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Employees love company cars, especially if they frequently drive to client sites and are allowed to drive the cars home.

Whether your organization supplies the sought-after sedans to staffers who drive around for business—such as sales reps and IT repair techs—or as a perk for valued employees, the road will be smoother if you set down clear policies in writing.

Here are some tips:

Offer choices. Some drivers like four-door sedans and others are more comfortable in subcompact cars. Buy or lease a selection of reliable, affordable cars and let employees choose.

Throw in a GPS. Satellite navigation systems are among the most popular extras that companies offer to their car-qualified staffs. Some companies also are using the devices to keep tabs on where employees take the cars.

Set clear rules on use. Is the car for business errands only or is it OK for the employee to use it for personal business as well? The arrangement will determine what portion of the car’s value the employee pays taxes on.

State what the company will pay for and what the employee is responsible for. Among the expenses to divvy up: gas, maintenance, insurance, repairs, parking, tolls, car registration fees and car washes.

Tell the drivers about tax laws. The value of the car, minus the amount of use for business purposes, counts as additional income. The employee may be able to deduct some auto expenses and should keep a mileage log. You’ll find specific tax deductions in the IRS publication, “Employer’s Tax Guide to Fringe Benefits” at www.irs.gov/pub/irs-pdf/p15b.pdf.

Consider doing your own repairs and maintenance if you have a fleet of cars, rather than leaving it to employees.

Write a policy that includes rules about:

  • How often the car should be serviced.
  • Mileage limits.
  • Who is allowed to drive the car.
  • Whether employees may use a cell phone while driving.
  • When the employee must give the car back (e.g., upon termination and during prolonged leaves).
  • What procedure to follow in the event of an accident.

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