Car subscription for your business (and employees)

If you're a business owner or decision-maker, you're probably always looking for ways to streamline operations, reduce costs, introduce employee perks and enhance your team's satisfaction.

However, buying or leasing brand-new company cars isn’t always possible or necessary, especially for small and medium-sized businesses. 

This guide is for business owners seeking a flexible, affordable business car subscription that meets their staff’s needs. We explain why subscriptions can be a viable alternative to business vehicle leases.

Especially if you're considering electric vehicles (EVs) for your fleet, this guide will provide unique insights and useful facts to help you make the best decision for your business.

What is a business car subscription?

A car subscription for your business is a service that allows companies to use a car, or a fleet of vehicles, for a fixed monthly fee. It's similar to a lease but with more flexibility and often more services included. 

Companies offer a range of electric vehicles, while others like Volvo offer non-EVs and hybrid models that can be subscribed to on a monthly basis. The subscription typically includes the car, insurance, maintenance, servicing, breakdown, and sometimes fuel or charging costs.

Employers can subscribe to as many cars as they need for their employees — while the car subscription provider takes care of the admin. 

Everyone in the company could gain all the perks of driving a company car without long-term contracts or ownership commitments. 

How does it work and what is the process? 

A business car subscription works much like any other subscription service. You choose the car or cars you want for your business, pay a monthly fee, and that's it. 

The signed up process usually looks like this:

1. Choose a provider: Research providers to find one that suits your business needs.
2. Select a car: Browse the selection of cars offered by the provider. Consider factors such as size, fuel type (including electric options), and cost.
3. Create a business account: Sign up for a business account with the provider. This usually involves providing some basic information about your business.
4. Book the car: Once you've chosen a car, you can book it through your business account. You may be able to name an employee as the main driver at this stage.
5. Deposit and fees: Most providers don't charge a deposit, but there may be a delivery fee.
6. Approval and delivery: After booking, the provider will check approval and confirm a delivery date. The car will be delivered to the chosen address.

The process is usually straightforward and can often be done entirely online. 

You can start by looking at your chosen car subscription provider's website to learn more about them or use our impartial subscription provider comparison page. 

Choose your car(s) and subscription options (including additional mileage and drivers if needed). Your provider will calculate your total monthly cost and invoice you monthly for as long as your subscription lasts. All fees and expenses are included in your monthly payment.

Most subscription providers allow you to cancel with just 30 days’ notice, so it’s easy to unsubscribe and return the car if you change your mind.

The difference between a company car subscription and a salary sacrifice scheme

There are two main types of business vehicle subscriptions:

• Company car subscription — ideal for high-salary employees who regularly travel for business.
• Salary sacrifice scheme — ideal for employees who want to save money on a car subscription

The business is the car leaseholder if you’re taking out a company car subscription. You’ll choose who is eligible to drive the cars assigned to your business.

With a salary sacrifice scheme, you can give your permanent employees the option to take out a car subscription in their name as a benefit-in-kind. The benefit-in-kind tax rate depends on which kind of car you drive. The BIK rate is set at just 2% for pure electric cars until the 2025/26 tax year. For other vehicles, the BIK rate can be as high as 37% — so how much employees save depends on their chosen car.

Some providers, such as Electric Car Scheme, offer their salary sacrifice scheme at the same rate as the business’s National Insurance savings — so it won’t cost your company a penny to provide this perk to your employees.

Who is eligible to subscribe to a car as a business customer?

Most companies with PAYE employees can take out a car subscription for business. This includes a limited company director who is the only employee at the company.

Employers can set their own policy regarding who is eligible for a company car subscription. Most companies offer company cars to employees with certain business travel needs and/or senior staff members. Salary sacrifice schemes are usually offered to all permanent employees who have passed their probationary period.

These employees can choose whether to opt into the scheme. Remember that a salary sacrifice scheme can’t reduce employee wages to below the minimum wage, so employees on or near the minimum wage threshold may not be eligible.

Car subscription providers also set driver eligibility criteria, such as age limits, credit checks, and residency rules. Check these car subscription requirements with your provider before you sign up.

The benefits

A business car subscription benefits your company and your staff. They allow businesses to:

• Save money on staff time and admin costs — you won’t need to arrange insurance or MOTs, and your subscription provider takes care of all breakdowns.
• Avoid vehicle depreciation worries — because you don’t own the car, there’s no need to worry about it losing value and the impact on your corporation tax bill.
• Offer more perks to your staff — making your employees feel valued can increase staff retention and productivity.
• Claim back VAT — VAT-registered companies can claim back some or all of the VAT on a business car subscription.
• Improve your environmental impact — choosing electric cars on subscription is a great way to reduce your corporate carbon footprint.
• Only pay for the cars you need — flexible short-term subscriptions mean you can trial certain cars, give contractors or new staff access to a company car, and upgrade your vehicles regularly.

Employees can also benefit from tax savings and a flexible, affordable way to drive — whether for business or personal use. See more reasons to get a car on a subscription.

The drawbacks 

With a car subscription, you won’t own the vehicle — so you may feel like you’re not making much of an investment. 

Electric vehicles may also require more investment, such as charging points at your workplace, to help employees make the most of their subscription EVs. 

However, certain EV subscription providers offer discounts on charge point installation and EV energy tariffs.

Also, there will be virtually no car customisation available. Unlike when you buy a car, you cannot customise a subscription car to your exact specifications. We checked every business subscription vehicle provider, and none offer car customisation.

Mileage limits are another thing to keep in mind. Some subscriptions come with mileage limits (usually about 700-800 miles a month), and you may have to pay extra if you exceed these.

How much will it cost?

Just like buying a company car, the cost of a business car subscription depends on various factors, including:

• Car make and model.
• Car age.
• Number of cars needed.
• Additional mileage beyond the included limit.
• Additional drivers registered to each car.
  

The average cost for a car subscription for a business can be anything from £400 to more than £1,200 for some high-performance cars (or long-range EVs). Additional fees may include delivery, usually £100 to £150, and sign-up fees (which depend on the provider). 

It’s safe to say that a Tesla Model 3 will be considerably more expensive than a Peugeot e-2008 GT, so it’s a good idea to calculate your overall fleet budget.

Remember that you won’t need to pay for additional or unexpected costs like servicing and insurance, as these are included in your monthly car subscription payment.

What’s best for your business: car subscription vs buying vs leasing? 

Company cars can help reduce your corporation tax bill. When you buy a car, you can claim it as a Capital Allowance so that you won’t pay tax on the purchase price. When you lease, hire, or subscribe to a company car, the fee can be claimed as an expense (in most cases).

But when you buy a car, it will eventually lose its value. So you’ll need to determine how this depreciation impacts your tax bill in future years. Plus, you’ll need to account for additional expenses like employee car insurance, courtesy cars, car repair and servicing, congestion charges, and road tax — not to mention staff wages for arranging all these things.

For some businesses, the tax savings may outweigh these extra costs — but for many, you can pay more when you buy a company car outright.

In recent years, business car leases and subscriptions have become popular to avoid these administrative and accounting headaches. Both allow you to pay monthly for an all-inclusive service while making the same savings as buying a car — but car leases are far more restrictive than car subscriptions. You’re often tied into a multi-year contract, which can be costly or difficult to manage if employees leave the business.

Car subscriptions are often more expensive per month. Still, you can cancel and renew your subscription whenever necessary, giving you (and your employees) greater flexibility.

We have two very in-depth guides on the above topics, so be sure to check them out:

• Car subscription vs buying a car: What's best for you?
  
• Car subscription, leasing or renting: What's best for you?
  

Which car subscription providers in the UK offer business subscriptions?

Several car subscription providers offer business vehicle subscriptions. 

Our approved partners, Drive Fuze and My Car Direct, stock many electric cars. 

Also, Pivotal offers a range of Jaguar and Land Rover vehicles; Volvo offers a range of its own models through its Care by Volvo service.

Each provider offers different cars, terms, and pricing, so it's worth shopping around to find the best fit for your business.

Business car subscription FAQs