How to build a company car policy

How do you draw up a company car policy, and which part of your business should own it? Roddy Graham, chairman of the Institute of Car Fleet Management, explains.

Company car schemes are an important and expensive part of any benefits package, and must be an attractive and aspirational policy that employees get value from. So, as with responsibility for other benefits, the ultimate owner of a fleet management policy must be HR.

If you want your HR department to take ownership of a fleet management policy, it is important that staff receive some basic training in fleet management. The ICFM (Institute of Car Fleet Management ) runs fleet management training programmes for HR personnel.

What should be in your company car policy? Regardless of whether the fleet is company-owned, leased, or supplied by an agency, you have to decide on:


  • Model choice. In an approved car list you need to decide between the financial advantages of a limited choice of models (a single- or dual-badge deal) and the incentive benefits of a much wider choice based mainly on value (although there may be some restrictions on inappropriate models).


  • Carbon dioxide (CO2) limits. Tax legislation increasingly favours low CO2 emission vehicles and, as a response to this, many organisations have introduced a limit on the CO2 emissions level of cars offered in their fleet. This will vary from fleet to fleet but in many cases the limit used is 160g/km as the corporation tax treatment for company cars is more favourable below this limit.


  • Replacement policy. The vehicle will be replaced after a stated number of years or a specific mileage or whichever of the two is reached first.


  • Allowing all those entitled to a company car to trade up or down (within the approved list) with an appropriate salary adjustment.


  • Offering a cash alternative.


  • Offering incentives for company car drivers to switch to other forms of transport.


  • What insurance cover to provide.


  • Parking. There is no tax as yet on the provision of parking places for company cars, however parking vouchers and reimbursement for parking charges are taxable.


  • Congestion charge. Is this included for just business use or private use as well? As there is no charge at the weekend you may as well just pay for it as a blanket policy.


The contract should also state:


  • What type of vehicle the employee is entitled to.


  • Whether it is available for private use and whether there are restrictions on its use.


  • Who is allowed to drive the car.


  • Who is responsible for fuel, maintenance, tax, insurance and repairs.


  • When it will be replaced (typically based on age or mileage).


  • Who is responsible for the cost of fuel, maintenance, tax, insurance and repairs.


  • Whether the car user is required to make a contribution in return for private use of the car.


  • Whether there are circumstances (such as extended leave or during a driving ban) when the vehicle may be withdrawn.


  • The car user’s responsibilities in respect of the vehicle.



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