“Premium company car: a motivation for employees or an excessive show-off?

According to various studies, a company car is one of the most desirable incentives for employees. Larger Lithuanian companies tend to allocate cars to senior employees. However, most businesses drive economy or, at best, mid-range vehicles. And it is rare to see even the head of a department in a premium branded car, except for the director himself. Why does business in Lithuania shy away from luxury models, and will there be a time when the CEOs of successful companies will drive Mercedes cars?

A car – added value for a good employee

Today, when computers, phones and the like have become the natural tools of the trade, when businesses are competing for good people, high pay is no longer the only motivating factor. Among the most popular means of motivating or attracting employees, HR experts also point to the flexibility of working hours and location, extra days off, health insurance and, of course, company cars.

“A car, I would say, acts as a means of attracting an employee to a new position, especially to a more senior position, such as a managerial position, and especially if they were a manager in another company and had a company car. Normally, cars are not shared, and there are clearly defined positions in organisations to which cars belong. For example, management, and this is included in the overall benefits package they receive when they go to work,” explains Laura Duksaitė Iškauskienė, Head of Master Class Lietuva, a search firm for executives and independent board members.

Companies usually buy rationally priced economy cars for business travel, and mid-range cars, often identically priced, for senior professionals. Large purchases save money. However, not all employees in companies have the same level of responsibility and pay, so the cars are different. Managers drive simpler cars, while executives drive better cars. But premium models are rare.

Car class depends on company policy

Car market expert Vitoldas Milius points out that companies often have different policies when choosing cars. Some may be more conservative, modest and unwilling to show off, while others, on the contrary, try to show that they live well and know how to make money.

“Only in this case can the stick be bent towards luxury. Of course, it all depends on the company’s strategy and thinking: some put price caps on prices, restrict brands, others allow employees to duplicate the car fee: they give “x” amount per month, and if you want something better, please, you’ll just have to make up the difference out of pocket,” says V. Milius.

He recalls an example of a Škoda dealer who was approached by a customer who had chosen the top Superb model with the most powerful engine and all the equipment available, and still asked if he could add any extras. When the salesmen wondered why the customer didn’t buy a Mercedes-Benz on his budget, because he really could, he sighed that he couldn’t: the company’s policy is that you need a “modest” Skoda.

There are other examples: companies that buy more expensive cars for their employees want to show that they really value them. In 2017, the Lidl chain surprised Lithuanian business by putting its store managers in Audi cars. “Lidl continues to follow the same path, with BMWs now making up the majority of the company’s fleet on the rekvizitai.lt portal. Mostly 1st, 2nd or 3rd series, but there are also X4 and X5 models.

“It depends on the organisation’s internal arrangements. We quite rarely see managers expressing their preference for the class or make of car. Asking for a car is perceived in our market as a sign of a rather poor tone,” explains L. Duksaitė-Iškauskienė, who explains that most of the time, managers agree to cars offered by organisations.

A car can make the difference between image and motivation

Different studies show that pay rises maintain their motivational effect on managers for 1-3 months. And a car will keep them happy for at least 1-2 years, until newer models hit the streets.

High-end company cars also have the added advantage that premium models are easier to attract good professionals and then motivate them further, as managers in other companies will no longer want to lower the comfort bar and drive economy models.

If a company has 10 managers, motivating all of them with a premium car will cost around €2,000 more per month compared to mid-range models.

“A car is not only a work tool, but also part of a person’s image: it’s important who they bring to a meeting. Sure, a large luxury SUV may seem like overkill, but the Mercedes-Benz C-Class, E-Class, and similar premium sedans are acceptable business cars in Western Europe. They are driven not only by executives, but also by managers of larger companies,” says V. Milius.

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