The report, compiled by training and IT recruitment consultant Masterclass, polled more than 40 companies with between 25 and 600 employees.
The Car Policy Survey showed that when using a cash-allowance scheme, 64-72% of companies were not fully funding their cars and business mileage was paid at cost of the fuel only.
However, 50-80% of those on a car lease scheme were fully funded.
Pauline Godley, director of recruitment at Masterclass, said: 'Cars remain a key element in the benefits package and whether they are leased or funded by cash allowances, they arouse strong emotions.
'It's therefore vital for companies to know the most up-to-date market expectations for vehicle provision or alternative financial compensation.
'This report highlights the importance of ensuring that those entitled to company assistance with vehicles receive the competitive packages that contribute to their continued motivation and loyalty.
'By the same token, in these cost-conscious times all businesses will want to be reassured that they are not over-funding vehicle or allowance provision.'
The Car Policy Survey provides financial data on cash allowance and car lease schemes, covering all employees, including directors and senior managers. The survey showed that the minimum car allowance paid by one company was £2,880 per year and the highest was £16,000 per year.
The trend for companies to offer cash allowances as opposed to running fleets continues, according to Godley. However, there are still restrictions for companies offering such schemes.
She said: 'Even for those receiving cash allowances, most companies will dictate the type of car that can be bought, even though the allowance is perceived as an element of salary.
'Typically, this means no two-door sports cars, no 4x4s, no cars older than five years, no convertibles etc. Unless an allowance is part of a manager's package, for instance, then an allowance can even be taken away if the recipient is not seen to be doing enough business mileage.'
Additional research published last month showed that a third of companies were reducing fleet sizes and offering their employees alternative cash schemes.
The research completed by Employee Benefits magazine, showed that the company car tax system launched in 2002 led to 37% of companies which operate cars reducing the size of their fleets during last year.
An increasing number of companies are opting for car ownership schemes as an alternative to providing company cars, the research claimed.
Employee Benefits Fleet Research 2004 polled 225 companies and found 14 companies had plans to launch employee car ownership schemes this year.
However, employees opting out of company car schemes were warned last week to be cautious of falling residual values.
Bank of Scotland Vehicle Management said the widening gap between the cost of new cars and falling used car values meant employees who had taken cash and bought their own cars were increasingly out of pocket. (Fleet NewsNet, February 24)