How much is depreciation in company car insurance?

A company car becomes worth less as the vehicle is used more and ages. You call this depreciation depreciation. How do you calculate depreciation and how do you handle it?

Buying a car on a business basis provides tax advantages. You can put the car on the balance sheet and so the tax authorities help pay for the company car. For company car insurance, the value of the car is an important factor in case of a claim to be made on company car insurance. The daily value is the new value of the car minus depreciation.

What is the depreciation on a company car?

When business car insurance talks about depreciation, it often refers to tax depreciation according to the Internal Revenue Service. A company car is considered an asset. The amount of depreciation is determined in the same way as the amount of depreciation on, for example, machinery in a commercial building. Three values are important in determining the amount of depreciation, namely:

• The purchase cost - The amount the vehicle was bought for. It can also be a car purchased used.
• Residual value of the company car - This is the amount you are likely to receive for the company car when it is sold.
• How long will you use the car? - How long will the car last? At least in 5 years the company car will be depreciated.

You calculate depreciation by reducing the purchase price by the residual value. Then divide the result by the probable useful life. You can enter the depreciation in the accounting records.

Depreciation according to company car insurance

In case of a claim on the commercial vehicle insurance, the amount of the current market value and thus the depreciation are also considered. The value for which the company car is listed on the balance sheet does not necessarily correspond to the current market value that is assumed in the event of a claim. In case of damage, an expert called in by the insurance company can determine the current market value. If the damage amount exceeds the current market value, it is a total loss. This is because the commercial vehicle insurance pays out a maximum of the current market value.

Don't forget the accessories

Are there accessories on the company car that were not standard on the car when it came from the factory? You must declare these accessories when comparing commercial vehicle insurance at Alpina.nl. By not including accessories in the insurance, a payout will not include the additions. A commercial vehicle is also more likely to be declared totaled, as the accessories do not count when determining the daily value.