Company Car vs Mileage reimburse. Which is better?

DeniseR

Hello All,
We are a sales company in Northern NJ. We are trying to evaluate which program is better. Offer our sales force a company car or continue our current mileage reimbursement program? What do you do?

Since we've never offered a company car, can you enlighten me on the requirements? How do you reimburse for gas? How is the monthly payment for the car made? Are there any tax issues we need to be concerned about?

Current mileage reimbursement. We currently remiburse exactly what the goivernment announces as the official reimbursement which since Jan 2004, it's been .375/mile (no taxes come out). Can a company reimburse a higher amount than what the govt allows? Do we have to pay taxes on it?

Last question, have your employees been asking you what you are going to do for them since gas prices are up to $2 a gallon!?

Help!!!Thanks for your advice

System

To answer your first question, we have both. Company cars are owned by the employer and the employer makes the payment. In this state, the owner is obligated for the insurance also. You could probably negotiate the maintenance - tires, oil changes, etc. I think whatever you arrange with your employees is up to you, the employer. I would run it by finance. Some of it may be considered taxable income.

For employees who do not use a company car, we reimburse mileage at .25, way below the actual cost.

No, employees have not been asking what we'll do for them about increasing gas prices. I wouldn't recommend any more than I would if milk and butter were increasing. Our employees get 4% annual raises. My personal opinion is that employees (including moi) find ways to conserve gas or adjust their budget. Maybe that's what you could do for them - conduct 'Creative Budgeting' courses.

marc

There are a number of things to consider when analyzing which way to go. I have been involved with companies who have done both. A third option to consider is a car allowance, which can be calculated to cover payments, insurance, gas, maintenance or any combination. By the way, the car allowance is fully taxable.

From an EE perspective, I like it best when the company owns the car. The insurance, tags and maintenance are on the company and all I have to do is pay taxes through the W-2 for the personal usage allowance (which can be fairly low).

From the company perspective, I don't like owning the cars. The storage, insurance, maintenance, tags, etc is a major hassle and IMHO, costs way more that it is worth. I much prefer paying mileage or a car allowance to the option of owning.

How much you reimburse or pay as a car allowance is a balancing act between keeping the EEs and what you can afford. The last car allowance I had, 17 years ago, was $400 per month. I used the money to buy a 280Z. Good commuter car!