paid on the purchase of a company car. In addition, the costs for insurance, maintenance and operation are generally fully deductible.
Vehicle tax is one of a company’s operating expenses if the vehicle is part of its business assets and is predominantly used for business purposes. For company cars with private use, only the business portion of the tax is deductible. The vehicle tax paid can be recorded in the accounts and claimed for tax purposes, which reduces the company’s taxable profit and thus lowers the tax burden.
In addition, companies benefit from a ten-year exemption from vehicle tax when using newly registered electric vehicles . This regulation, which applies to first registrations until December 31, 2030, can offer companies financial advantages and make the use of electric company cars in the fleet economically attractive. In addition, they can reduce the gross salary of employees by taxing the non-cash benefit of company cars. This makes company cars both a practical solution and an economically attractive option.
Company car employer: advantages and disadvantages
The decision for or against company cars depends heavily on the individual requirements and general conditions of a company. Above all, company cars offer employees numerous benefits. But employers can also benefit from company cars. Here is an overview of the advantages and possible disadvantages:
Advantages of company cars
- Tax advantages: Operating costs such as maintenance, insurance and fuel are generally tax-deductible. In the case of new vehicles, VAT can also be reimbursed.
- Retention and motivation: Company cars are valued by employees and can increase loyalty and satisfaction.
- Flexibility through leasing: With leasing, the residual value risk remains with the leasing company, which offers financial planning security.
- Efficiency for business trips: Company cars are particularly economical for field service or frequent customer visits.
Disadvantages of company cars
- High costs: In addition to purchasing or leasing, there are ongoing costs such as insurance and administration. These make company cars a cost-intensive solution.
- Administrative effort: The coordination and maintenance of company vehicles require additional organizational effort. However, this can be significantly simplified by using fleet management software that enables efficient vehicle management and maintenance.
- Reasonableness: Not all employees need a company car. In many cases, alternatives such as pool vehicles or mobility budgets can be more cost-effective.
Company car: save costs
The high cost of company cars can place a heavy burden on the vehicle fleet. Employers can take various measures to reduce this amount:
- Establish acar policy: Clear guidelines on vehicle selection for employees, such as limiting them to cost-effective models with low fuel consumption, not only create transparency, they also help to avoid high expenses.
- Use electric and hybrid vehicles: Government subsidies and tax benefits often make alternative drive systems cheaper than conventional petrol or diesel vehicles. They also offer advantages in terms of sustainability and can improve the company’s image.
- Leasing instead of buying: Leasing contracts offer flexible terms and lower fixed costs, allowing companies to remain more financially flexible.
- Car sharing in the company: Companies can opt for corporate car sharing instead of the traditional company car model. Here, employees can access a vehicle pool as required. This increases the efficiency of the vehicle fleet and minimizes downtimes.
- Use fleet management software: Digital tools help to efficiently manage the use of company cars, plan maintenance intervals, monitor costs and analyze driving behavior.
These strategies can significantly reduce company car costs without sacrificing mobility.
Conclusion: Costs of company cars for employers
- In addition to purchasing or leasing, company cars also incur running costs for operation, insurance and administration. Fleet managers should keep these costs in mind when managing vehicles.
- Many expenses such as maintenance, insurance and vehicle tax are tax-deductible, and there are also tax advantages for electric vehicles. Employees must pay tax on the non-cash benefit of private use.
- Strategies and tools such as the use of fleet management software help to make the fleet more efficient and reduce expenses.
Manage company cars with our fleet software Fleet+
FAQ - Costs for company cars
Despite the high costs, a company car can be worthwhile for employers, as it serves as an attractive additional salary and offers tax advantages, such as the deductibility of operating costs and the reimbursement of VAT on new vehicles. It also strengthens employee loyalty and motivation. Leasing offers financial planning security, as the residual value risk remains with the leasing company.
The costs of a company car for the employer are made up of the acquisition costs and the ongoing operating costs. The latter vary depending on the vehicle type, financing model and use of the vehicle. The expenses can therefore vary depending on the circumstances.
The purchase of a company car is worthwhile if the vehicle is to be used over a longer period of time and the company has sufficient financial resources. The purchase is particularly advantageous if the annual mileage is low.
The insurance costs for a company car are usually covered by the employer, as the vehicle belongs to the company and is used for business purposes.
Other useful articles on the topic of company cars
Car Policy: Significance and advantages of a company car policy in the vehicle fleet
E-mobility in the Company: 5 Important Points of the Fleet Analysis
Key management in the fleet: manage keys digitally
Fleet management: How to manage your fleet successfully
Owner liability in the fleet: These obligations apply to fleet managers
