A car policy and a company car agreement both govern the use of company cars, which is why they are often confused. The difference is fundamental, though: the car policy sets out the rules that apply to all company cars in an organisation. The company car agreement (in German, Dienstwagenüberlassungsvertrag) defines the rights and obligations of one specific person for one specific vehicle. Only together do they create clarity, for the employer and for drivers.
The car policy, known in Germany as Dienstwagenrichtlinie or Dienstwagenordnung, is the rulebook for the entire fleet. It answers the questions that are the same for all eligible employees: Who gets a company car? Which vehicle categories and budgets apply to each role or level? Which manufacturers, drivetrains and equipment are permitted? It also covers general obligations such as regular driving licence checks, what to do after accidents or damage, the use of fuel and charging cards and, where relevant, rules on telematics and data protection.
German law does not prescribe a specific form for a car policy. Companies can issue it as an internal guideline or, where there is a works council, conclude it as a works agreement (Betriebsvereinbarung), since much of its content touches on the works council's co-determination rights, for example regarding vehicle tracking or pay structures. What matters is that the rules are clear, complete and accessible to everyone who is eligible.
Many companies add an annex listing reference vehicles. It shows example models and budget caps for each eligibility level and can be updated without changing the policy itself, for instance when manufacturers change prices or new electric models become available.
The company car agreement is the individual arrangement between employer and employee for a specific vehicle. It records what applies to that particular person:
German law does not require a separate company car agreement; the rules can also be part of the employment contract or a works agreement. A separate document signed by both parties is nevertheless the usual and recommended approach. If the car may be used privately, this forms part of the employee's pay, which the employer cannot simply withdraw. If the employer wants to be able to reclaim the car, for example during garden leave, the agreement needs a revocation clause that clearly states the reasons.
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In practice, the company car agreement refers to the car policy. The general rules then do not have to be repeated in every agreement, and the agreement can focus on what is individual. Three points matter for this to work.
First, employees should confirm in writing that they have received the car policy. Only rules they demonstrably know can be enforced later.
Second, anything that applies only to that person belongs in the agreement itself: the vehicle, any employee contribution and special arrangements on private use or cost allocation.
Third, the reference clause determines whether later changes to the car policy apply automatically. A common approach is to refer to the car policy "as amended from time to time". Whether such a clause is valid in a given case should be checked by an employment lawyer, especially where changes put employees at a disadvantage.
Either way, both documents need regular maintenance. New tax rules, electric vehicles or changes to payroll processes all call for updates. A proven approach is a version number with a date, a short summary of changes for drivers and a review at least once a year.
Electric cars raise new questions, and these are also split between the two documents. The car policy covers the general rules: which charging card to use, which networks are preferred and how idle fees at charging stations are handled. Our guide to car policies shows which rules an e-car policy should include. The company car agreement covers what concerns the individual vehicle and household: whether a wallbox is provided, who owns it and what happens to it when the employee leaves, how electricity costs for charging at home are reimbursed and documented, and whether idle fees may be passed on.
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Get infoMany companies now extend their car policy to include the Deutschlandticket, company bikes or a mobility budget. The division of roles stays the same: the mobility policy defines who receives which benefits, and the individual agreement covers the specifics.
For bike leasing, this is a separate user agreement for the bike. A mobility budget, by contrast, is not tied to a vehicle. Here, terms of participation take the place of the company car agreement, covering for example whether unused amounts expire, what applies to part-time work or when someone leaves the company, and who can see which usage data.
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