Company car or car allowance?

[Turkish]

Which are you better off with?

 

I now have to option of company car after being on an allowance for years. I currently get £450 a month allowance and 38p a mile fuel allowance. Or I can have a new/nearly new 3 series or A4 and 16p a mile but obviously no service, tax or insurance to pay.

 

What are the implications tax wise and what am I better off with financially? Assuming if i opt in I could sell my own car and settle the finance on it.

[Tokyo-Saint]

Go for whichever option means you either a) have the company logo down the side of the car of b) have the ad shaped slightly like the product you are selling.

 

Then upload the photo on here. This will make supermikey super jealous.

[Colinjb]

I've never had the option of a car allowance but even if offered I would stick with the company car scheme.

 

Inclusive servicing, tyres and insurance and it really came into it's own in the last couple of weeks after I was hit by an uninsured white van man at the exit of Winnall Tesco, the peace of mind and convenience in having to just do the minimum follow up and let the company's insurer do the rest really helped. The car is actually being collected for repair today with a courtesy car in exchange. Tax only works out at about £80 per month (Some basic calculations based on a take-home salary calculator compared to my wage slips, I have the generic rep type Mondeo/Passats) but couple that with a new vehicle every three years and no depreciation to factor in it's effectively negligible.

 

As you also wouldn't have to compromise too much on the vehicle you would get Turkish I would go company car all the way.

Edited 17 September, 2013 by Colinjb

[Turkish]

Well i do about 30k a year so deperciation is steep as well as at least one set of tyres, 1-2 services, insurance with class I business use and other maintenace costs, plus the older it gets the worry that something is going to go wrong with it. Running cost wise it's not cheap but the allowance covers my finance and insurance and fuel allowance means i probably break even on running costs. Getting a company car would make sense from that perspective and I was leaning towards the company car option until someone told me if i was to get a new 3 series or A4 then you pay tax based on 15% of the list price, which for one of those would come to around £4k a year, so i'd lose my car and fuel allowance and pay another £300 a month in tax, meaning i'd be nearly a grand a month worse off in my pay packet! Surely this cant be right???

[Colinjb]

Well i do about 30k a year so deperciation is steep as well as at least one set of tyres, 1-2 services, insurance with class I business use and other maintenace costs, plus the older it gets the worry that something is going to go wrong with it. Running cost wise it's not cheap but the allowance covers my finance and insurance and fuel allowance means i probably break even on running costs. Getting a company car would make sense from that perspective and I was leaning towards the company car option until someone told me if i was to get a new 3 series or A4 then you pay tax based on 15% of the list price, which for one of those would come to around £4k a year, so i'd lose my car and fuel allowance and pay another £300 a month in tax, meaning i'd be nearly a grand a month worse off in my pay packet! Surely this cant be right???

 

Well, as i've always experienced the tax is simply the slight monthly deduction onto of the usual PAYE. The £4k a year sounds very steep, even on the old Mondeo I had 15% list price would have been £3,150 per year. In reality i'm paying approx £960. So the only way that would in any way work is if it is 15% of the vehicle cost over the three year lease term.

[Turkish]

Well, as i've always experienced the tax is simply the slight monthly deduction onto of the usual PAYE. The £4k a year sounds very steep, even on the old Mondeo I had 15% list price would have been £3,150 per year. In reality i'm paying approx £960. So the only way that would in any way work is if it is 15% of the vehicle cost over the three year lease term.

 

That seems more likely, maybe it's £4k over the term rather than a year!! That would work out about £120 a month which is more like it!

[Tokyo-Saint]

Wanna buy some paper?

 

[Golden Balls]

I'm in the opposite situation.

 

I've had a company car for the last 4 years. Brilliant that I don't have to worry about anything. Fuel card as well.

 

Just got a new job. They give me a £6k car allowance plus fuel allowance. I'm torn whether its best to go for a lease or buy a used car on finance. A lease I wouldn't have to worry about much, can get a better car and a new one every 3 years. Finance means in 3-4 years I'd own the car then the majority of that £6k a year will go in my pocket but the car won't be as good and I'd have the maintenance/service costs etc.

 

Haven't looked into the tax side of things yet.

[Turkish]

I'm in the opposite situation.

 

I've had a company car for the last 4 years. Brilliant that I don't have to worry about anything. Fuel card as well.

 

Just got a new job. They give me a £6k car allowance plus fuel allowance. I'm torn whether its best to go for a lease or buy a used car on finance. A lease I wouldn't have to worry about much, can get a better car and a new one every 3 years. Finance means in 3-4 years I'd own the car then the majority of that £6k a year will go in my pocket but the car won't be as good and I'd have the maintenance/service costs etc.

 

Haven't looked into the tax side of things yet.

 

I looked into leasing and I do too many miles to qualify, if you do 10-15,000 then its not a bad option.

 

Most of the guys at our place, myself included have got BMWs or Audis with our allowance, got them with about 50k on for about £10k and run them for about another 100k before chopping them in. Done 40k in mine and two services, a new set of brake pads and a new set of tyres are the only costs so far, so with the higher tax code, car allowance and fuel allowance I'm well up in terms of money in v maintenance costs.

 

I'd really like an new/nearly new A5 but not really much point spending £25k on a car that will be worth 10% of that once I've racked up the miles on it so a few years old and second hand does seem to be the most efficient way of doing it.

[Frank's cousin]

I looked into leasing and I do too many miles to qualify, if you do 10-15,000 then its not a bad option.

 

Most of the guys at our place, myself included have got BMWs or Audis with our allowance, got them with about 50k on for about £10k and run them for about another 100k before chopping them in. Done 40k in mine and two services, a new set of brake pads and a new set of tyres are the only costs so far, so with the higher tax code, car allowance and fuel allowance I'm well up in terms of money in v maintenance costs.

 

I'd really like an new/nearly new A5 but not really much point spending £25k on a car that will be worth 10% of that once I've racked up the miles on it so a few years old and second hand does seem to be the most efficient way of doing it.

 

Given the mileage you do, Company car will always work out better - simply because of service insurance and depreciation.

 

You say your current car allowance is 5400 per year which from a company car perspective is same as a £21600 car over a 4 year period. with a company car, you pay tax band rate on 25% of the list price so on a 22k car, around £1500 per year tax.

 

In effect you are already paying tax on that 5400 car allowance, in theory with the take home portion covering your finance on your own.... If you sell and pay off the finance, you should find you are about the same on a monthly basis but without the need to pay insurance, services tyres or depreciation.

[Turkish]

Given the mileage you do, Company car will always work out better - simply because of service insurance and depreciation.

 

You say your current car allowance is 5400 per year which from a company car perspective is same as a £21600 car over a 4 year period. with a company car, you pay tax band rate on 25% of the list price so on a 22k car, around £1500 per year tax.

 

In effect you are already paying tax on that 5400 car allowance, in theory with the take home portion covering your finance on your own.... If you sell and pay off the finance, you should find you are about the same on a monthly basis but without the need to pay insurance, services tyres or depreciation.

 

Cheers frank, that explains it a bit better, you see we can get on

 

I thought it was steep as a few years ago I had a company car, Golf TDI and was only paying about £100 a month in tax. Having looked at the figures more closely wages and allowance wise I'll be slightly better off with the company car, but my fuel allowance is currently 38p and mile and will be 16p a mile if I opt in, so I do quite well from the fuel allowance too and this has covered all maintenance, tyres etc with a few grand over so far but I've had nothing go wrong with it yet, which will inevitably happen the older it gets. Some people say opt in and some people stick with the allowance and in a year the finance will be paid and I'll have a year or so left where the allowance is profit before I hit the 150k Mark and really need to chop it in. Still not sure what to do!

[Turkish]

So frank or whoever else, having looked into the company car option a little deeper, it seems that the sort of cars I can get give benefit it kind value of around £5.2k and a tax payable @40% of £2110. Am I correct in saying that this means that I would pay £2110 in a tax per year for having a company car?

[colehillsaint]

So frank or whoever else, having looked into the company car option a little deeper, it seems that the sort of cars I can get give benefit it kind value of around £5.2k and a tax payable @40% of £2110. Am I correct in saying that this means that I would pay £2110 in a tax per year for having a company car?

 

Yep.

 

IMHO the best reason for going with a company vehicle is if your driving style tends to be hard on the car. If you want to make the most money, buy a solid second hand Skoda, VW or BMW, with about 60k on it, letting the first owner take the big depreciation, and drive it with care. If you like the smell of brand new cars, let the company buy it and drive it how you want to, knowing that it won't effect you or even effect the company much when it's sold at auction after 2 or 3 years. Over the last few years the 320's have been the ultimate blend of desirability and tax efficiency. Fuel cards on the other hand are an expensive luxury, and if your company don't mind you are better off claiming 18p per mile for your business mileage, ensuring that your monthly claim is a bit less than your vat receipts for fuel. HTH

[Turkish]

Yep.

 

IMHO the best reason for going with a company vehicle is if your driving style tends to be hard on the car. If you want to make the most money, buy a solid second hand Skoda, VW or BMW, with about 60k on it, letting the first owner take the big depreciation, and drive it with care. If you like the smell of brand new cars, let the company buy it and drive it how you want to, knowing that it won't effect you or even effect the company much when it's sold at auction after 2 or 3 years. Over the last few years the 320's have been the ultimate blend of desirability and tax efficiency. Fuel cards on the other hand are an expensive luxury, and if your company don't mind you are better off claiming 18p per mile for your business mileage, ensuring that your monthly claim is a bit less than your vat receipts for fuel. HTH

 

Thank you mate. I've done as you suggested at the moment, got a second hand BMW. Now leaning towards a company car as I could get a better and newer car than I'd be willing to pay for myself and no worries about tyres, service costs, repairs etc. my two mates have opted in and they think its better.