Company car vs personal car: 24% standby charge or 73 cents a km

What does each route cost in 2026?

The two routes put the tax in different places. A company car gives the corporation the deductions and gives your client a taxable benefit for personal use. A personal car keeps the deductions small for the corporation but lets it pay a reasonable per km allowance that never reaches your client's return. The 2026 numbers come from Finance Canada's January 14, 2026 announcement canada.ca.

The standby charge is in ITA s.6(1)(e) with the formula in s.6(2), and the operating cost benefit is s.6(1)(k) laws-lois.justice.gc.ca. The allowance stays out of income under s.6(1)(b)(vii.1) only if it's reasonable and measured solely by business kilometres. The detail sits on the standby charge, operating cost benefit 2026 and allowance rates 2026 pages.

A $50,000 car at 21,000 business km: $8,098.38 of benefit or $14,370 tax free

Your client works for their own Ontario corporation as an employee. The car costs $50,000 including 13% HST, and running costs are $6,000 a year. In 2026 they drive 30,000 km: 21,000 for business and 9,000 personal, so business use is 70%. Run it both ways.

The car costs more than $39,000 before tax ($44,247.79), so it goes in class 10.1 with a capital cost of $39,000 plus 13% HST on that amount, or $44,070 canada.ca. The 45% first year rate is the reaccelerated incentive covered on the class 10.1 page. The $5,930 above the ceiling is never deducted.

Over a four year hold at the same driving, the company route puts about $32,393.52 of benefit on the T4 ($8,098.38 × 4). The personal route pays your client $57,480 tax free ($14,370 × 4), and the corporation still deducts every dollar of it. Your client then carries the car and the running costs personally, so compare those after tax dollars against the tax on the benefit at their marginal rate.

Now cut personal driving to 2,000 km. The reduced standby charge falls to $12,000 × 2,000 ÷ 20,004 = $1,199.76, and half of that, $599.88, beats 2,000 × $0.34 = $680 for operating costs. The T4 benefit drops to $1,799.64 and the company car starts to look better.

To total each route, take a 29.65% combined marginal rate: the 20.5% federal rate plus Ontario's 9.15% on 2026 taxable income between $58,523 and $107,785, before any Ontario surtax canada.ca. Assume the corporation pays its profit out as salary, so every corporate deduction saves tax at that same rate, and hold the 2026 rates, the driving and the $6,000 of running costs for 2026 to 2029. CCA is $19,831.50 in 2026, then 30% a year on a UCC cut by the $5,070 ITC: $5,750.55, $4,025.39 and $2,817.77, or $32,425.21 over four years. The car's resale value is the same either way, so it drops out, as do the $6,574.79 of UCC left at the end of 2029 and the GST/HST the corporation owes on the benefit.

The personal route costs $9,499.51 less over four years. Cutting personal driving to 2,000 km narrows the gap to $2,029.20, but at this price the company car still loses. The allowance deduction net of its ITCs ($50,867.24) beats the company route's deductions net of the taxed benefit ($24,031.69 at 9,000 personal km, $49,226.65 at 2,000), so a higher rate, Ontario surtax included, only widens the gap.

When does the company car come out ahead?

Personal kilometres are the swing factor. The standby charge is reduced only when the employer requires the car for work, business driving is more than 50%, and personal driving is no more than 1,667 km per 30 days, or 20,004 km a year canada.ca. A client who meets all three with little personal driving can carry a small benefit while the corporation deducts the full cost of the car.

The price matters the other way. The standby charge runs on the car's full cost including taxes, every year, while CCA stops at the class 10.1 ceiling. A $90,000 car is a poor company car; a car at or under $39,000 before tax goes into class 10 at 30% with no ceiling waste canada.ca.

A work truck can skip the standby charge entirely. A van or pickup that seats the driver and two passengers and is used more than 50% to carry goods or equipment in the year it was bought isn't an "automobile", and neither is an extended cab used 90% or more for goods, equipment or passengers canada.ca. For those, the benefit is a reasonable value of the personal use, not a standby charge.

Commuting doesn't help. Travel between home and a regular place of employment is personal driving, so a long commute in a company car adds personal kilometres and can sink the reduction on its own canada.ca.

What changes if your client is a shareholder but not an employee?

The math stays the same but the slip changes. Subsection 15(5) measures a shareholder's automobile benefit as if s.6(1), (1.1), (2) and (7) applied, reading "employer" as "the corporation", unless the car is already taxed under s.6(1)(e) laws-lois.justice.gc.ca. The CRA has you report it on a T4A under code 028, not on a T4 under code 34 canada.ca. See the shareholder benefit page for the rest of s.15(1).

The tax free allowance is written for employees: s.6(1)(b)(vii.1) excludes a reasonable motor vehicle allowance from employment income laws-lois.justice.gc.ca. A client who takes only dividends should go on payroll, even at a modest salary, before the corporation starts paying a per km allowance.

Paying personal car bills straight from the corporate account is the worst of both routes. Without an allowance or a company car, those payments are a shareholder benefit with no deduction to the corporation, and they can also end up in the shareholder loan account.

How does GST/HST change the comparison?

A registrant corporation follows the primary use rule on a passenger vehicle: no ITC at 50% business use or less, a full ITC above 50% canada.ca. Section 201 of the Excise Tax Act caps that ITC at the tax on the capital cost deemed by ITA s.13(7)(g), which is why the example claims $5,070 instead of the $5,752.21 of HST actually paid laws-lois.justice.gc.ca. The CRA's guide still lists the 2025 ceiling of $38,000 as of October 2026. The ITC on a company car page covers the rest.

At 70% business use the ITC doesn't reduce the 2026 capital cost. Below 90% the CRA has you subtract it from the opening UCC of the following year, and at 90% or more you subtract it before recording the cost canada.ca.

On the personal route, a registrant can generally treat a reasonable allowance as including tax and claim an ITC with the provincial fraction: 13/113 for a vehicle used in Ontario, 5/105 in a GST only province canada.ca. On the company route, the corporation owes GST/HST on the automobile benefit, calculated at the end of February after the year and reported on the return for the period that includes that date canada.ca.

Which records and traps sink either route?

Both routes need a log of business and total kilometres. The CRA wants the date, destination, purpose and distance of each business trip, plus odometer readings at the start and end of the year canada.ca. Without one, the reduced standby charge and the per km allowance both fall apart. The vehicle logbook page has the simplified three month method.

An allowance becomes fully taxable if it isn't based solely on kilometres, or if the corporation also reimburses costs of the same driving such as gas or repairs. Supplementary business insurance, tolls and ferry charges are the only carve out laws-lois.justice.gc.ca.

An allowance above the prescribed rates that stays off the T4 loses its deduction for the excess under ITA s.18(1)(r) laws-lois.justice.gc.ca.

On the company route, a class 10.1 car gives no terminal loss when sold under s.20(16.1)(a) laws-lois.justice.gc.ca, and any recapture stays out of income under s.13(2) laws-lois.justice.gc.ca. Whatever UCC is left after the year of sale is lost.