Clients often ask if there is an advantage to having a company vehicle, and unfortunately, it is not a simple answer. There are several variables to consider, and several pros and cons that go along with each variable.

The first thing you must consider are the possible benefits having a company vehicle could bring to your business. Having a company car can be an appealing perk that could serve to attract talented employees to your business. It also serves as a fringe benefit for company owners and employees that yields both tax and non-tax benefits, and can even provide tax deductions for the employer. However, these benefits are irrelevant if your company simply does not need a vehicle. Providing a car for personal use, business use, or both, does not come free of potential complications or paperwork. Personal use of the company vehicle must be calculated and added to your salary as income. This requires maintaining a mileage log to support the business and personal use of the company owned vehicle.

The second thing to consider is which vehicle would be the most appropriate fit for your business. Your options can range from the common passenger car, to a truck, SUV, or van. With all of these options however, you have to consider maintenance cost and depreciation. Depending on how the auto is used, maintenance may be either completely or partially deductible. Depreciation can be seen as both a pro and a con; the advantage being that you can deduct part of the cost of the vehicle, the disadvantage being that you can only deduct so much per year, thus it may take an excess of 10 years to fully depreciate the vehicle.

Another option entirely would be to own a vehicle personally, and use the standard mileage rate determined by the IRS each year that is used as a reimbursement amount in lieu of actual expenses. In 2015, the standard mileage rate for business purposes was set at $0.575 per mile. The advantages of this method are numerous. There is no need to track actual expenses including depreciation, as the rate has a depreciation component built into it, and is often accelerated over the actual calculation of depreciation. Additionally, there is no need to calculate a personal use component for the vehicle to add to your salary, because it is your personal vehicle.

The disadvantage to this method, is the need to document the business miles driven, which needs to include the mileage to and from the locations and the business purpose of each trip. However, this is not hard to do, so long as your employees remember to keep a record, or print a map with the mileage clearly stated. This mileage log should be submitted to your company as part of an expense report. This represents an expense to the company, but does not result in taxable income to you.

Each situation in which a company vehicle might be required is different, and should be reviewed on a case by case basis. Speaking with your CPA can further inform you on the risks and benefits owning or leasing a company vehicle might provide your business.