Many businesses rely on company cars. As well as helping staff get from A to B, company cars are also a great staff incentive. And with staff turnover rates soaring, now is a good time to offer perks that keep your staff happy and make it easy for them to do their jobs.
But buying brand new company cars isn’t always possible or necessary, especially for small and medium-sized businesses. This guide is for business owners looking for a flexible, affordable business car subscription that meets your staff’s needs. We explain why subscription can be a viable alternative to business vehicle leases.
Car subscriptions are a relatively new way to drive. Just like other subscription services — like Netflix or Spotify — drivers pay monthly and get an all-inclusive driving package. This usually includes car hire, insurance, MOT and servicing, breakdown cover, and road tax.
Most car subscriptions are available on short-term rolling contracts, so you can cancel and renew as and when you need to.
Company car subscriptions work the same way. You can hire as many cars as you need for your employees — while your car subscription provider takes care of the admin. Your business and your employees gain all the perks of driving a company-owned car, without having to organise insurance, servicing, or courtesy cars.
Some car subscription companies also offer a salary sacrifice option, so you and your employees can get tax benefits when you choose a car subscription (especially if you choose an electric car subscription).
Setting up a business car subscription is simple. Take a look at your chosen car subscription providers site to see which cars are available (or use an impartial car subscription comparison tool to see cars side-by-side). When you know which car(s) you want, sign up as a business user or enquire on your chosen provider’s site.
Choose your car(s) and subscription options (including additional mileage and drivers if needed). Your provider will calculate your total monthly cost and invoice you monthly for as long as your subscription lasts. All fees and expenses are usually included in your monthly payment. Most subscription providers allow you to cancel with just 30 days’ notice, so it’s really easy to unsubscribe if you change your mind.
There are 2 main types of business car subscription:
If you’re taking out a company car subscription, the business is effectively the car leaseholder. You’ll choose who is eligible to drive the cars assigned to your business.
With a salary sacrifice scheme, you can give your permanent employees the option to take out a car subscription in their own name as a benefit-in-kind. The benefit-in-kind tax rate depends on which kind of car you drive. For pure electric cars, the BIK rate is set at just 2% until the 2025/26 tax year. For other cars, the BIK rate can be as high as 37% — so how much employees save depends on the car they choose.
Some providers, such as elmo, offer their salary sacrifice scheme at the same rate as the business’s National Insurance savings — so it won’t cost your business a penny to offer this perk to your employees.
Most companies with PAYE employees can take out a car subscription for business. This includes a limited company director who is the only employee at the company.
You can set your own policy regarding who is eligible for a company car subscription. Most companies offer company cars to employees with certain business travel needs, and/or senior members of staff. Salary sacrifice schemes are usually offered to all permanent employees who have passed their probationary period.
These employees can choose whether to opt-in to the scheme. (Bear in mind that a salary sacrifice scheme can’t reduce employee wages to below the minimum wage, so employees on or near the minimum wage threshold may not be eligible.)
Car subscription providers also set eligibility criteria for drivers, such as age limits, credit checks, and residency rules. Check these car subscription requirements with your provider before you sign up.
A business car subscription benefits your company and your staff. They allow businesses to:
Employees can also benefit from tax savings, and having a flexible, affordable way to drive — whether it’s for business or personal use. See more reasons to get a car on subscription.
With a car subscription, you won’t actually own the vehicle — so you may feel as though you’re not making much of an investment. But this comes with its own advantages. Cars are notorious for losing value, so you won’t need to worry about depreciation of your assets (and accounting for this every year).
Certain cars — such as electric vehicles — may also need more investment, such as charging points at your workplace. However, certain EV subscription providers offer discounts on charge point installation and EV energy tariffs.
There are also government grants available for businesses that install charge points at their offices. Other providers offer free charging, so it may not be necessary to install your own charger if there’s an available charging point nearby.
Just like buying a company car, the cost of a business car subscription depends on various factors, including:
It’s safe to say that a Tesla car subscription will be considerably more expensive than a Ford Focus, so it’s a good idea to calculate your overall fleet budget.
Bear in mind that you won’t need to pay for additional or unexpected costs like servicing and insurance, as these are included in your monthly car subscription payment.
Company cars can help reduce your corporation tax bill. When you buy a car, you can claim it as a Capital Allowance, so you won’t pay tax on the purchase price. When you lease, hire, or subscribe to a company car, the fee can be claimed as an expense (in most cases).
But when you buy a car, the car will eventually lose its value — so you’ll need to figure out how this depreciation impacts your tax bill in future years. Plus, you’ll need to account for additional expenses like employee car insurance, courtesy cars, car repair and servicing, congestion charges, and road tax — not to mention staff wages for arranging all these things.
For some businesses, the tax savings may outweigh these extra costs — but for many, you can actually end up paying more when you buy a company car outright.
Business car leases and subscriptions have become popular in recent years to avoid these administrative and accounting headaches. Both allow you to pay monthly for an all-inclusive service, while making the same savings as buying a car — but car leases are far more restrictive than car subscriptions. You’re often tied into a multi-year contract, which can be costly or difficult to manage if employees leave the business.
Car subscriptions are often a little more expensive per month, but you can cancel and renew your subscription whenever you need to, giving you greater flexibility.
Many major UK providers offer car subscriptions for businesses. These include:
Cazoo has also announced they will expand into commercial car subscription services in the near future.
Car subscriptions are highly flexible. It depends on which subscription provider you choose, but most allow you to change or cancel your subscription with 1 month’s notice.
This may include cancelling your subscription altogether, or reducing the number of cars you need.
As a business owner, you can subscribe to a car through your business. If you’re an employee, you’ll need to find out if you’re eligible for a company car or salary sacrifice.
This depends on your employer’s internal policy. You’ll also need to meet car subscription requirements set by the car provider, and pass a credit check.
It depends which cars are available at the car subscription provider chosen by your company. Certain car subscription providers, like Onto and elmo, specialise in electric vehicles.
For most cars, yes. You can claim the monthly subscription fee as a business expense. However, cars that exceed certain emissions regulations are exempt from this — so you can save more by choosing a hybrid or electric vehicle with low or no emissions. Learn more about the benefits of choosing an electric car subscription.
It depends what type of car you choose, how much you plan to use it, and how much you’ll save through your salary sacrifice scheme.
You can subscribe to a pure electric car at a benefit-in-kind rate of just 2%, which can save you a lot of money compared with the standard income tax rate of 20-40%. If you choose a vehicle with high emissions, the BIK rate is higher. So you’ll save less, but it may still be worthwhile.
Use Onto’s salary sacrifice calculator to see how much you could save with an electric car subscription.
Yes. When you get a car subscription through a salary sacrifice scheme, you’ll almost always pay less than if you take out your own car subscription.
No. You can use your company car for both business and personal use.
A personal car subscription is paid for by you, whereas a business car subscription is paid for by the company. However, if your car subscription is part of a salary sacrifice scheme, payment will be deducted from your salary each month.
Usually, yes. Most startups and new businesses can sign up for a business car subscription, as the eligibility criteria are less strict than for long-term leasing. However, your employees will need to pass a credit check before they’re approved to drive a car on a subscription.
You can decide where the car(s) are delivered, whether it’s to your business premises or your employee’s home address. Providers may charge a fee for delivering or collecting a car, especially if it’s a long way from their depot. Some providers may allow a named driver to collect the car from their depot.
Find out more about how car subscription delivery and collection work.
Here are some of the most popular car brands. We based this list on the number of searches our users have carried out on our website since January 2022.
Here are some of the most electric cars available on subscription. We based this list on the number of searches our users have carried out on our website since January 2022.
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