Company car, allowance or mileage?

[iaind]

Hi All, been a while since I've been back here - I hope the usual wisdom of Motors is still around!

About a year ago, I started a new job and bought a Saab 93 diesel because of an increase in personal mileage. It's been superb, not had any issues at all with it and it's been a great car to run. Over 120k miles on it now and it looks and feels like half that.

However, the job has turned in a direction I never expected and I'm now doing a significant amount of mileage for business. I'm probably going to do 20k plus in the next year - with only about 6k being personal/commute. At 40p per mile, that's £466 per month in mileage claims. And by this point next year, the Saab will be close to 150k on the clock. Despite the fact that the mileage claim could cover any possible expense on top of the fuel (hell, I could buy a new one with a year's expenses!), both me and my employer are questioning whether it's sensible to keep doing things this way.

I have a few options.

- Keep claiming the mileage as I'm already doing. Apart from lacking a bit of load space (an estate would be much more appropriate for work) it does everything I need
- Take a car allowance and buy something on personal finance with a warranty. Assuming a £400 allowance, thats £240 after tax. If I top that up by ~£200 out of my own pocket, it gives me a loan of about £10k plus what the Saab is worth - so, say £13k to buy something. Getting something new on PCP would also be an option.
- Get a company car and pay the tax. A 2 year/20k lease on something appropriate would cost them ~£300 after recovering 50% of the VAT. Cost to me in tax, assuming 14% BIK on a £30k car would be £150-£200 per month. I'd be able to sell the Saab and pocket the value or (I believe), use it to contribute to the deposit and offset against the tax.

Either of the latter options would involve claiming business mileage at ~10p per mile or potentially a fuel card.

Option 1 seems like the most sensible from my perspective, but there are advantages to having a brand new fully maintained car.

So what should I do?

FWIW, I'd be looking at a smaller estate with an automatic box. The new D4 engine in the Volvo V60 would be great for a company car - 181bhp, 60 in 7.something and 99g CO2 (14% BIK). If I was buying myself I'd probably look at a BMW 3 series touring or a Merc C class.

Anything I'm missing?

Ta

 

[Rotty]

check the mileage alowance, if they are still paying you 40p a mile on more than 10k then 15p of it will be taxable

 

[[TW]Fox]

£400 before tax is a pittiful and pathetic allowance and would cover the lease of pretty much nothing suitable for use for 20k business miles a year. If that really is what they offer - with a reduction in the mileage rate along with it - then you are surely best off staying the way you are!

Cost to me in tax, assuming 14% BIK on a £30k car would be £150-£200 per month.

Are you sure? That seems a lot. There is no requirement to chose a £30k car either - even something like a £20k midspec Focus would be suitable and would have company car tax in double, not triple, figures.

 

[Rotty]

£400 is pretty standard with then petrol monay on top, tax relief will get most/all of the tax back

 

[[TW]Fox]

The numbers don't look right to me, if the allowance would only be £400 a month before tax I cannot see the company car alternative being as nice as whatever £30k buys you these days. That looks like the sort of allowance one might be offered instead of a midsize hatch level company car.

 

[Rotty]

Are you sure? That seems a lot. There is no requirement to chose a £30k car either - even something like a £20k midspec Focus would be suitable and would have company car tax in double, not triple, figures.

at 40% tax it will be in that range

 

[Rotty]

The numbers don't look right to me, if the allowance would only be £400 a month before tax I cannot see the company car alternative being as nice as whatever £30k buys you these days. That looks like the sort of allowance one might be offered instead of a midsize hatch level company car.

possibly, often there are a lot of other factors such as the compnay getting great deals from a single manufacturer etc

my last company car was an Impreza STi abd my allowance £462

 

[Rotty]

either way I have found the bext way to go is to buy a 2/3 year old car and rake the allowance

 

[[TW]Fox]

at 40% tax it will be in that range

So it is, whereas something like a Golf Diesel Bluemotion comes out at £91 a month at 40% and £46 a month at 20%.

Don't forget when comparing company car v allowance you start at the allowance position, so you need to add the 'lost' allowance per month to your company car tax bill per month to give you the true cost of taking the company car option.

For illustration purposes, allowance = £300 after tax, company car tax = £100 a month.

Therefore the purposes of comparison the cost of the company car to you per month is £400, plus the extra mileage rate on top.

If you can buy and run something you'd prefer for similar or less, taking the cash is the better option. If not, the car is.

 

[Rotty]

my last company car cost me £433 in tax for car and fuel per month , add that to the £462 a month I get

add those together, close my eyes and at a push I can justify running the Jag

 

[iaind]

Thanks guys

Just to clarify - I'm second guessing the company a bit. It's a small company with no set schemes in place. I'm looking at options to pitch to them as a mutual benefit - a £400 allowance was just a number I pulled out to be similar to what they're paying in mileage. I'm trying to figure out what the preferred situation would be so I can propose it to them. If I was looking at an allowance, what sort of figure would be reasonable to suggest? For context, I have a senior management role and a salary on the high end for this part of the world.

I'm thinking it's best to carry on with personal ownership - whether keeping the Saab or changing for something newer. That way, whether the money is coming in from mileage claims or an allowance, it doesnt really matter too much. The benefit in my head of an allowance is consistency - so that the finance is paid regardless of how many miles I do that month.

With that in mind, if I set myself a budget of about £13k if I did upgrade, what sort of thing should I be looking at? I'd want something that *could* have a warranty if I wanted. The trouble with cars at 100k+ is that no warranty scheme is really worth it because of the amount they exclude. So at 20k a year over 3 years, I'd want something at 40k or less

My criteria would be an estate with good ride quality, auto box preferable, decent fuel economy and not much longer than the car I've got (I have on road parking at home and there are often times there are spaces I cant fit into currently - so something like a 5 series would be even worse). Bluetooth with stereo streaming and built in nav would be good to have. Merc C class would be excellent but wouldn't fit into that price bracket. 3 series and A4 have similar problem although the lower spec ones are about doable.

The likes of the Mazda 6 (no auto or nav though), Insignia and Mondeo all fit the bill. Going a bit left field, I could get a newer 9-3 sportwagon, a Subaru Legacy or a Skoda Octavia. Any thoughts?

 

[rodenal]

£400 is about the equivalent to focus level company car, you want more than that to make it work.

As above make sure you're considering the fact that you only get 40ppm (45 actually) tax free for your first 10k

 

[iaind]

If I go that route then maybe push for closer to 600? That would be 360 after tax

I hadn't realised that you knot got the first 10k miles tax free. Is that based purely on miles or value? Shouldn't skew the numbers too much but worth bearing in mind - the miles I'm doing are only going to go up!

 

[rodenal]

Indicative, quick and undoubtedly flawed illustration:

£4000+£1000 = £5000

/12 = £416 averaging everything out. Pay the car and fuel from your own pocket, but remain untied to a lease deal should anything happen with work or your personal life.

Allowance of £5.5-6k is about what I would expect to be the equivalent of a mondeo type car so for the sake of quick and dirty calcs (higher tax and £6k assumed) call it £350 /month net, assuming your fuel allowance will cover the cost of the fuel you use (doubtful, you'd need to be getting around 60mpg) you'd have all of that to play with. I'd be surprised if you couldn't pick up a Mondeo type car for that on a 2 year lease so long as you aren't fussy, even with an assumed 20k per year. It won't be maintained but you'd have to pay for all servicing / tyres on your own car above anyway. If the company don't have any set rules on age etc then you're in an even better position in that you could pick up something a couple of years old and can be whatever the hell you want. I assume you can also claim tax relief on the 30p delta for the first 10k miles - but can't remember as it's been so long since i've had a car or allowance!

Company car, assume with Fuel card and picking an ecocrap tiny engined diesel I'd be surprised if you were hit with more than £180-200 per month BIK all in. Compare that with the increase from taking a car allowance and option 2 looks attractive (at £6k and with some of my massive assumptions for the sake of time being correct). Even if you don't take the fuel card with the direct monthly cost halving at best you'll be £100 down and trying to get the fuel allowance to cover the cost of fuel.

You can't really do any of this on conjecture though, you're actual allowance / choice of cars will make a big difference to what is best. You can only really work it out once you have all these variables.

 

[Pug]

I have a mid-level management role in a global $13 billion company.

My car policy allows me to have a lease (not allowed the cash) of £550/month, with which i chose a F30 320d Sport with extras allowance.

Senior managers in my company would get nearer £700, which equates to A6/5 series M Sport sort of level, so you're either overselling your title or undervaluing your company car allowance.

 

[iaind]

Senior management in a small 60 person company so probably more equivalent to your job in this sense

 

[Abyss]

£400 is low for a company car allowance. . I am middle management in a very large company, so sounds like a similar level to you. I get £410 every 4 weeks plus an extra £100 due to doing over 20k miles, so the equivalent of £552 if you are paid monthly. I then get 16p per mile to cover fuel.

By claiming back the tax relief on the mileage etc I run a 2 year old Audi A6 which costs me about £80-£100 per month over my car allowance including depreciation. This still puts me better off than where I would be if I had a company car and was subject to tax.

 

[Pug]

Senior management in a small 60 person company so probably moNre equivalent to your job in this sense

small companies sometimes have the best perks!

if you like cars I think you could push for £600, and haggle on cthe lease to benefit both ends!

 

[iaind]

Cool, as I said I had no idea what a "normal" allowance would be

Would allowances normally come with conditions attached - eg that it has to be new? £600 would comfortably cover the repayments on a short 10k loan, a decent warranty and all the servicing. That would give me something I actually own at the end but not sure if it would be something you'd normally be allowed to do.

13-14k seems to buy plenty of decent things - the Seat Exeo has caught my eye. Aware it's the old Audi a4 but it's bloody good value for money

 

[Abyss]

Some allowances come with restrictions and some don't.

My only restriction is that the car has to not negatively impact the image of the company or some other wooly term that has never been called upon.

Some of the consultants I work with do have restrictions though such as maximum age of car (usually 3 or 5 years) or that the car has to seat 5 people.

For outright best value for money for doing high mileage in comfort I would seriously consider the Skoda superb elegance.