Company car

A take-home vehicle, or company car is a vehicle which companies or organisations lease or own and which employees use for their personal and business travel.

There are three main reasons which explain why the provision of a company car for private use as a benefit may be attractive for both the employee and the employer. The first reason is that companies can supply the fringe benefit at lower costs than the employee is able to achieve on their own – and consequently pass it on to the employee. Secondly, the tax system may encourage the provision of cars over monetary remuneration from the perspective of both the employer and employee. Thirdly, firms may want the employee to drive in a car of certain minimum standard or have access to a suitable vehicle at all times. It may also benefit the employer if there is advertising/branding on the car's paintwork (or window stickers), since if the employee uses the car during the evening/weekend, it spreads advertising in public areas more than if the car was locked up in a garage during these times.

The use of company cars is widespread in some regions. For example, business registrations account for roughly 50% of all car sales in the EU, largely due to taxation rules which give companies a strong incentive to provide the benefit. The practice has been criticised by many groups who argue that the benefit encourages people to drive more (thus increasing CO₂ emissions), reduces government tax revenues, distorts economic competition, and may work to neutralise other government programs and objectives.

Police departments are among frequent participants in take-home vehicle programs, allowing officers to take home the police cars they use while on duty. It is considered to be a fringe benefit by the departments. It has been viewed by some departments as a crime-fighting tool, given its cost.

There is a straightforward distortion in consumer markets as consumers through tax incentives are being encouraged to consume more car services than they would have been otherwise.

There is also a substantial tax loss resulting from the subsidy.

Studies have shown that the subsidy encourages consumers to buy more and bigger cars than they would choose otherwise. In many areas, fuel costs are also covered by the benefit, so that the marginal cost of driving may approach zero. In these areas consumers are encouraged to drive more frequently and farther than they otherwise would, and avoid other forms of transportation. Emissions of CO₂ and other harmful gases are clearly higher as a result.

When issued by a government agency, concern has been brought up by citizens and advocates over taxpayer money used to fund take-home vehicles. This has led some cities to cutting or reducing the number of employees to whom vehicles are offered.

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Wikipedia