How to choose a company car?

March 18th, 2015

Middle-sized companies often develop the need to update their car fleet or decide to create one for themselves. Once the possible budgetary expenses have been worked out with the accountants, the next step is almost always to eagerly book test drives and hunt for the lowest prices. However, many questions arise early on – what would the most optimal vehicle be for a salesman? What kind of a car should the company’s top executive drive? And most important of all – how much will it cost and who’s paying for it?

Choosing a suitable vehicle isn’t an easy or a cold and calculated decision. Besides considering personal favourites you’d have to think on a particularly complicated matter: what kind of an impression a company’s car fleet leaves. We all remember what the situation was like during the previous economic peak when construction sites were flooded with luxurious SUVs and limousines in every sense of the word – and they didn’t belong to construction firm owners or top executives. Even the most common construction worker didn’t fret about arriving in front of the client with a car that most probably exceeded the price of the client’s own ride. When this whole glorious economic bubble burst and missed lease payments multiplied, these companies were forced to come face to face with a neglected car fleet that no one had the finances to use and no one any longer wanted to buy. But the myth of overpaid construction workers lived on strong.

Choosing a suitable vehicle isn’t an easy or a cold and calculated decision

Companies have solved the use of company cars in various ways. Some view it as part of a compensation package, clearly as a perk for an employee, and that’s also mirrored in how they pay their taxes. Today, however, a more practical approach has won over and company cars are mostly meant for business-related rides, and that’s in turn reflected in a more modest car fleet. The reason for agreeing to a vehicle doesn’t only stem from the amount of monthly lease payments, but also from the impression and status of the vehicle, and vice versa. There are also examples of ministries here domestically, where a politician wishes to leave an impression of frugality and sparing use of state resources by choosing a vehicle from a lower class than usual. And later they get caught in a tricky situation when it becomes clear that monthly payments for their seemingly cheaper car greatly exceed the ones for a vehicle from a higher class.

Nevertheless, too much austerity in choosing a car might prove to be a slippery slope for a company executive. There are plenty of legendary examples. For instance of two American major corporation executives who for years competed on who had the oldest car. And we’re not talking about some restored old-timers from the 60s, but 80s American lower middle class clunkers that the big bosses personally spruced up with duct tape. Driving such a wreck verging on its last breath to client meetings might not leave a particularly reliable impression. However, driving such a thing to the tax office is a solution worth considering…

As such every company ought to consider each of these concerns for themselves depending on the fate of their company, their clients and the desired image. But the questions keep on coming – could the top executive’s car be better than the one the company owner drives? What should a salesman’s car be like if it shouldn’t outperform the client’s car but should still project an image of a successful company? What about when the enterprise is owned by the state or the local government or the vehicle is in use for public services? The easiest solution would be to turn to an expert of the field straight at the beginning – for instance a lease company or an experienced rental firm.

Could the top executive’s car be better than the one the company owner drives?

According our experience here at Rentest, 15-20% of the clients outsourcing car fleet management services leave the decisions on car brands up to the rental company. Of course, specific boundaries have been set by international large groups where according to internal rules acquiring certain brands for company cars is out of the question and it’s precisely regulated to which class the vehicles should belong to for the employees either lower down or higher up in the company’s hierarchy. Additionally, some companies have ordained that all their fleet vehicles should globally be of the same brand or by the same manufacturing group.

The practice so far shows that business clients don’t value the car’s looks as much as they do its comfort level. Besides, lower priced cars have become very good in terms of driveability, which is why increasingly smaller cars have started to come to prominence in corporative car fleets. Using chauffeur services, which rather popular among top executives in other parts of the world, is still rarely seen in Estonia and can be afforded by only a few. Instead, the most popular means of transport is the luxuriant microbus that beats the cost of European top luxury sedans hands down. Not to talk about the labour costs. Why it would be more reasonable for small and middle-sized enterprises to buy all car fleet management services from rental companies can be read about from our next post.

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