Fleet News

Rent sharing — 'more choice, no extra cost'

December 2001: A new system of company car leasing has been launched in Germany by fleet management company AMS together with Opel MasterLease and insurance company DBV Winterthur.

Called rent sharing, the scheme allows employees to drive the car they want, when they want. Maybe they want a sports car for a company car? A second company car for their spouse? Or a second car from the company?

All this is possible through rent sharing, say the scheme's developers, without costing the company any extra money. The only loser, they say, is the government exchequer — even though the scheme is legal.

Rent sharing has been under development by AMS for several years, and is only now being launched. The employee chooses the car he wants and pays half while the employer pays the rest as a benefit-in-kind.

This is offset against tax and the 1% tax ruling is therefore avoided (the German benefit-in-kind tax for privately-used company cars based on 1% of the car's list price).

The German tax authorities have recognised and certified rent sharing, even though it is a clear way to save on tax.

The routine costs for the car are divided between the employer and the employee so both sides save money (see example calculation). Rent sharing is especially useful for those employees who, according to their contract, have actually no right to a company car.

But the person who already drives a company car can also take advantage of rent sharing — it is possible to get a second car or a car for their partner.

The advantage of the new system is that it involves direct payment by the employer — but a payment that is different to a salary because it is tax free. In these circumstances, it does not matter whether the employee chooses a new or a second hand car. The payment is not taxed.

The employee can also drive his preferred car without higher costs to the employer. In this way, the employee is actively contributing to the reduction of the fleet costs and takes on a higher personal responsibility for the car.

The employer does not take on a higher risk with rent sharing because the owner liability is transferred to the employee.

The driver also bears the costs for damage or excess mileage when the car is returned. A further advantage is that rent sharing contracts can be terminated with one month's notice. The employer's payment for the car ends when the employee leaves the company.

How rent sharing works

A 30-YEAR-OLD employee is offered a DM300 salary increase. Until now he has received DM5,000 before tax. If he decides to take the money, his boss will transfer to his account DM5,300 monthly.
This is approximately DM3,049 after tax. In this case the employee himself pays all the costs for the car — in our example DM600. This amount is deducted and he will be left with an income of DM2,449.
With rent sharing this calculation looks much better: the employee gets a company car instead of the monthly DM300 before tax. The employer will pay the DM300 towards this company car.
The salary after tax is therefore DM2,923, but the costs for the car have been halved (DM300). The employee is left with a net income of DM2,623. Rent sharing increases the employee's pay packet by DM174 per month. And this also works to the advantage of the company — it saves paying the simple salary increase. These saved wage costs could finance an additional private pension.

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