Company car: Overview, definition, and example
What is a company car?
A company car is a vehicle provided by an employer to an employee for business use. In some cases, company cars are also used for personal purposes, depending on the terms of the agreement. Typically, company cars are given to employees whose roles require regular travel for work, such as salespeople, executives, or service technicians. The employer usually covers the costs associated with the vehicle, such as maintenance, insurance, and fuel, though employees may be required to pay taxes on the personal use of the car.
Company cars can be an attractive employee benefit, providing convenience and reducing the personal cost of transportation for employees who need to travel for business.
Why is a company car important?
Company cars are important because they provide a practical solution for employees who need to travel frequently for their work. By providing a vehicle, businesses ensure that employees have the right tools to do their jobs efficiently without incurring personal transportation costs.
For the employer, offering company cars can improve employee satisfaction and retention, especially for positions that require significant travel. Additionally, company cars can help businesses maintain a professional image, as employees often drive vehicles that reflect the company's brand.
Understanding company car through an example
Imagine a sales manager at a large company who regularly visits clients in different cities. As part of their compensation package, the company provides them with a company car to use for business trips. The company covers the costs of gas, maintenance, and insurance for the vehicle, but the sales manager is allowed to use the car for personal errands as well. In this case, the company car helps the employee perform their job more efficiently by eliminating the need to rent or use their own vehicle for business purposes.
In another example, an executive at a tech company receives a company car as part of their benefits package. The company car is used for commuting to the office and for business meetings. The employer provides a high-end vehicle to enhance the executive’s professional image, and the car is fully maintained and insured by the company.
An example of a company car clause
Here’s how a company car clause might appear in an employment agreement:
"The Employee shall be entitled to use a company-provided vehicle for business-related travel and, at the discretion of the Employer, personal use. The Employer shall be responsible for the maintenance, insurance, and fuel costs associated with the vehicle. The Employee shall be liable for any taxes associated with personal use of the company car, as required by applicable law."
Conclusion
A company car is a valuable employee benefit that provides practical support for roles requiring travel and can help businesses improve employee satisfaction and efficiency. By covering the costs of a vehicle, employers ensure that employees have the tools needed to perform their jobs while reducing their personal expenses. Company cars also serve as a professional image booster for employees, especially in roles involving frequent client interaction.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.