Company Car Allowance

A Company Car Allowance is an amount of money that you may be offered by your employer, so that you can acquire your own vehicle instead of receiving a company car.

Company Car or Company Car Allowance?

If you have the choice of cash or car, you should check out how much company car tax you would pay if you accept a company vehicle, by using the car tax calculator, and then decide whether to go for the company car or cash. You could be better off taking the cash allowance, even though it is taxable.

The Cash for Car scheme has become increasingly popular with both employers and employees in recent years. Employers save time and money in not having to source, maintain and administer a fleet, although they must always be aware of their Duty of Care and Health & Safety responsibilities. And as an employee, you have more freedom to choose the car you drive, and you could even be better off if you don’t spend all of the company car allowance you receive. However, some employers do stipulate the type and age of vehicle that is acceptable, according to the job you are doing.

Don’t forget that if you choose the company car instead of the allowance, all your motoring costs (except private fuel) will be taken care of by your employer including insurance, road tax, servicing and repairs. If you choose the company car allowance, you then have the option to lease or buy your car.

For Car Leasing advice, check out our Car Leasing vs Buying and Benefits of Leasing a Car sections.

Mileage Allowance

If you choose a company car allowance and provide your own vehicle for business use, you’re entitled to claim from your employer a mileage allowance for each business mile travelled. H. M. Revenue & Customs approves these mileage rates that employees can claim for business travel.

Employee Car Ownership

Part way between the company car and a company car allowance is something called Employee Car Ownership. This is where your employer gives you a car allowance, but the company organizes the finance deal and takes care of insurance and running costs.

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