Company Car vs Personal Lease

With a company car your employer provides the car and you pay company car tax on its benefit; with a personal lease you pay for the car yourself from your take-home pay. For an electric car, taxed on 4% of its list price in 2026/27, a company car usually costs you far less. For high-emission cars taxed at up to 37%, the gap narrows, and a personal lease gives you a free choice of car.

Side-by-side comparison

Company car compared with a personal lease, 2026/27 rules
FeatureCompany carPersonal lease
Who pays for the carYour employer; you pay company car tax on the benefitYou, from your take-home pay
TaxIncome tax on the car's list price × the appropriate percentage for its CO₂ emissionsNo company car tax
Fully electric car (2026/27)Taxed on 4% of the list priceNo tax advantage
Petrol and diesel cars over 50 g/km (2026/27)Taxed on 17% to 37% of the list priceNo tax advantage
Insurance and maintenanceOften arranged and paid for by your employerYour responsibility unless included in the lease
Choice of carUsually limited to the employer's policy or listAny car you can lease
Private fuelIf your employer pays for private fuel, a separate fuel benefit charge appliesYou pay for your own fuel

Who each option suits

Company car

Best forEmployees offered a car as part of their package, especially an electric or low-emission car, where the company car tax is low.

Personal lease

Best forDrivers who want a free choice of car, are not offered a company car, or would face a high company car tax bill on the car they want.

Key takeaways

  • For the same car, a company car usually costs you only the company car tax.
  • Electric company cars are taxed on 4% of their list price in 2026/27, so the tax is low.
  • A personal lease is paid from take-home pay, so it costs more of your gross salary than the headline figure.
  • Free private fuel from your employer adds a separate taxable benefit.

Total Car Cost Calculator

Add up the full monthly cost of a personal lease, including insurance, fuel and maintenance.

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What each costs you: a worked example

A car with a £40,000 list price, for an employee in England, using 2026/27 rates.

Company car, fully electric (4%): the benefit is £40,000 × 4% = £1,600.

  • Basic-rate taxpayer (20%): £320 a year
  • Higher-rate taxpayer (40%): £640 a year

Company car, petrol at 120 g/km (30%): the benefit is £40,000 × 30% = £12,000.

  • Basic-rate taxpayer: £2,400 a year
  • Higher-rate taxpayer: £4,800 a year

Personal lease at £350 a month (£4,200 a year): paid from take-home pay. To have £4,200 left after income tax and National Insurance, a basic-rate taxpayer (20% tax and 8% National Insurance) needs about £5,833 of gross salary, and a higher-rate taxpayer (40% tax and 2% National Insurance) about £7,241. Insurance and maintenance usually come on top.

For the electric car, the company car costs a higher-rate taxpayer £640 a year in tax, against £4,200 of take-home pay for the lease. For the petrol car the gap is smaller, and the lease lets you choose any car.

If you are offered a cash allowance instead

Some employers offer a cash car allowance as an alternative to a company car. The allowance is taxed and subject to National Insurance as pay, and you then fund your own car, for example with a personal lease. Compare what is left of the allowance after tax with the company car tax and the full cost of the car you would run.

Company car tax explained shows how the benefit is worked out, and salary sacrifice vs company car covers the salary sacrifice route.

FAQs

Is a company car cheaper than leasing privately?
Usually, for the same car, because your employer pays for the car and you pay only the company car tax. The gap is largest for electric cars and smallest for high-emission cars.
Do I pay tax on a company car I only use for work?
Company car tax applies if the car is available for private use, which includes commuting to a permanent workplace. Ask your employer how your car is treated.

Figures use 2026/27 rates for an employee in England whose salary is their only income, with the whole benefit taxed in one band. Employer schemes, cash allowances and fuel arrangements change the comparison. This comparison is general guidance, not tax advice.

Sources and review

Related comparisons and guides