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Company Car Policy Sample

A company car policy is a set of guidelines to use company-owned or leased cars to support work and personal use. It determines the eligibility of employees to fulfill their work or non-work-related transportation requirements. When it comes to a company car policy, there are two different policies: company-owned car policy and company car lease policy. 

A company-owned car is a vehicle purchased by the company itself. In such cases, the company allows employees to use the car for work and personal use. Using a car for non-work-related purposes requires pre-approval from the respective managers. Some companies may offer the personal use of work as a part of its benefits and perks. For company car leasing, the company gets into an agreement with a leasing company to lease the car. This restricts the level of usage, limits flexibility, and there’s no customization. 

Whether company-owned car policy or company car lease policy, it: 

  • Helps employees understand their responsibilities towards the company-owned cars 
  • Serves as guidance regarding the company’s obligations and responsibilities towards this policy 
  • Is used to take actions, especially for departments like Finance and HR 

Policy brief & purpose

The company car policy defines the responsibilities, guidelines, and rules for employees to lease the company car for work and non-work-related purposes. A company car is assigned to employees to fulfill their transportation requirements. These guidelines have been formulated to ensure a simple and employee-friendly car policy to facilitate troublesome-free commuting for a few employees to fulfill their official duties. 

Scope

This policy applies to all eligible employees who are under the employment contract of the organization to receive a company car. Employees will be eligible for a company car when they are in [Designation/Level/Grade] or above. 

There are two types of schemes: Company car-owned policy and company car lease policy. Employees who are eligible can opt for either of the schemes. If the car provided by the employer is used for personal use and the expenses are incurred by the employee, the entire amount will be taxable.  

Employees are eligible for a company vehicle if they have a driver’s license for [Years]. They qualify for the available schemes if they drive more than [Number of miles] per month for official purposes or if their daily work as a driver requires them to use a company car. They are also entitled to receive a company car as a benefit or a perk. Additionally, employees in [designation/grade] or above are eligible for the policy.  

Employees of [company] need to have a spot-free driving record for [x] number of years, meaning they were not held at fault for a car accident or violating car and traffic laws. Overall, the [company] has the final say in which employee is to be granted a company car. If the employee is eligible and hasn’t received one, contact HR. 

Eligible employees are allowed to use their assigned cars for non-work-related purposes or outside of work hours, only if they adhere to the [company’s] rules and regulations and receive approval in advance from their respective managers. 

It is to be noted that [company] has the right to revoke or reassign company cars. 

Policy elements

Company Car Types and Availability 

  • Eligible employees can opt for one of the types of schemes: company-owned or company-leased cars. Under the company-owned car policy, employees will be granted a car that is insured, maintained, and customized by the company as per the needs of the employee to fulfill their transportation requirements. Cars are only assigned exclusively for work-related use and limited personal use during work hours, and they have no ownership over the vehicle. Employees have no choice regarding the type of vehicle to be assigned. 
  • Under the second scheme, the employee has the option to choose the type of vehicle but will have to participate in the lease payments as the company has entered into an agreement with a car leasing company. Until the end of the lease tenure, the employee will have ownership of the company car. Premature exit from this scheme will be allowed after the employee has paid the remaining installments including any charges or penalties. 
  • For employees with disabilities, the company will be providing reasonable accommodation. They are not eligible for either of the types of cars if they are on medication that affects their ability to drive a company car.  

Guidelines for the Employee 

Eligible employees who drive the company car are obliged to follow predefined guidelines and rules. They must: 

  • Follow traffic laws  
  • Drive sober 
  • Document all the driving-related expenses every month 
  • Maintain the company car in good condition 
  • Incur any running costs like fuel, oil, cleaning, parking, etc., as required 
  • Record all the trips and maintain a vehicle log that covers the dates, locations, odometer readings, passengers, names, and even where the car needed an oil or gasoline change  
  • Reach out to HR to report damage or issues with their cars 
  • Do not accept any responsibility or guarantee payment when involved in an accident, unless authorized by the company 
  • Avoid driving when sick or facing disability problems 
  • Inform HR in case their driver’s license is suspended or revoked 
  • Continue their clean driving record 
  • Ask HR for overnight accommodations during emergencies 
  • Ensure that the auto insurance policy is up to date and carries proof of coverage to avoid any charges  
  • Avoid smoking inside a company car 
  • Do not lease, sell, or lend a company car 
  • Do not leave the company unlocked and unattended  
  • Do not allow unauthorized people to drive/ride a company car unless it is an emergency or has been pre-approved 

Procedure for Obtaining a Company Car 

The procedure for obtaining and returning a company car may vary depending on whether the company car is leased or owned. However, both have a similar process: 

1. Check the eligibility criteria 

To obtain a company car, whether on lease or company-owned, refer to the eligibility criteria to determine if an individual is qualified for a company car. Such criteria include the designation of the employee along with his driving license, clean driving record, or the number of hours he travels per day to complete his work. 

2. Opt for one of the schemes 

Once it is determined that the employee is qualified for a company car, the next step is to choose either of the schemes: Company-owned policy or company car lease policy. If it is a company-owned car, an employee does not have any ownership rights on the car, unlike a leased company car. Moreover, employees have no option on the type of car chosen when it comes to a company-owned car. 

3. Forward the requirement to HR 

After opting for one of the schemes, forward the requirement to HR. Depending on the scheme, the vehicle procurement process will begin. For the company has ownership over the car, the vehicle will be treated as an asset in the books of accounts. To lease a car, HR will contact the car lease company and the employee can choose a vehicle of his choice. 

4. Sign an internal agreement 

In the fourth step, an individual will have to sign an internal agreement on the maintenance, safety, and use of the company car before it is returned. However, a different agreement will be signed to lease a car for the purchase, use, and periodical payments before the end of the lease tenure. 

5. Submit the necessary documents 

Some documents include any invoices, insurance policies, insurance cover notes, and other documents as required by the organization. 

6. Obtain and maintain the company car 

The delivery of the car is ensured once all the agreements have been signed and documents have been submitted. Employees are obliged to ensure maintenance of the company car and record the trips and expenses incurred when traveling for work purposes. 

Procedure for Returning a Company Car 

  • State the reason. There could be many reasons to return a company car. Most often, employees return company cars when resigning from the company or at the time of expiration of the leasing contract. Sometimes, not ensuring proper maintenance of the company car may force employees to return the vehicle. 
  • Ensure the car is in good condition. Regardless of the reason, it is an employee’s responsibility to return the company car in the same condition it was received. The car must be freshly washed, cleaned, and vacuumed. Empty out any personal belongings and bring all the keys. 
  • Gather all the car’s documents 
  • Return the car as per the scheme. If the company owns the car, the vehicle can be returned at any point in time. However, if the car has been leased from a car leasing company, premature exit from the scheme will only be allowed when the employee pays the balance installments and any charges/penalties. After the foreclosure charges have been paid, the car is returned. 

Consequences of Company Car Policy Violations 

If the company car policy has been violated, employees will have to face disciplinary consequences. These consequences are categorized into: 

  • Reprimands 
  • Loss of car privileges 
  • Suspension, demotion, and reassignment 
  • Termination of employment 

Depending on the severity of the case, employees are warned via a written or verbal reprimand. These include minor offenses like receiving fines, allowing unauthorized people, not taking prior approvals, etc. However, when the offenses are serious or continued, companies may revoke the company car, or it may result in the loss of car privileges. It may also result in suspension, demotion, or reassignment to another position for cases when employees lease out the company car for personal gain, causing accidents, intoxication, etc. Organizations may choose to take legal action against the employee or even terminate him for more serious offenses. 

Final thoughts

There are certain responsibilities both the employee and the company are obliged to fulfill. Also, there are a few consequences employees face when a company car policy is violated. It may lead to legal and financial action being taken against the employee. For employees, a company car policy serves as a guideline to carry out daily work-related tasks and travel from one place to another. It saves time, money, and effort. This will, in turn, benefit companies in the long run as employees do their jobs effectively without compromising their motivation and productivity. 

FAQs

1. What is the company car policy?

A company car policy is a set of rules and guidelines to use company cars for commercial or personal transportation needs. This policy is divided into company car lease policy and company-owned car policy. 

2. Who is eligible for a company car?

Any employee who is under the employment contract of the company is eligible for a company car. He may further have to qualify for the eligibility criteria set by the company. 

3. What is the benefit of company car policy?

A company car policy offers convenience, cost savings, and improved productivity for both employers and employees. It provides employees with a convenient means of transportation, saves them expenses on fuel and maintenance, and enhances work-life balance. Employers benefit from better fleet management, brand visibility, and improved control over their vehicles.

 4. How does the company car policy work? 

A company car policy sets rules for employees using company-provided vehicles, including eligibility, usage guidelines, maintenance, and consequences for policy violations. Its purpose is to ensure the safe and efficient use of company cars while minimizing liabilities.

5. How often is the company car serviced and maintained?

Most company cars require servicing and maintenance every 6 to 12 months but may vary depending on the company’s policy.  

6. Who is responsible for the cost of repairs and maintenance of the company car?

Some companies require employees to pay the maintenance and repair costs of the company car. Employers are responsible for paying for the expenses incurred when using the vehicle. 

7. What happens if the company car is involved in an accident?

When a company car is involved in an accident, immediately inform HR before guaranteeing any compensation for damage. At the time of emergency, inform HR as soon as possible. 

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