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Advice: Creating a company car policy for a small business

Company car policy: can help reduce costs


16 February 2011

Two business people discuss a company car policy
Company car policy: can help reduce costs

MOST small companies probably don’t even think of running a structured company car policy. After all, many small businesses only run a few vehicles.

And the acquisition and on-going management of the company’s business cars is often looked after by an individual as part of a wider job function – quite often it’s the business owner.

Understandably, then, it doesn’t always get the priority and attention it might deserve.

However, adding process and structure to the buying and selling of company cars – or, alternatively, to the management of business cars using contract hire – can help reduce costs. And make sure the business, and its staff, meet their legal obligations.

Here are the 12 key points to consider.

1, Company policy statement – what is the purpose of the business car? What choice do you give staff and how do they choose their car? (Usually this is either by list price or by monthly contract hire rental for consistency.)

2, Who does what? – What are the responsibilities of the driver for looking after the car and maintaining it? And what are those of your company? Make sure this is reflected in your employee’s contract or employer’s HR handbook if you have one.

3, Guidelines for using company cars – how should they be used? And when? What happens when a driver has an accident? And what are the servicing arrangements for the car?

4, Who gets a company car? – What level is needed to qualify for a company car? Can they add some of their own money to trade their choice up and what is the policy for the company signing off an order with the dealer or contract hire supplier?

5, Fuel policy – Do your staff pay for their own fuel and claim it back? Or are they issued with fuel cards? Can they claim for their private mileage as well? And if they have to claim fuel back, do they need to present a VAT receipt?

6, Driver’s responsibilities – What is the policy when a driver breaks down? What about parking and speeding fines? Are you clear on who pays for these fines? Using mobile phones on company business is a key area within a company’s Duty of Care responsibilities. So what are the rules for in-car use?

7, Insurance – Who is insured to drive a company car – other staff, driver’s spouse for example – and what happens if a driver’s personal possessions or a company laptop are stolen if a car is broken into?

8, Taxation – Each driver will have to pay Benefit-in-Kind tax on their car – this is known as company car tax. If you provide free fuel, this will also have to be declared as part of your annual employee tax returns.

9, Changing company vehicles – Telling your drivers how you expect the vehicle to be returned is important. If you buy your cars good vehicle conditions allows you to get a better price, whether you use an auction or as a part-exchange for a new car. If you use contract hire, the leasing company will expect the car to be returned in a certain condition. Failure to meet this will mean further charges to your business.

10, Health and Safety/Environmental awareness – What is your Health and Safety policy? Do you have one? And how do you monitor drivers adhere to this? Other important issues that need covering include: helping drivers reduce accidents; ensuring drivers have regular eye tests; and how many hours you expect your drivers to spend behind the wheel.

11, Company vehicle withdrawal and termination of employment – defining the areas where your business considers withdrawing the drivers’ vehicle or fuel card should leave the employee in no doubt where they stand when they join the company.

12, Driver acceptance form – getting a driver to sign a form which accepts all of the conditions on their vehicle before you hand it over is often a wise move.

More help with a company car policy

If you want to read more about  a proper company car policy, then click here: Review policies on mobile phone use

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Ralph Morton

Ralph Morton

Ralph Morton is an award-winning journalist and the founder of Business Car Manager (now renamed Business Motoring). Ralph writes extensively about the car and van leasing industry as well as wider fleet and company car issues. A former editor of What Car?, Ralph is a vastly experienced writer and editor and has been writing about the automotive sector for over 35 years.

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