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Finance & Legal
Nov 16, 2012 | Julie Charles

Government Announces 2014 Automobile Deduction Limits and Expense Benefit Rates for Business

Should your travellers get the keys to a company car or be reimbursed to drive their own? What’s best for the sales fleet is a debate generating lots of mileage.

Few decisions in business travel can invoke as many opinions, from corporate travel and treasury departments, to human resources, procurement, sales and marketing.

“Depending on the company, the choice often comes down to a balance between culture, image and cost,” says Phil Gilmour, VP sales & client services, eastern region at TLS Fleet Management, Toronto, one of Canada’s largest independent lease financing firms and fleet managers.

“The CFO might be all about the bottom line, but I think sales and marketing are looking at different types of ROI from a company car, including the image and brand you want to project, while HR will view it as compensation,” Gilmour says. “I think everyone deserves a place at the table as it relates to their area, from operations to corporate travel.”

Average annual business mileage in Canada: 19,691 km

Deciding Factors
Cost and risk are two most often-cited reasons to rethink car policies. One Montreal-based travel and fleet manager for an engineering firm (who requested his company not be identified), says cost and risk triggered management to review current policy, which leases a small fleet of unbranded corporate vehicles used by sales and service executives.

“It’s something we’ve been asked to look at, not just for potential cost savings, but to limit risk,” he says. A final decision has yet to be made.

Off the Hook for Liability
When a company owns or leases a car, the employer holds 100 per cent liability over use of that vehicle, even during personal use and if someone else gets behind the wheel.

“Who is driving your company’s car outside of business hours, on evenings and weekends and vacations and holidays?” asks John Domsy, president of CarDATA Consultants Inc., an Oakville, Ont.-based company that designs and administers car allowance and reimbursement programs.

“Could that company asset be in the hands of a teenage son or daughter?” Domsy has seen clients switch from corporate cars to an auto expense reimbursement program partly in response to accident claims for cars in personal use.

Plus, there are cost savings to shifting ownership: “If it’s a company car being used for personal use on weekends, that’s two out of seven days of a company’s costs that can be saved—or 28.6 per cent savings,” says Domsy.

Average fixed car allowance in Canada: $769/month

What do Travellers Want?
The ultimate decider might be, what’s fair to the driver? “I get this question all the time from salespeople: ‘Should I own my own car or take a company-leased car?’” says Anne Babej, VP, professional development at the Canadian Sales Professional Association, Toronto.

Generally, the more ground travelled, the less fair it is to have employees assume wear-and-tear to their own vehicles. “If you’re driving 24,000 km or more a year on business, you generally don’t want to use your own car,” she says.

“If you’re a business to business salesperson, a car is still part of the compensation package—just look at the job ads for sales reps,” says Babej. “A car can still be considered a sales tool, and the kind of car is the extension of their brand.”

Disclaimer: The views and opinions expressed in this article are strictly those of the author. CPSA does not endorse any of the companies, products and services mentioned within this article.

Click here to view this answer in French.

Recommended Reading:
- What kinds of vehicle cost reimbursement programs exist, and which should I use for my sales team?
- In Canada, what is the current cents per kilometre limit on vehicle allowances outlined by the Department of Finance Canada?

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*This article was originally published in Ignite Magazine September-October 2012 issue.

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