COMPANY LEASE CAR? Watch out for disadvantages!
A company car is a fringe benefit that not only increases employee mobility, but also has numerous financial and tax implications. This article we list the disadvantages of a company car for you.
COMPANY CAR: THE COSTS
Although you get a company car and it can save you a lot, that does not mean there are no costs at all for you. Just think of private use, this involves additional taxes. In addition, your employer may ask you for a monthly co-payment. It is important to have a clear picture of the costs and rules that are for your own account.
OWN CONTRIBUTION COMPANY CAR
If you want to know how a lease car will affect your salary, you should also check whether you have to pay a personal contribution for the company car. This is because your boss may ask for an extra contribution if you also want to use the car privately. Usually, this cost is automatically deducted from your salary. The exact amount depends on the type of car you lease.
Your employer may also ask for a co-payment if you exceed the standard lease amount. This means that the lease car you want costs more than your employer is willing to pay for a lease car. If the norm lease amount is €400 p/m and the car you want is €450 p/m, you pay that extra €50 each month yourself.
So while this co-payment means additional costs for business driving, there is not all bad news. In fact, you can deduct the own contribution for a company car from your additional taxable benefit. Still, it makes a difference.
APPENDIX
The addition is an important tax consideration for executives when deciding whether to provide a company car to their employees. If an employee also uses a company car privately, this is considered a form of income. The executive must then apply an addition to the employee’s taxable income, resulting in additional income tax for the employee. The manager must calculate the addition and deduct it from the employee’s salary.
When calculating the addition, taxable income is added to the tax value of the company car, which can have a direct impact on the income tax an employee owes.
NO CLAIM-FREE YEARS ACCRUAL
If you do not have your own car in your name, then you (usually) do not build up any claim-free years either. That’s a shame, because claim-free years make for a lower premium. Have you driven a company car without claims for years and are you switching to your own car? Great that you have driven damage-free, but this is often difficult to prove. You can request an employer’s statement (which requires you to have been the only one who drove the car), but often an insurer will not accept it. And even if the insurer does, it often only accepts a certain number of claim-free years.
PAY RISE OR COMPANY CAR?
A company car is in many cases more advantageous for the employer than giving a pay rise. Thus, it may save the employer more than giving a higher gross salary. Also note that companies do not consider a leased car as salary, this saves you some holiday pay as well as pension. Even for taking out a mortgage, a pay rise is more favourable than a company car.
