Companies that want to ensure the mobility of their employees usually provide them with company cars or pool vehicles. Efficient pool vehicle management plays a decisive role in optimally organizing the use of the vehicles. But there is another option: car allowance. Find out how the concept works and what advantages and disadvantages it has in this article.
What is a Car Allowance?
Employees who use their private vehicle for business purposes receive financial compensation from their employer – the so-called Car Allowance. This allows the employee to cover the costs of purchasing, maintaining, fueling and insuring their own vehicle. The employee is responsible for all costs that exceed the allowance, such as vehicle maintenance.
While flat-rate car rental is already widespread in the USA and the UK, it is only just starting to play a role in German fleets.
What is the difference between a car allowance and a company car?
While the employer bears the costs of the company car model and is responsible for managing the vehicle, this responsibility lies with the employee in the case of the car transfer allowance. The employee has the flexibility to choose the vehicle, but must also pay for maintenance and all costs incurred. The vehicle remains the property of the employee and does not have to be returned even after termination of the employment relationship. The Car Allowance concept also eliminates the need to comply with central owner obligations such as regular driving license checks or UVV driver training .
What are the advantages and disadvantages of a car transfer allowance for companies?
A car allowance offers companies a number of advantages. These include cost control, as the expenses for the car allowance are fixed and calculable. Maintenance and repair costs, which are otherwise incurred for company vehicles and account for a large proportion of the fleet ‘s expenditure, are eliminated. The employee is responsible for the maintenance of the vehicle. In addition, the administrative burden for companies is reduced as they do not have to provide, manage and insure their own vehicles – or only a few. This saves valuable resources and time in the fleet.
However, there are also disadvantages to be considered with a car allowance. For one thing, employers only have a limited say when it comes to the choice of vehicle. This can result in an inconsistent appearance and compromise compliance with company guidelines or safety standards. Costs that are not covered by the car allowance are borne by the employees themselves. This can increase dissatisfaction.
When is a car transfer allowance worthwhile?
A car allowance can be particularly advantageous for employees who make irregular or only a few business trips. This is because a low annual mileage reduces the overall costs for the employer, while the employee benefits from greater flexibility. A car allowance can also be particularly attractive for employees who attach great importance to choosing their own vehicle or prefer to drive their familiar private car.
As there are no unexpected expenses for maintenance, repairs or additional insurance, a car allowance is particularly worthwhile for companies that prefer a clear and predictable cost structure. At the same time, the car allowance is also worthwhile for companies that do not operate their own or an extensive fleet of vehicles and want to keep administrative costs as low as possible.
What is the difference between a car allowance and a mobility budget?
Although in both cases it is usually a monthly lump sum, the two concepts differ from each other. The car allowance is tied to the use of a specific vehicle and usually leaves no scope for other mobility options. Employees can use a mobility budget for different types of mobility and combine different means of transport, such as public transport, car sharing, bicycles or e-scooters.
