A company car is a vehicle that is made available to the employee by the employer – primarily for professional use, but in most cases also for private use. The company car is often also referred to as the company car.
Both terms are basically synonymous, they just focus on different aspects. The term company car is more common in colloquial language and emphasizes the company's point of view. The term "company car", on the other hand, is more formal and puts the perspective of the employee or the employer in the foreground. company car driver more in focus.
However, these basic definitions leave central questions unanswered. Which vehicle models belong to the classic company car? How is the market changing, the model hierarchy and what special forms are there? And how should a company car actually be equipped??
In addition, there are the two large topic blocks of private taxation and the form of acquisition – such as the question of how the company car can be taxed and depreciated and what advantages leasing offers.
Many open questions therefore, to which we want to give an answer in this guidebook.
1) The company car – the classic forms
Company cars are still extremely popular with both employees and employers. For the employee, they are a highly visible sign that they have made it on the job. For the employer resp. the company, the company car is on the one hand a good way to present the internal hierarchy and motivate the employees. On the other hand the vehicle park can carry the self-image of the company outward, whereby here the principle applies: The existing image is to be underlined with company cars only.
Given these features, it is not surprising that the company car is so widespread in Germany. Most common among branch and sales managers, members of senior management, and middle to upper management. Self-employed entrepreneurs also like to have their car registered with the company because it is more favorable under tax law (cf. Point 4 and 5).
A look at the industries shows that company cars are extremely popular in the sales sector. But also employees from the areas of IT, technology and personnel management often use a company car. In the financial sector, company cars are less common, but larger and more expensive. Status is particularly important here. The situation is similar in the legal sector, in the political sector and, last but not least, in the automotive industry itself.
Given this broad field of application, the range of classic company cars is as large as it is varied. Basically, however, the "classics" include compact class vehicles and those in the basic and upper-middle classes. For a long time, sedans and station wagons were the dominant body styles, but SUVs are now also among the classic company cars, just as they are in the private sector.
A) Classic company cars – popular brands
Volkswagen remains the most popular manufacturer for company cars. But Audi, Opel, Ford, BMW and Mercedes are also strongly represented here; and Volvo – as ever – has a high status in the circle of prestigious company cars. Other imported brands, on the other hand, continue to struggle to gain a foothold in the market. Due to the constantly increasing cost pressure, however, models from Seat, Renault or Hyundai can be found more and more often in company car fleets.
B) Classic company cars – popular models
The company car models reflect the company hierarchy and the company's. most clearly reflect the salary grade. The upper middle class remains bspw. reserved primarily for the executive suite, with board members and directors paying an average of around 70.000 euros for their company car. The most popular models here are the BMW 5 series, the Audi A6 and the Mercedes E-Class.
Specialists and division managers, meanwhile, mostly drive cars from the compact or luxury class. Middle class; the average purchase cost is in the range of 40.000 euros. The most successful models here are the VW Passat, the VW Golf, the Audi A4 and the Audi A4. S4, the Mercedes C-Class, the BMW 1 Series and 3 Series, the Mazda 6; and among SUVs, the Opel Mokka, the Porsche Macan, the VW Tiguan and the Volvo XC60.
However, new developments can also be observed in the company car market, especially in recent years – driven not least by the desire for further cost reductions. After all, in many companies the vehicle fleet is already the second largest cost factor after personnel costs. The motto is therefore save – But how?
Models that are not only inexpensive to buy but also to maintain are particularly well suited for this purpose. What counts in the end are the total costs of a model or. of the entire vehicle fleet, i.e. the so-called Total Costs of Ownership (TCO).
2) Special forms of company cars
The ideal way to meet these requirements is with small and efficient vehicles, i.e., small cars and minis (subcompacts). They therefore also enjoy particularly high growth rates. Particularly for small and medium-sized companies, there is great potential for savings here. Small companies often prove to be pioneers in this respect, not least when it comes to switching to particularly efficient company cars with electric or hybrid drive systems.
The small company cars are used primarily in the care sector or by delivery service providers. The special feature here is that the company cars are used primarily for business and only rarely for private purposes – a type of company car use that has its own special features from a tax law perspective (see points 4 and 5).
3) The company car and the question of equipment
Company cars are therefore tending to become smaller. In order to make the smaller models attractive to employees, fleet managers and entrepreneurs can equip the company cars with higher-quality seats in the process. But the extras have to be chosen wisely, because many optional extras quickly lose their value. Others not only increase resale value, they also make a lot of sense from a financial and safety perspective.
Some features, such as a radio and air conditioning system, are a must in every company car – also from the point of view of resale value. Depending on the class, other basic extras may also be added here. In mid-range cars, for example, a navigation system is almost a must, whereas in compact cars this extra tends to incur unnecessary costs.
As a guideline for the equipment of company cars, the experts recommend the following principle: It makes sense to have special equipment that is part of the factory equipment in the next higher class. However, you should always keep an eye on the depreciation in value.
The following three equipment areas deserve special attention in company cars:
- Extras for safety& Damage minimization
- Extras in the area of connectivity, multimedia, etc. (saying mobile office)
- Extras for greater comfort& More health
Safety& Damage prevention
Parking damage is also the most common source of damage to a company car. However, parking warning systems only help to a limited extent, as the analyses of accident researchers show. Systems that actively help with parking promise greater benefits.
Electronic assistance systems are also among the useful extras. This applies in particular to the emergency brake assistant, because it helps to prevent accidents and damage in large numbers. This is worthwhile for the company car driver, but also for the company car owner.
Connectivity& mobile office
Today, nothing works without the Internet, especially if the company car is to be used as a mobile office. A WLAN hotspot, Bluetooth and corresponding connections for external devices as well as the conclusion of a data flat rate are therefore standard, especially for company cars of the upper management class. For young employees in particular, good infotainment equipment also increases the attractiveness of a model.
Health& Comfort
The health aspect is not least important in the case of company cars for sales representatives who drive 50.000 kilometers and more are important. Investments in high-quality seats pay off quickly for both sides, for example.
4) The company car – tax advantages for the employee
In addition to the aspects of image and technology, company cars are also highly interesting from a legal, especially from a tax point of view: for both the employee and the employer.
The tax assessment of the company car depends to a large extent on the form of use. For the employee, there are two main forms to distinguish here:
A) Private use of the company car
In most cases, the company car is also used privately. The driver or. the employee must then take the company car into account in the income tax return
Income tax – imputed income
If employees use the company car privately, this use is taxable as a so-called non-cash benefit under Section 6 of the German Income Tax Act (Einkommensteuergesetz). This also applies to self-employed persons who use the company car, which is registered to their own company, for private purposes. The employee can choose between two variants that are based on different costs:
- A monthly flat rate of 1% of the gross list price (d.h. the manufacturer's recommended retail price on the date of initial registration). If the company car is also used to travel between home and work, a further 0.03% of the list price is added monthly for each kilometer of this journey.
- The actual costs determined with the help of a driver's logbook.
It may be worthwhile for the employee to keep a logbook if the company car is rarely used for private purposes, i.e. if the company car is not used for business purposes.h. if the costs per month are less than 1% of the list price. This applies above all to company car drivers who still have their own private car.
A tip: If you are not sure which of the two taxation options is the more favorable one, you can first opt for the one-percent option and at the same time keep a proper driver's logbook. If there is a tax advantage in the end, the actual costs can still be included in the income tax return.
B) Use of own car as company car
If, on the other hand, the employee uses his own car as a company car, he can have the employer reimburse him 30 cents per kilometer driven free of wage tax. If the employer does not pay the full amount, the difference can be claimed as income-related expenses in the tax return.
5) The company car – financial and tax advantages for the employer
The company car also offers advantages for the employer, i.e. the owner. Since the company car is considered a non-cash benefit under income tax law, it effectively reduces the employee's gross salary – and thus also the ancillary wage costs to be paid by the employer.
In addition, there are further tax advantages, whereby here again two cases of company car use must be distinguished:
A) Private use of the company car
Value added tax – gratuitous transfer of value
If the employee also uses the company car privately, the employer can recognize the costs in the VAT return as a gratuitous transfer of value (§3). This is possible in three different ways:
- In the form of a monthly lump sum of 1% of the gross list price (but this option is only open if the employee also taxes the company car in this way).
- According to the costs determined with a logbook
- According to the costs of a proper estimate (simplified logbook, etc.).)
B) Company cars not used privately
Although this case is rarer, it also has its advantages. On the one hand, the employer must bear all operating costs and maintenance costs, and on the other hand, the employee must pay for the use of the car. On the other hand, the employee can deduct these costs as business expenses for tax purposes.
Financial advantages of leasing
For the employer, the purchase of a company car can also result in further financial advantages. When buying a new car, the buyer usually not only gets the sales tax back, but can also write off the purchase and maintenance costs as business expenses.
From a financial point of view, however, leasing is even more interesting in many cases. The most significant advantages include
- A regular change of vehicles: the company cars are thus always up to date with the latest technology.
- Low burden on liquidity: leasing usually places a much lighter burden on the company's liquidity than a new purchase, although the monthly fixed costs increase. A purchase via a loan also worsens the equity ratio.
- High flexibility: both financially, due to high discounts and adaptable leasing rates; and technically, due to regular vehicle changes.
- Reduced risk of loss of value
- Tax advantages: bspw. lease payments and ongoing operating costs are tax-deductible; revenue-plus accountants are allowed to fully deduct the down payment (down payment amount) as a business expense in the year of payment (balance sheet accountants must spread it over the entire lease term); there is also the option of residual amount deduction (input tax deduction and depreciation).