12 July, 2022

What is the total cost of ownership of a company car?

Wat is de total cost of ownership van een bedrijfswagen

The three-letter word 'TCO' dominates the company car policy of an increasing number of companies in Belgium. And that is no surprise. With the rising cost of fuel and more expensive prices for electric cars, the total cost of ownership of a company car is a much more transparent parameter than the previously known "monthly lease price". The monthly lease price of a company car in fact gives a distorted (positive) picture of the budgets that employers cough up for the provision of company cars for their employees. High time, therefore, to take a closer look at this new approach to company car budgets!

What is the TCO budget of a company car?

TCO stands for total cost of ownership of a company car - the total cost associated with providing a company car.

In contrast to traditional company car lease budgets, a TCO approach takes all costs into account, with the most important additional factors being fuel or charging costs and (para)fiscal charges.

For example, the TCO budget of a company car will consist of:

  • the lease costs (usually including insurance costs and maintenance costs)
  • the fuel or loading costs
  • the non-deductible VAT
  • the corporate tax on non-deductible car expenses
  • the CO2 solidarity contribution for social security
  • the expense allowances related to the company car (e.g. monthly lump sum of EUR 15 for parking)
  • less the own contribution paid by the employee

However, this list is not exhaustive. As long as there is no legal definition of "total cost of ownership", one can go as far as one likes. For example, there are companies that want to include the costs of damage at the end of a lease contract or the deductible in the context of an insurance contract in the TCO budget. In these cases, it is more a case of a TCU ('total cost of use') than a TCO budget.

‍One thing is certain: the TCO budgets are significantly higher than the well-known lease budgets.

A concrete example of a TCO calculation can be found via the link!

Wat is de total cost of ownership van een bedrijfswagen 2

Applications of the TCO approach

The (compulsory) greening of company cars by 2026 has caused many companies to rewrite their company car policies. More expensive prices for electric cars and extra costs for charging points have also made employers want to communicate more "correctly" and "transparently" to employees when it comes to company car budgets. After all, employees will have to understand that their known lease budget is not equal to a (higher) TCO budget, with the result that they will get less company car for the same amount of money.

This transparent cost approach for company cars is also reflected in the framework of the legal mobility budget, whereby an employee exchanges his or her company car for a budget - equal to the TCO of the car - that can be spent on all kinds of alternative mobility. ‍

The increasing popularity of the mobility budget - together with the cafeteria plan, the two pillars of 'flexible salaries' in Belgium - makes the problem of the lack of a legal definition of TCO all the more acute: many a car policy in Belgium, under the guise of greening, is in principle supplemented by a very green chapter of the mobility budget. It is in the context of the mobility budget that the legislator provides the possibility of establishing, via a Royal Decree, an unambiguous formula for calculating the amount of the mobility budget (read: TCO). Unfortunately, this has not yet materialised. We'll keep you posted!