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A company car: A huge advantage or a massive money waster? You decide!

by , 15 July 2014
Every asset your company buys comes with its own pros and cons. One of the biggest culprits is your company car.

It's wonderful for your employee who gets to do all his business travel in the car, but does it benefit you?
As a constantly depreciating asset, a company car could be a massive money waster.

To help you decide, here are the pros and cons of spending your hard earned company money on a business car...

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The disadvantages of a company car

As I said, a company car is a depreciating asset. This means when you decide to sell it, you're going to get much less for it than you paid for it.
This makes it an automatic loss. 
Then there's the maintenance, fuel and insurance. All of these add up because your company is completely responsible for it. 
It's also an unpredictable asset. Unless you're a wizard with cars, you won't know when it's going to start acting up. You may find your company has to fork out R1 300 on new brake pads when you hadn't budgeted for that.
So there are a lot of disadvantages to a company car, but there are handy advantages too...

The advantages of a company car

Even though it's a depreciating asset, you can still get some extra money from it. You can claim a wear and tear allowance on the asset depreciation. In fact, if you use the straight line depreciation method, you can save a ton on tax and make up for the car's depreciating value.
A company car is also much simpler to manage than a travel allowance and your employee's the one that pays tax on it, not you.
With that information, you can decide whether a company car is the best idea for your company. 
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A company car: A huge advantage or a massive money waster? You decide!
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