Why a Company Car is a Great Idea for your Business

For those who run their own business, driving a company-owned car can make a lot of sense. It’s possible to save money not only on the car purchase but on your company’s tax liability if the right decisions are made.


There’s no getting away from it, the temptation to drive something that is a far cry from the sort of modest runabout you used when learning to drive can prove irresistible to some.

Running a late model car of a certain brand can contribute to an image of your company being successful and thus worth doing business with. On the other hand, overdoing it can make people think you’re doing a bit too well.

BMW i8

The secret is running something commensurate with the image you’re trying to create and the reputation you’re hoping to foster. That said, this can be over-estimated; do you really need a car of a certain quality to ‘look good’ when visiting customers? In truth, your customers might not mind much as long as it isn’t a tatty wreck.

Ironically, with the types of finance options available these days it’s possible to run a prestige car for sensible amounts of money. Indeed, the usually higher residual values of many makes, such as BMW and Mercedes, often contribute to lower finance costs than a heavier depreciating model of a more modest brand.

Financial advantages

Depending on your business set up, a company car could pay off financially. In general terms, you’d likely be able to spend less and have a higher quality car than you would buying privately.

In limited company circumstances, there are usually capital allowances on the purchase of vehicles and – assuming your business is VAT registered – this can be reclaimed on payments such as (usually) leasing and contract hire.

Savvy learners can save money by bulk buying lessons and downloading free theory test materials – drivers should keep that spirit up later when buying and using cars for their personal and business use.

Sole trader

Generally, there’s no real distinction between you and your car in a business sense because you ‘are’ your business in effect, even if you use a different trading name. You can usually claim some expenses such as mileage covered in discharging business-related tasks.

A businesswoman driving a company car

Limited company

Here you’d have a choice whether to own the car personally and claim expenses from your company (similar to the sole trader above) or have it owned by your limited company. If the latter, then the company meets the running costs and can offset these against its tax bill as expenses.

There may, however, be a personal tax implication for you as you’re effectively running a company car similar to a company employee.

Professional advice

Professional advice is imperative. The tax situation and the best way to fund a car will differ depending on circumstances, so your accountant is the first port of call. A decision might seem sensible – but if it’s not based on sound knowledge it could turn into a costly mistake.

An attractive option

Being able to run the car of your desires and have your company meet most of the costs – and possibly reduce them into the bargain – is certainly possible and may even make a lot of sense. Just take it easy at the showroom; you don’t want your customers getting too jealous.