Is It Worth Having a Company Car in 2025?
Source: Shutterstock
With the UK's push towards Net Zero and evolving tax policies, many employees and employers are questioning whether company cars remain a worthwhile benefit in 2025. The answer depends on several factors, but with electric vehicles offering exceptionally low Benefit-in-Kind (BiK) rates and innovative schemes like salary sacrifice, company cars can still represent excellent value for money.
What Is a Company Car Scheme?
A company car scheme is an employee benefit where your employer provides a vehicle for both business and personal use. Modern schemes have evolved significantly from the traditional approach of employers buying cars in bulk. Today, most company car schemes allow employees to choose from a pre-approved list of vehicles, with many offering salary sacrifice options that can reduce costs by 20-50%.
The most popular type of company car scheme in 2025 is salary sacrifice, where you exchange part of your gross salary for a fully maintained vehicle. This approach offers substantial tax advantages, particularly for electric vehicles, making it an attractive option for both employees and employers.
Pros of Having a Company Car
Significant Tax Advantages with Electric Vehicles
Electric vehicles offer the most compelling tax advantages, with BiK rates of just 3% for the 2025/26 tax year. This represents exceptional value compared to traditional petrol or diesel vehicles, which can attract BiK rates of up to 37%.
For example, a Tesla Model 3 with a list price of £39,935 would result in monthly BiK tax of just £13.33 for a 20% taxpayer or £26.67 for a 40% taxpayer. This makes driving a premium electric vehicle surprisingly affordable through a company car scheme.
Access to Higher-Specification Vehicles
Company car schemes allow you to drive away a higher class of vehicle for less money, with many discounts available on premium brands such as Audi, Mercedes, and BMW. Through salary sacrifice, employees can access vehicles they might not otherwise afford, particularly when combined with the low BiK rates for electric cars.
No Depreciation Worries
Car leasing avoids the burdens of vehicle depreciation as you never own the vehicle. Once the contract has ended, you can order a new lease car or walk away without any of the stress of having to sell the car. This eliminates one of the biggest financial risks of car ownership and provides predictable monthly costs.
Always Drive the Latest Technology
Company cars are usually changed every two to four years, which means you'll always be driving one of the latest vehicles on the market, allowing you to benefit from the latest in-vehicle technology and safety features. This is particularly valuable with electric vehicles, where technology is advancing rapidly.
Comprehensive Coverage
Most company car schemes include maintenance, servicing, insurance, and breakdown cover in the monthly cost, providing peace of mind and eliminating unexpected expenses. This all-inclusive approach makes budgeting much easier and removes the hassle of managing multiple suppliers.
Cons of Having a Company Car
BiK Tax Liability
The most significant drawback is the Benefit-in-Kind tax you must pay. As a company car is considered a privilege paid for by your employer on top of your annual salary, employees must pay BiK tax based on the vehicle's market price, income tax band, age of the car, fuel type, CO2 emissions, and engine size.
However, this disadvantage is significantly reduced with electric vehicles, which attract the lowest BiK rates.
Fuel Benefit Tax
If the employer covers the cost of all fuel used by a company car, including personal journeys, the employee also pays tax on this benefit using a fixed amount of £28,200 for the 2025/26 tax year, multiplied by the car's BiK tax band. This tax applies regardless of whether you spend £1 or £10,000 on company fuel, making it cost-effective only for very high-mileage drivers.
Limited Flexibility
Unlike owning a car outright, company cars come with restrictions on modifications, mileage limits, and usage terms. You also don't build any equity in the vehicle, as you would with ownership.
Potential Job Dependency
Your access to the company car is tied to your employment. If you change jobs or are made redundant, you may lose your vehicle with little notice, potentially leaving you without transport.
Company Car vs Car Allowance Comparison
When offered a choice between a company car and a car allowance, the decision depends on your personal circumstances:
Company Car Advantages:
No upfront costs
All-inclusive monthly payments
Tax advantages with electric vehicles
No depreciation risk
Latest technology and safety features
Car Allowance Advantages:
Cash in hand for any purpose
Freedom to choose any vehicle
No BiK tax liability
Keep the money if you don't need a car
The choice between salary sacrifice and car allowance often comes down to your annual mileage, tax bracket, and preference for convenience versus flexibility.
Tax Implications and BiK Calculations
Understanding the tax implications is crucial when evaluating whether a company car is worthwhile:
2025/26 BiK Rates:
Electric vehicles (0g/km CO2): 3%
Plug-in hybrids (1-50g/km CO2): 3-15% (depending on electric range)
Petrol/diesel vehicles: 16-37% (depending on CO2 emissions)
Calculation Example:
For a £40,000 electric vehicle with a 3% BiK rate:
Annual BiK value: £40,000 × 3% = £1,200
Monthly BiK value: £1,200 ÷ 12 = £100
Monthly tax (20% taxpayer): £100 × 20% = £20
Monthly tax (40% taxpayer): £100 × 40% = £40
Smart business owners are rapidly switching to electric and hybrid company vehicles due to potential savings of over £11,000 per year compared to traditional combustion engines.
Factors to Consider When Deciding
Personal Circumstances
Annual Mileage: High-mileage drivers benefit more from company cars due to included maintenance and breakdown cover
Tax Bracket: Higher-rate taxpayers see greater absolute savings with low BiK rates
Parking: Those with secure parking benefit more from company cars
Family Needs: Consider whether one vehicle meets all your requirements
Vehicle Choice
The type of vehicle significantly impacts the value proposition. Electric vehicles are far and away the logical choice from a financial perspective for anyone running a company car, but they don't suit everyone's needs or circumstances.
Business Use Requirements
Some employers require significant business mileage to justify a company car. Consider whether your role genuinely requires business travel or if the car is primarily for personal use.
Salary Sacrifice Options
Salary sacrifice schemes represent the most tax-efficient way to access a company car in 2025. These schemes allow you to:
Save 20-50% compared to personal leasing
Benefit from the 3% BiK rate for electric vehicles
Include maintenance, insurance, and breakdown cover
Spread the cost over 2-4 years
The Electric Car Scheme specialises in salary sacrifice electric vehicles, offering employees access to the latest EV technology while maximising tax savings. Common questions about salary sacrifice include eligibility criteria, available vehicles, and tax implications.
Real-World Example: The Electric Advantage
Consider Sarah, a 40% taxpayer looking at company car options:
Traditional Petrol Car (£30,000, 25% BiK rate):
Annual BiK value: £30,000 × 25% = £7,500
Monthly tax: (£7,500 ÷ 12) × 40% = £250
Electric Vehicle (£40,000, 3% BiK rate):
Annual BiK value: £40,000 × 3% = £1,200
Monthly tax: (£1,200 ÷ 12) × 40% = £40
Despite the electric vehicle costing £10,000 more, Sarah saves £210 per month in tax – over £2,500 annually. This demonstrates why electric company cars offer exceptional value.
What our Clients Say
Richard Mason, Head of ESG at Holland and Barrett, explains: "Colleagues can lower their environmental impact while reducing their own motoring costs" through The Electric Car Scheme.
Lindsay Beresford, HR Director at Leeds Bradford Airport, adds: "We at Leeds Bradford Airport are absolutely delighted to have set up The Electric Car Scheme..."
These testimonials highlight how modern company car schemes benefit both employees and employers, supporting environmental goals while providing financial advantages.
Is a Company Car Worth It in 2025?
Yes, a company car is worth it in 2025 if:
You choose an electric vehicle to benefit from the 3% BiK rate
Your annual mileage is moderate to high (over 8,000 miles)
You value convenience over ownership
You're a higher-rate taxpayer
Your employer offers a salary sacrifice scheme
Consider alternatives if:
You drive very few miles annually
You prefer ownership and building equity
You need maximum flexibility in vehicle choice
You're a basic-rate taxpayer with low mileage
The key to maximising value from a company car in 2025 is choosing an electric vehicle through a salary sacrifice scheme. This combination offers the lowest tax liability, access to the latest technology, and significant savings compared to traditional car ownership or leasing.
With the UK's commitment to Net Zero and the continued expansion of charging infrastructure, electric company cars represent not just a financial opportunity but a chance to contribute to environmental goals while enjoying premium transport at a fraction of the usual cost.
The landscape of company cars has transformed dramatically, and those who embrace electric vehicles through salary sacrifice schemes will find 2025 to be an excellent year to make the switch.
Are you an employer?
BOOK A DEMOAre you an employee?
SEE AVAILABLE CARSECS GUIDES AND ADVICE
Ready to Go Electric? Your Guides and Tools to a Smooth Switch
-
How the Scheme WorksFind out how salary sacrifice can work for you or your business.
-
The Charge SchemeSave 20-50% on all charging costs through salary sacrifice - at home, the office, or in public..
-
Complete Employer ProtectionAll employers and drivers are protected from day 1.
-
Used Electric CarsDiscover the most affordable way to drive electric. Cars delivered in 14 days.
You might also like…
Last updated: 29/05/2025
Our pricing is based on data collected from The Electric Car Scheme quote tool. All final pricing is inclusive of VAT. All prices above are based on the following lease terms; 10,000 miles pa, 36 months, and are inclusive of Maintenance and Breakdown Cover. The Electric Car Scheme’s terms and conditions apply. All deals are subject to credit approval and availability. All deals are subject to excess mileage and damage charges. Prices are calculated based on the following tax saving assumptions; England & Wales, 40% tax rate. The above prices were calculated using a flat payment profile. The Electric Car Scheme Limited provides services for the administration of your salary sacrifice employee benefits. The Electric Car Scheme Holdings Limited is a member of the BVRLA (10608), is authorised and regulated by the FCA under FRN 968270, is an Appointed Representative of Marshall Management Services Ltd under FRN 667174, and is a credit broker and not a lender or insurance provider.
Copyright and Image Usage: All images used on this website are either licensed for commercial use or used with express permission from the copyright holders, in compliance with UK and EU copyright law. We are committed to respecting intellectual property rights and maintaining full compliance with applicable regulations. If you have any questions or concerns regarding image usage or copyright matters, please contact us at marketing@electriccarscheme.com and we will address them promptly.
