The days of the company car may be numbered. During the past year, droves of small businesses have been switching from company-owned to employee-owned (and company-reimbursed) vehicles. John Deere Insurance Co., in Moline, Ill., went so far as to provide employees with $1,000 each toward the purchase of a company-leased -- or, for that matter, any other -- car. Other companies have offered their employees interest-free loans to purchase company-owned cars at a bargain price.
After making such a switch, many companies retain outside consultants, such as Runzheimer International, of Rochester, Wis., to advise them on reimbursement. "It's essential to use a third party when calculating these costs," says Karl Hickerson, John Deere's personnel manager. "Do it yourself, and you'll be constantly second-guessed by your employees." Deere pays Runzheimer an annual fee of $100 per car for up-to-date reimbursement estimates, based on surveys to determine the cost of operating and maintaining vehicles in the areas where the company operates.
Hickerson says that employees "adjusted [to the new system] once they realized that some of the advantages included tax breaks, and that they could drive whatever car they wanted." That seems to be a common experience. One executive of an Indiana printing company says he would have switched to employee-owned cars three years earlier had he not been concerned about the effect on morale among his company's employees. Since he made the change, he's discovered that 90% of his employees prefer the company-reimbursed cars.