Navigating Car Leasing: Can Companies Rent Used Cars from Individuals for Employee Use?

Can you help me with the following questions:

1. Can we (the company) hire cars from various individuals and provide them to our employees of certain grades? In other words, must the cars be hired from a leasing company only?

2. Is it mandatory to lease only new cars? We want to hire second-hand cars.

3. Does renting a car from an individual to a company, for use by a certain employee of that company, amount to commercial use or personal use by a third person? It is to be noted that the car will not be used for transporting employees or goods of the company.

Thanks in advance.

Hi Vikas, the comments on your queries are as follows:

Can we hire cars from various individuals and give them to our employees of certain grades?

It's not unique or peculiar to your company alone. It is quite common as many companies use such arrangements, especially IT & ITES units. There are plenty of tours & travel operators who would lease/rent vehicles of your choice at different rates.

Is it mandatory to have a car leased as a new car only?

It's your choice; you are free to hire either new or used (second-hand) cars.

Whether renting a car from an individual to a company to be used by a certain employee of that company amounts to commercial use or personal use of a third person?

If the cars are arranged for a pool of people like pick-up & drop of employees for transporting employees from their homes and dropping them off at the office after the close of office hours, it is not considered commercial use for individuals. Companies can book the cost as business expenses. However, when a hired car is allotted for the exclusive use of an employee, anything beyond the limit is to be considered as 'perks,' which is subject to income tax.

What do you mean by this?

I have corrected the spelling, grammar, and punctuation errors in your text while ensuring proper paragraph formatting. Let me know if you need any further assistance.

Thank you, sir, for your valuable time. Can you help me with a query regarding the subject? Suppose the company does not want to buy a car itself and prefers to ask an employee's family member to purchase it and then lease it to the company. Can the company then allocate it back to the employees for official work? If this scenario is possible, what would be the impact?

I don't know whether you came across such instances being followed elsewhere or if any real doubt arose. This is exactly what is happening in many establishments, including banks. I know that in some IT units, the company grants loans to some of their employees to buy cars, registers them in their names, of course with hypothecation duly endorsed, allots the very same cars to the employees themselves, and either allows payment or lease rent. So, your doubt is nothing new. It's beneficial if the cars are not in the names of employees. Whether for official work or for personal use alongside, who can strictly track those instances? Once car usage allowances are paid, the matter ends there. Paying rent would involve some paperwork.

Dear Vikas, the comments to your queries are as follows:

1. There is nothing wrong with hiring vehicles from others for the company’s usage. It is now a common practice to remain unbothered if a car is hired from an agency. The cars can be hired for certain hours of usage or for 24-hour use as needed. These can be allotted to any of your staff.

2. While hiring and paying costs, one generally opts for new cars. However, if you want to cut down on the cost of hiring, you can consider second-hand cars, as the case may be.

3. This is a policy matter for your management to decide whether to hire from an individual or from any travel agency.

4. Your company management should establish a policy for the use of cars, including KM running, personal and family use, and limits of area (home to office or home to office and other places). By doing this, you can control usage and costs.