Car Allowances

Car Allowances as a financial tool
For some car allowances are used as a tool for delivering ‘company cars’ in a more tax efficient manner, these are commonly known as ECO or ‘Employee Car Ownership’ schemes. ECO schemes make effective use of ‘Tax Free’ business mileage rates to reduce the amount of taxable ‘Car Allowance’ necessary to fund the business car, and can be an attractive proposition if you have high mileage drivers.

Whereas the principles that govern these schemes are pretty much consistent across a range of products on the market, the methods of calculation and sometimes the components used vary dramatically from provider to provider and as such the evaluation of schemes can be exceedingly complex.

Couple the complexity with the necessary variations in compensation and tax efficiency that will be inevitable with a driving population driving different vehicles, with different mileage patterns and with different tax codes, you may find that you have only the product provider’s word and sometimes loaded calculations as the basis for critical decisions.

Additionally, these schemes, regardless of the sales speak, are quite demanding in terms of resource, and as such you will need to take account of internal and outsourced structure when taking decisions.

Fleetworx have experience with many different schemes, and can help you evaluate these from a level playing field. We also know where licence is taken on ‘projected savings’ and can highlight the militating circumstances that need consideration.

We have the tools and experience that you need on your side of the table to help create ECO solutions where both parties have their eyes open and that can be effectively measured going forward.Section –

Car Allowances as Alternatives
Most businesses today offer car allowances in lieu of company cars, to some extent within their business.
For many it is a method of delivering greater flexibility and choice, and where restrictive company car policies are in place this can present an attractive proposition. It is important, however for all concerned to recognise the cost of cash allowances to the business and the value to employees, if these are to managed and communicated effectively.

Fleetworx have a clear understanding of the principle drivers of cost and value in all car allowance situations and, aided by our sophisticated software package, are able to help you create car allowances that meet your key objectives, whether that be to contain costs to the business whilst offering a realistic alternative, or whether that is to encourage drivers in one direction or the other through meeting their personal aspirations.
We have found that where accountants may be able to help with the pure economics of calculating breakeven points, our specialist market knowledge and experience with the commercial and operational aspects of running car and cash policies, gives us a serious advantage when helping our clients create equitable solutions.

Car Allowance review projects range from updating benchmark breakeven points on a handful of grades, right through to a driver by driver cost / benefit analysis across several hundred employees, the latter being the exception rather than the rule, however essential where drivers are being forced in one direction or another.

What you need to know in order to get the balance right
Deliverables of a Fleetworx Cash Allowance Review
Fleetworx Cash Allowance Review Process