Driving book article

Free Car or Tax-free Driving Allowance

Often the question is whether it is worthwhile to have a free car provided by one's employer.

As of 1 January 2022, the rates for the tax-free driving allowance are DKK 3.51 per km for the first 20,000 km and 1.98 per km in addition. The rate has kept up with the rising costs associated with having a car. Where in the past it was often worthwhile to use your own car commercially, it now depends entirely on how much is driven commercially and which car is driven in.

Free car versus driving allowance

Calculations based on FDM's information on operating economic depreciation and ongoing operating expenses of keeping a car show that it is still often best to use your own car. However, be aware that the new rates of tax-free driving allowance do not fully compensate for the higher petrol prices. Therefore, it is worth choosing a petrol-efficient car.

Conditions that speak in favor of the choice of free car:

• Less than 50% of total driving is commercial
• Large overall driving demand, a significant part of which is private driving
• High operating costs
• Large operating economic depreciation — high loss of value of the car
• If the employer pays the expenses of the car without compensation for workers, for example in a majority shareholder relationship

When buying expensive cars with an ownership period of more than 3 years, it can often pay off to choose a free car. This is due to the fact that many cars have a large loss of value in the first 3 years, and that maintenance costs after 3 years are proportionately high. The value of the car is calculated from the purchase price alone, regardless of the amount of ongoing maintenance costs. Regardless of whether a new or an old car is chosen, it is a condition that the employer has the operational economic risk on the car.

Conditions that speak for driving in your own car:

• High demand for commercial driving
• Small operating economic depreciation - low loss of value of the car
• Low operating costs, e.g. low petrol consumption

When buying a relatively inexpensive car, with small operating costs, it can often pay off to choose your own car. If the car is very petrol-economical, such as the new Lupo from VW, being a car owner can even make a profit if the business driving demand is large enough.

Calculation 1 - VW Lupo

The salary is reduced so that the employer's expenses to cover the employee's private driving are not paid by the employer.

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Calculation 2 - Audi A3

The salary is reduced so that the employer's expenses to cover the employee's private driving are not paid by the employer.

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Calculation 3 - BMW 520

The salary is reduced so that the employer's expenses to cover the employee's private driving are not paid by the employer.