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Company Car Insurance Guide |
Thinking of buying your staff company cars? It is vital to know how much this will cost your business - the calculation is a little more involved than just looking up car price lists, as it may be that the models with the highest initial price will be the least expensive overall. There are three stages to the calculation of company car ownership costs:
Initial purchase price
All cars come with a recommended retail price, but are hardly ever sold at that price. Huge discounts are available and, if you are buying in quantity, the price may be very different to those published. Certain manufacturers and dealers may be much keener for your business than others, so shop around for quotes - for a commercial loan quote click here. Consider also negotiating over a service contract or one of the finance schemes, like contract purchasing or lease hire - get a quote on leasing your company car. It may be that you can use the promise of a long-term relationship to win even better deals.Running costs
The running costs of different models can vary considerably. Motoring magazines and price guides often supply the data in the form of cost per mile. It may be more accurate for your company to do a calculation based on the car's annual insurance premium, its fuel bill, cost of cleaning, servicing and maintenance, together with an allowance for repairs. It may be useful to add in notional unseen costs, like provision of parking and a proportion of company time spent purchasing, managing and disposing of vehicles. For commercial motor insurance quotes, click here.Resale value
The biggest single cost in car ownership is depreciation - the loss in value over time. This can be fairly accurately predicted and you will find estimates of each vehicle's estimated residual value in motoring magazines and price guides. This is the crucial part of the equation because there are big differences in what your company cars will be worth at the time of disposal. Some cars lose more than half their value in the first three years - some retain a much higher proportion. To this end, leasing may be more cost effective.
The final sum
The vehicle's purchase price, and any discount, needs to be added to the annual running cost for the proposed duration of ownership. Then the estimated residual value should be deducted. The resulting figure is the cost to your company of ownership.
This is a guide. It may be helpful for you to speak to an advisor in commercial motor financing and insurance. E&OE Copyright © businesseurope.com 2002