Choosing the best company car is a major decision for any business. Whether you’re looking to transport employees, deliver products, or simply maintain a professional image, the right vehicle can support daily operations and provide tax benefits. But with a growing range of petrol, hybrid and all-electric options, as well as flexible lease schemes for employees, it’s essential to weigh your choices carefully.
This guide explores the pros and cons of different types of vehicles, the leasing vs ownership decision, and what businesses need to know about employee car schemes and tax implications.
Should You Lease or Buy?
One of the first decisions is whether to hire/lease or buy the company car.
Buying outright can be a good option if you have enough capital and want full ownership. You can claim capital allowances, and over time, it may cost less than leasing. However, you’re also responsible for depreciation, maintenance and resale.
Leasing, on the other hand, means paying a fixed monthly fee for the use of a vehicle, usually over 2–4 years. It’s ideal for businesses that want access to newer vehicles without a large upfront investment. Lease agreements often include maintenance, and some can be tax-deductible as business expenses.
It’s essential to compare all costs involved and not just the headline monthly payment. Before making a decision, explore options and make sure you’re fully covered with suitable car insurance.
Understanding the Pros and Cons: Electric, Hybrid and Petrol
The type of vehicle you choose will depend on its intended use, environmental goals, and budget. Here’s how different vehicle types compare:
1. All-Electric Vehicles (EVs)
Pros:
- Low running costs and no fuel expenses
- Zero emissions and lower Benefit-in-Kind (BIK) tax
- Government grants or incentives for certain models
- Ideal for short daily routes or urban driving
Cons:
- Higher upfront cost or monthly lease
- Limited range (although this is improving)
- Charging infrastructure is still growing in some areas
2. Hybrid Vehicles
Pros:
- Combines a petrol engine with an electric motor
- Better fuel economy than petrol alone
- Lower emissions, reducing BIK tax
- Good for mixed driving (city and motorway)
Cons:
- More expensive than petrol cars
- Less electric-only range than a full EV
- Still uses fossil fuel
3. Petrol/Diesel Vehicles
Pros:
- Lower upfront cost
- Wide range of models and sizes
- Better suited for high-mileage or long-distance driving
Cons:
- Higher emissions and fuel costs
- Higher BIK tax
- May face restrictions in low-emission zones
Employee Company Cars: How They Work
Many businesses offer company cars to employees as part of their benefits package. These cars can be:
- Company-owned or leased, provided exclusively for business or mixed use
- Salary sacrifice schemes, where employees give up part of their salary in exchange for a leased car
Employee Costs and Payments
In most cases, employees pay for private use of a company car through taxation rather than direct payment. The Benefit-in-Kind (BIK) tax is calculated based on:
- The car’s list price (P11D value)
- The CO₂ emissions
- The employee’s income tax band
Electric cars currently have very low BIK rates (as low as 2% in the UK), making them an attractive option for both employer and employee.
Salary sacrifice schemes can reduce the employee’s income tax and National Insurance contributions, especially if the car chosen is a low-emission model.
Buying New vs Used
A used company car can help reduce upfront costs and offer better value for money. Today’s used car market has a wide selection of reliable models, including hybrids and EVs. However, used cars may come with an unknown history, so always check:
- MOT and service records
- Vehicle history reports
- An independent inspection by a trusted mechanic
Match the Vehicle to Its Purpose
When choosing the best company car, always consider how it will be used:
- For goods transport or site visits: Consider an SUV, estate car or van with strong load capacity and durability
- For executive or sales roles: A stylish hybrid or electric vehicle can reflect your brand and reduce running costs
- For daily staff commutes: Economy, low-emission vehicles help reduce BIK taxes and operational expenses
- To pick up and drop off employees: If you want to use it to pick up and drop off employees, an SUV like a Honda CRV can meet your objectives well.
Be sure to factor in auto insurance that matches the vehicle’s intended use.
Consider Branding Opportunities
Company cars often serve as mobile adverts. Adding business branding to the vehicle is a cost-effective way to raise awareness while staff travel between jobs or locations. Just make sure your graphics comply with local vehicle advertising laws and do not obstruct visibility.
Final Thoughts
Choosing the best company car involves more than just selecting a model. Consider the vehicle’s environmental impact, tax efficiency, employee benefits, and overall practicality. Whether you opt for electric, hybrid, or petrol, and whether you lease or buy, your decision should support your business goals, staff needs, and long-term sustainability.
By doing your research, comparing costs, and aligning your decision with how the car will be used, you can find a company car solution that delivers both value and performance.
