Company Car Policy: Sample Template and Free Download
Learn how to create an effective company car policy. Cover eligibility, guidelines, and benefits for employees. Read more.
TABLE OF CONTENTS
The struggle is real when employees use company cars. Without clear rules, you're constantly playing catch-up, wrestling with ambiguous questions about who pays for a flat tyre, what constitutes reckless driving, or who's responsible after a minor fender-bender.
A solid company car policy eliminates this chaos. It establishes fair guidelines on everything from vehicle maintenance and insurance compliance to driver eligibility and acceptable road behaviour. With these fair boundaries, you replace confusion with clarity and prevent the stress and financial and legal headaches that ambiguous rules create.
In this blog, we'll break down the essential components of a company car policy, explaining how to protect your people and assets. To help you get started right away, we also provide a sample policy template you can customise for your specific needs.
A company car policy eliminates risk and chaos by formalising rules for all work-related driving (owned, leased, or personal vehicles), converting ambiguous situations into predictable processes.
A robust policy must cover driver eligibility, usage limits, accident protocol, and clear disciplinary actions.
Financial responsibility for all traffic fines and accident deductibles rests with the employee, while the company maintains primary insurance and scheduled maintenance.
Use the provided comprehensive template to structure complex areas like dual car schemes (owned vs. leased), foreclosure terms, and include necessary legal undertakings for employee accountability.
A company car policy is the official rulebook for all work-related driving. It's not just a document about who gets what car; it's a formal, comprehensive set of guidelines that governs the use of any vehicle, whether owned, leased, or even personally driven for company business.
The main goal of this policy is to ensure that both the employee and the organisation clearly understand their respective duties and boundaries. This clarity is especially important when distinguishing between vehicle types:
Company-Owned Vehicles: These are cars the company fully manages, maintains, and insures. Eligibility is typically determined by job requirements, seniority, or a designated business need.
Leased Vehicles: These are vehicles rented through a third-party agreement. While the day-to-day use is similar to an owned car, the policy needs to clearly outline who is responsible for lease-specific issues like mileage limits and return conditions, ensuring you avoid costly fines.
Ultimately, your policy is designed to eliminate ambiguity, protecting your team from unexpected costs and securing the company against liability.
Also Read: Understanding HR Automation: Key Processes, Strategic Benefits, and Best Practices
When developing your company car policy, it is essential to establish clear guidelines that address the entire lifecycle of a work vehicle, from assignment to accident. A comprehensive policy provides necessary structure, prevents disputes, and ensures compliance.
Here are the critical elements your policy must cover:
Driver Eligibility: Who is qualified to drive on company business (based on job role, age, and driving record).
Vehicle Usage: Defined rules for work-related travel, approved personal use, and prohibited activities (e.g., carrying unauthorised passengers).
Maintenance & Inspection: Clear division of responsibility for routine upkeep, scheduled servicing, and prompt reporting of defects.
Insurance & Liability: Details on coverage limits, who pays the deductible for an at-fault accident, and liability for fines or traffic violations.
Accident Reporting Protocol: The mandatory, step-by-step process employees must follow immediately after any incident.
Disciplinary Action: Defined consequences for non-compliance with the policy, including loss of privileges or employment termination.
With the key elements in place, here’s a practical company car policy template to guide you in creating a clear and compliant policy for your business.
Also Read: 7 Essential Employee Onboarding Checklist Templates for Success
A policy is only effective if it leaves no room for doubt. This template provides a detailed guideline that you can adapt to create a clear, compliant, and defensible company car policy for your organisation.
Define the Policy's Scope and Purpose
Before drafting any specific rule, you must formally establish the policy's authority, core goals, and the full range of employees and assets it governs. This critical step limits future liability by clearly defining boundaries.
Determine Objective: Establish a framework for the safe, legal, and responsible allocation and use of company assets, mitigating corporate risk and defining employee obligations.
Establish Scope: Specify that this policy applies to all employees allocated a company-owned or leased vehicle and also covers any employee driving a personal vehicle for business purposes regarding sections on eligibility, insurance, and accident reporting.
Establish Driver Eligibility and Allocation
The initial step in managing fleet risk is a thorough driver risk assessment. This section ensures that only qualified, low-risk drivers are authorised to operate vehicles on the company's behalf, thereby satisfying insurer requirements and promoting safety.
Verify Eligibility Requirements: Before allocating a vehicle, the employee must meet the following non-negotiable standards, designed to satisfy insurance mandates and reduce company exposure:
Possess: A valid, current driver's license for the class of vehicle assigned.
Age: Meet a minimum age requirement (e.g., 21 years old) to satisfy insurance mandates.
Screen Driving Records: Must consent to and pass an initial Motor Vehicle Record (MVR) check. The policy must state the acceptable threshold (e.g., no more than two minor violations, and zero major violations like DUI, reckless driving, etc., in the past three years).
Allocate Vehicles: The allocation process involves formal approval and documentation, ensuring the vehicle is assigned based on genuine business necessity:
Allocation is strictly based on written approval from the relevant department head and HR, following an analysis of the job role and required annual travel mileage.
The employee must sign a Vehicle Assignment Agreement acknowledging receipt and acceptance of all policy terms.
Review Documentation: To maintain compliance and verify driver fitness, employees must provide the following to HR before vehicle use is permitted:
A copy of their valid driver's license.
Proof of required personal auto insurance (if driving a personal vehicle for work)
Also Read: Understanding the Meaning and Rules of Leave Travel Allowance (LTA)
Govern Vehicle Usage and Restrictions
This section defines the precise boundaries between professional and personal use. Clear restrictions are necessary to limit the company's liability resulting from misuse or unauthorised actions outside the scope of business.
Specify Authorised Use: These guidelines dictate when and how the vehicle may be used:
Primary Use: Company vehicles are to be used primarily for official company business.
Limited Personal Use: This may be permitted only if explicitly stated in the employee's Vehicle Assignment Agreement. This use is a taxable benefit and must be handled in line with company tax reporting procedures.
Prohibit Certain Activities: The following actions are strictly forbidden and may result in disciplinary action:
Operating the vehicle under the influence of alcohol, illegal drugs, or impairing medication.
Using a handheld mobile device while driving (only hands-free calling is permitted).
Allowing any unauthorised person (including family members, unless specified in the policy) to drive the vehicle.
Using the vehicle for commercial activities outside the company (e.g., ride-sharing, deliveries).
Maintain Vehicle Condition and Safety
A safe vehicle is a legal vehicle. This section divides responsibility for maintenance and cleanliness, ensuring the asset remains roadworthy and reflects a professional company image at all times.
Schedule Servicing: The company is responsible for planned, major maintenance, but the employee must actively participate in the process:
The company (fleet manager) will schedule and cover the cost of all manufacturer-recommended maintenance (oil changes, tyre rotations) and major repairs.
The employee must make the vehicle available for scheduled service appointments upon request.
Inspect Daily: The employee is responsible for day-to-day vigilance, as they are the primary user of the vehicle and the first line of defence against mechanical failure:
The employee must conduct a pre-trip and daily safety check of lights, tyres, mirrors, and fluid levels.
Any mechanical malfunction, defect, or damage must be reported to the fleet manager immediately (within two hours) for repair authorisation.
Fuel and Cleanliness: The driver must manage running costs and appearance as part of their duty of care:
Fuel Vehicle: Use the designated company fuel card or follow the specified reimbursement procedure.
Keep vehicle Clean: Maintain the interior and exterior to a professional standard reflective of the company image.
Report Accidents and Violations
This section is perhaps the most crucial for risk management. It establishes the mandatory, immediate protocol for documentation and notification following an incident, protecting the company’s legal standing and streamlining insurance claims.
Notify Immediately (Accidents): In the event of an accident, the following sequence of notification is mandatory:
The employee must report any accident, regardless of severity or fault, to local law enforcement and to HR/Management within one hour of the incident.
Do not admit fault or discuss liability with third parties, but fully cooperate with the police and the company's insurer.
Document the Scene: Collect necessary information: names, contact details, insurance information of all involved drivers, witness contact information, and detailed photographs of the damage and the scene.
Address Fines: All fines, fees, and penalties resulting from traffic violations (speeding tickets, parking violations, toll evasion) are the employee's sole financial responsibility. Failure to pay a fine in a timely manner may result in disciplinary action.
Return the Vehicle Upon Termination or Request
A clear return process ensures the company can swiftly recover its asset when an employee leaves or loses driving privileges. This prevents legal uncertainty and minimises potential financial losses due to delays or damage.
Return Immediately: Upon termination of employment or loss of driving privileges, the employee must return the vehicle, keys, and any associated documents (fuel card, insurance card) to the designated manager immediately.
Assess Condition: The vehicle must be returned clean, fully fuelled, and in the same condition as received, allowing for normal wear and tear. Any damage exceeding normal wear will be assessed and may result in the employee being responsible for repair costs.
Enforce Policy Violations
A policy is only as effective as its enforcement mechanism. This section clearly articulates the escalating consequences of non-compliance, ensuring adherence, managing ongoing risk, and demonstrating a commitment to safety.
Issue Warnings: Minor infractions (e.g., late maintenance report, failure to submit expense logs) will result in written warnings.
Suspend Privileges: Serious violations (e.g., at-fault accident, second moving violation within 12 months, unauthorised personal use) will result in temporary suspension or permanent revocation of company driving privileges.
Terminate Employment: Severe breaches (e.g., DUI conviction, reckless driving, operating the vehicle with a suspended license, property damage due to gross negligence) may result in immediate termination of employment.
Implementing these detailed requirements can be time-consuming, but you don't have to start from scratch. We've compiled all of these elements into a comprehensive, downloadable company car policy template you can customise for your organisation today.
Also Read: Guide to Employee Attrition: Meaning, Types, and Rates
A comprehensive policy transforms the company vehicle from a source of potential friction into a guaranteed, reliable perk. You're not just documenting rules; you're trading uncertainty for absolute clarity. The panic over an accident or the argument over a speeding ticket vanishes because there is now a predictable process for every single eventuality.
By clearly defining every obligation and cost, you ensure your valuable employees feel supported and secure, allowing them to focus purely on business without worrying about unforeseen financial traps. Use the template provided to solidify this professional standard, minimise administrative stress, and turn your company car policy into a competitive advantage that protects your reputation on the road.
Disclaimer
This policy is meant to serve as a helpful reference. Every organisation’s needs are unique. please review and customise the content to fit your company’s culture, policies, and legal requirements.
Download the Policy Template Here
