If your employees regularly need to make deliveries, run errands and perform other related tasks for your business, you have two main options available for providing them with transportation. These options include buying and maintaining a company car or setting up a vehicle reimbursement program for your employees to drive their own cars for business purposes.
1. Review the possible options
As a business owner, you want to find the most cost-effective option available. Each company has unique travel needs, so there is not a clear cut answer regarding affordability that applies to all situations. However, there are many instances when giving your employees a car allowance makes excellence sense.
With a closer look at the benefits of instituting a car allowance policy through a vehicle reimbursement program, you may be able to review the options more comprehensively for your own business. You may be able to find more resources and insights at the CarDATA website.
2. Understand how a car mileage allowance works
Before you decide whether to move forward with a company car or a vehicle reimbursement program, it is important to understand how a car mileage allowance works. With this setup, your employees will be required to drive their own vehicles for work-related purposes, and you will compensate them for their efforts through an established per-mile rate. The employee will be responsible for gas, car insurance, maintenance and even liability for the car, and you will have a flat rate that is applied to all miles driven.
However, there is always a question of how honestly the employees will document their mileage and if they will take the shortest route possible. Such issues may cost your company extra money.
3. Eliminate the need for a company car
When your business owns a company car, you are responsible for all repair and maintenance costs, fuel, insurance and even the car payment on the auto loan. These vehicle expenses can mount, and this is particularly true if you have a fleet of vehicles. A company car may make sense if you only need to have one driver run errands or make deliveries from time to time.
However, if have more significant travel needs, a vehicle reimbursement program may be more cost-effective. Each business owner will need to review the options carefully to determine which is best for them.
4. Analyze the costs
When you make your comparison of the two types of vehicle and transportation options available, ensure that you carefully analyze all aspects of the costs for each option.
Consider the loss of value your company may experience through vehicle depreciation as well as the liability associated with having a company car. When all things are considered, you may find that it is a better overall option to set up a vehicle reimbursement program.