Asset Use

• The first issue to consider when it comes to buying a company car is the outlay of cash to make the purchase. The possibility exists that such a purchase might not be the best use of business assets. The owner must decide if the chunk of change required is money that would have to be taken from other essential purposes or if it is pure profit laying around that needs to be put to use in some manner to avoid paying taxes on it.
  
  

Tax Advantages

• A host of tax advantages can be claimed related to the expenses of buying a company car. Like most other big ticket items purchased by a business, a car can be depreciated on tax returns at a certain percentage each year over the vehicle's expected useful life. Through the use of IRS rules on fringe benefit income, the entire expense of insurance, oil, gas and maintenance can be written off, even if the car is used by an owner or employee for personal business part of the time.
  
  

Fringe Benefits

• By taking advantage of the IRS guidelines, the cost of driving personal miles is reduced to the amount of tax paid for fringe benefit use. As an example, say you drove a company car 45 percent of the time for personal use. The only part of that use that is not deductible is the tax paid under the fringe benefit rules. That same number of personal miles driven in a new car bought with personal resources would be astronomically more expensive.
  
  

Wear and Tear

• Another factor to consider is that driving some amount of personal miles in a company car, at a reduced cost, saves the wear and tear of putting those miles on any personal vehicle you might own. Wear and tear can get quite expensive and predictably manifests itself in higher maintenance costs as a car ages. It is much cheaper to put those miles on a company car and legally deduct the expense. Racking up miles on a company versus private car also helps the private car to maintain its resale value when the time comes to get rid of it.