What to Consider Before Lending Company Cars to Employees

giving the key
  • Ensure comprehensive insurance coverage for all potential employee drivers.
  • Put policies in place for maintenance, repairs, and usage of vehicles before lending.
  • Require a valid driver’s license from all who would use company vehicles.
  • Seek legal advice for potential liabilities related to car accidents. 
  • Evaluate cost-benefit analysis before lending out cars to employees. 

For businesses that require their employees to travel frequently for work-related purposes, it can be practical and cost-effective to provide them with company vehicles. However, before lending out company cars, there are several factors that employers need to consider to protect themselves and their employees and ensure that all parties are satisfied with the arrangement. Here are some of the most important factors to think of.

Insurance Coverage

When it comes to lending out company vehicles, it is vital to ensure that they are insured for all drivers who will be driving them. This insurance should be comprehensive and cover theft, damage, accidents, and liability.

Employers should also consider whether they will need to pay extra for personal use of the vehicles or if the insurance that is already in place will suffice. For instance, employers may need to take out additional liability coverage if the employee will be using the vehicle for personal errands.

Furthermore, employers must consider whether they want to require all drivers of the company vehicle to possess valid driver’s licenses, as this can affect the cost and coverage of insurance.

closeup on a car key on top of a blurred auto insurance policy on wooden desk

Maintenance and Repair

Employers should ensure that company vehicles are well-maintained and receive routine servicing to avoid any malfunctions or breakdowns that could be hazardous to employees. Additionally, employers should have clear policies in place for how employees should report any vehicle issues and how repairs will be handled. Here are some examples:

Who will be responsible for regular maintenance and repairs?

Employers should carefully consider who will be responsible for the regular maintenance and repairs of company vehicles. Depending on their resources and budget, they may choose to outsource these tasks to a third-party service provider or have an in-house mechanic take care of them.

What type of repairs or services are covered by the company?

When it comes to vehicle repair and maintenance, employers should consider the types of services that are covered by their company policy. For instance, employers may choose to cover basic servicing such as oil changes and tire rotations, while more complex repairs and replacements will need to be carried out by third-party providers or in-house mechanics.

How quickly should reported issues be addressed?

Employers should also put procedures in place for how quickly any reported issues must be addressed. It is vital that all vehicles remain safe to use and that any problems are fixed as soon as possible. Moreover, employers may want to consider implementing a system where employees can easily report any vehicle-related issues, such as via an online platform or a dedicated phone line.

Use of Vehicle Policies

Employers must have clear and specific policies in place for employees who are driving company vehicles. These policies should also address what happens if the car is damaged or involved in an accident, how fuel and maintenance costs are covered, and expectations for employees to keep the vehicle clean and in good condition. Here are some other questions regarding vehicle policies:

How should they use the vehicle?

Employers should also consider the type of usage their employees will be making of the company vehicles. They must evaluate if their employees will be using them primarily for business-related purposes or if they will also be driving them for personal errands. If so, employers must create specific policies to ensure that there are clear rules on what kind of usage is allowed.

Who is permitted to use them?

Employers should also consider who is permitted to use company vehicles. While it may be tempting to offer cars to all employees, employers should carefully weigh up the associated risks and decide if it is worth having multiple drivers. It is also crucial that employers make sure that only those who have valid driver’s licenses are allowed to drive the vehicles.

Under what circumstances could they use the vehicle?

When it comes to lending out company vehicles, employers must also consider under what circumstances it is acceptable for employees to use them. This could include limitations on the number of passengers that are allowed in the vehicle, specific destinations that are allowed to be visited, and even restrictions on when the car can be used (such as during peak hours).

female employee talking to male employee ironing out details before lending company cars

Legal Considerations on Car Accidents

When lending out company vehicles, employers must also consider the potential legal repercussions in the event of an accident. In the case of a car crash, it is essential to have proper legal representation from a reliable car accident lawyer.

They will be able to advise on who was at fault and what damages may be claimed, as well as any additional compensation that may be sought. For example, if an employee is found to be responsible for a car accident, employers may be liable for any damages that were caused.

If possible, employers should also seek legal advice on whether they can protect themselves from liability in the event of an accident or other claims arising from company vehicles.

Lending company vehicles to employees can be an effective strategy for businesses that require frequent employee travel. However, employers must take careful consideration of various factors before choosing to lend out vehicles, such as insurance coverage, driver’s license verification, maintenance and repair, use of vehicle policies, and cost-benefit analysis. By approaching this practice thoughtfully, companies can ensure the safety and satisfaction of their employees, minimize liability risks, and achieve their travel-related business goals.

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