Understanding Company Cars as Benefits in Kind for Sales Roles

What is a benefit in kind car for sales?

A benefit in kind (BIK) car, often referred to as a company car, is a vehicle provided by an employer to an employee for business use—and sometimes for personal use as well. In sales roles, these cars serve a dual purpose. They facilitate travel necessary for business operations, such as client visits or territory coverage, while also potentially offering a personal-use convenience. Because the employee gains a personal advantage from using the car, this use is considered a “benefit in kind” and is subject to taxation.

The use of a BIK car in sales roles is typically determined by the nature of the work. Sales professionals frequently drive to meet clients, attend meetings, and conduct site visits, making a company-provided vehicle a practical business tool. However, any personal use of this vehicle—including commuting to and from work—qualifies as a taxable benefit under most tax codes, including those set by the IRS in the United States.

Employers offering company cars must report this benefit on employee tax documents. In the U.S., the IRS includes such benefits under fringe benefits, requiring accurate tracking of mileage to distinguish between business and personal use. If the employer does not keep such records or if the vehicle is used predominantly for personal travel, the entire benefit may be considered taxable income.

Why Companies Offer BIK Cars to Sales Teams

For many employers, providing a BIK car to sales personnel is a strategic move. It ensures that employees represent the company consistently and can perform their duties without incurring personal vehicle expenses. It also helps standardize the brand’s mobile presence, particularly when vehicles are branded or uniformly maintained.

Still, there are significant financial implications. A traditional fleet model—where a business owns or leases vehicles and covers all costs—entails ongoing expenses for maintenance, insurance, depreciation, and administrative management. These costs can accumulate quickly, especially for businesses with geographically dispersed sales teams.

To counteract this, many companies are reevaluating their BIK programs and shifting toward Vehicle Reimbursement Programs (VRPs) such as Fixed and Variable Rate (FAVR) plans. These programs offer an alternative model, where employees use their personal vehicles for work and are reimbursed accordingly. The FAVR method, for example, allows for tax-free reimbursements when guidelines are properly followed, and can offer up to 30% savings compared to traditional car allowance or fleet options.

Taxation and Compliance: Key Considerations

For employees, receiving a BIK car means that the IRS or relevant tax authority will assign a taxable value to the benefit, based on factors like the car’s market value, the amount of personal use, and the employer’s tracking methods. If an employer does not implement an “accountable plan”—a system that separates and documents business from personal mileage—the benefit is likely to be fully taxable.

Accountable plans must include:

• A business connection to the expense
• Adequate documentation of mileage and vehicle use
• Repayment of any excess reimbursements

If these criteria aren’t met, the vehicle’s value is reported as income, increasing the employee’s tax liability. Conversely, reimbursement programs like FAVR can bypass this issue by aligning reimbursements directly with IRS thresholds, making the benefit entirely tax-free for both employer and employee.

Practical Challenges with BIK Cars

Maintaining a fleet of BIK vehicles introduces numerous operational challenges. First, fleet management requires significant administrative oversight: vehicle procurement, licensing, insurance, maintenance, and driver behavior policies must be centrally managed. Fleet management companies can handle these logistics, but at a premium, further raising the total cost of ownership.

Second, fleets present financial unpredictability. Costs fluctuate due to insurance premiums, vehicle depreciation, and fluctuating fuel prices. For sales teams driving varied distances across different regions, this makes cost control difficult. Moreover, older fleet vehicles contribute to higher emissions, increasing the company’s environmental impact.

The third challenge is liability. Companies with BIK cars are generally liable for accidents that occur during personal use. Even if the employee is at fault during non-business hours, the company may bear legal and financial responsibility. Transitioning to reimbursement models mitigates this exposure since the employee’s personal insurance typically applies first.

Alternative: Using Vehicle Reimbursement Programs

Given these complexities, many organizations are replacing BIK cars with VRPs, particularly the FAVR model. This system reimburses employees based on both fixed costs (like insurance, registration, and depreciation) and variable costs (fuel, maintenance) incurred while using their personal vehicles for business. FAVR ensures equitable compensation by accounting for geographic differences in driving costs and mileage levels.

FAVR programs are IRS-compliant and allow for greater flexibility. Employees can choose vehicles that meet both personal and professional needs without relying on a company-issued car. Employers, in turn, gain scalability and can avoid overcapitalizing on fleet assets that might go underutilized.

These programs also incentivize fuel efficiency and timely vehicle maintenance, as employees bear the cost implications of driving less efficient or poorly maintained vehicles. This dynamic fosters a culture of responsibility and aligns employee interests with the company’s cost-control goals.

Cost Implications for Sales Organizations

From a cost perspective, switching from BIK cars to FAVR reimbursement can lead to substantial savings. Fleet vehicles are approximately 30% more expensive than FAVR programs due to higher overhead, liability, and maintenance expenses.

One study reported annual savings of over $16,000 per driver when companies transitioned from an IRS-rate car allowance to FAVR. Moreover, VRPs allow businesses to scale quickly without acquiring new assets. Instead of expanding a vehicle fleet, employers can onboard new sales reps and compensate them with standardized, tax-efficient reimbursements.

These cost advantages are especially pronounced in volatile economic climates where fuel prices and vehicle costs fluctuate. Reimbursement models adjust dynamically to reflect these shifts, while fleet programs often lock in costs that become outdated or inefficient.

Sustainability and Brand Alignment

BIK cars also intersect with corporate sustainability efforts. Fleet vehicles tend to have longer replacement cycles, and older gas-powered models contribute more to greenhouse gas emissions. Transitioning to reimbursement programs supports sustainability by enabling employees to select hybrid or electric vehicles.

This flexibility is especially beneficial for sales roles, where public visibility and travel patterns affect brand perception. Salespeople driving electric or newer personal vehicles enhance the company’s image and demonstrate alignment with environmental values.

Additionally, businesses can maintain brand consistency without full ownership by offering guidelines for vehicle presentation, or by implementing optional branding such as removable decals.

Conclusion

For sales roles, a benefit in kind car represents more than a mode of transportation—it is a financial, administrative, and strategic decision for employers and employees alike. While BIK vehicles have traditionally offered convenience and consistency, the associated tax burden, administrative overhead, and liability risks have prompted many businesses to adopt more flexible and efficient alternatives.

Vehicle Reimbursement Programs like FAVR offer a compelling path forward. By enabling personalized vehicle choice, ensuring tax compliance, and lowering operating costs, they provide a scalable solution that aligns with modern business needs—especially in the sales domain, where travel is frequent, performance is visible, and flexibility is paramount.

Disclaimer:

The content provided in this blog is for informational purposes only and is not intended as legal, financial, or tax advice. While every effort has been made to ensure the accuracy and reliability of the information at the time of writing, Cardata and the author assume no responsibility for any errors or omissions. Readers should consult with a qualified professional to determine how any information discussed may apply to their specific circumstances.