Company car cash allowance advice

cyber69

cyber69

cyber69

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I've just been told that once the lease is up on my company car in early 2018 then they will no longer be offering a replacement and instead I will have to take the cash for car option which is £4,100.

So no urgency yet but as I've never actually owned my own car for the past 27 years I'm looking for advice on what to do with the £4,100 cash.

I'm a 20% tax payer so i'll be taxed on the £4,100 and we can claim 13p per mile and I understand you can claim some tax back on the mileage you do each year. I won't see any tax benefit until I've paid the back tax on my current company car off in early 2019.

I'll be doing roughly 25k miles a year, 20k business and 5k private, I have a clean license but have no idea how much insurance is going to cost.

Could I get some kind of personal lease deal or would I be better off getting a bank loan and buying a good used car and change it every 3 years?

I've no idea so any advice would be most welcome for a start to give me some idea what to do.

I'd also like some advice on what kind make/model car would be good to buy?
 
That is a lot of business miles to be putting onto your own car! I opted out of my company scheme and elected to take the cash back in 2004 but I only do a max of around 2k business miles so for me was a no brainer. It was a bit of hard decision to make as I'd been in a company car since 1989 so the fact that I was opting out of what was worry and trouble free motoring did make me nervous.

I looked at the option of buying my then leased car but the leasing company wanted near dealer price for it without any warranty so told them to jog on but if you are happy with your current car then it could be an option worth pursuing. I went out and purchased my own car outright and have been running the same car to date. I am looking to change it now but I keep delaying things for one reason or another.

On the insurance side of things I got my leasing company/company car drivers scheme at work to write a letter stating how long I had been driving and that it was accident free. At that time Churchill allowed me to use that letter but each year counted only as half a years no claims.

In terms of other deals, I've seen a lot of talk about PCP or personal hire deals, some do look good but it's not an area that I've personally explored, hopefully others with more knowledge in this area will post, which I'll also be reading and taking interest in :)
 
If I was doing regular short trips to customers every day and doing less than 10k miles then I wouldn't be so worried but the fact is my company expect me to do short and long trips, sometimes to the coast of Wales so I would need a car as reliable as is possible which I can run into the ground over 3 years and then replace it for something else.
 
If you are thinking of the PCP route, not an expert but from what I've seen the best deals have been for 5k miles a year, your 25k a year will increase the costs significantly so make sure you get that right and know what the excess mileage costs will be also.
 
£4100 and 13p per mile is ludicrously low is you are doing 20k business miles per year. Can you not opt out and claim a higher mileage rate?

As an example I do similar business miles and with a high mileage supplement get a total of £7,080 per year plus 16p per mile.

£4100 will give you £273 per month after tax then you will get around £73 per month in tax relief, a total of £346. This is an OK amount for low mileage but not for 20k! Once you've paid for insurance, servicing, tyres etc you will have very little to lease a car. Your employer is making no contribution towards the costs of doing high business mileage, just covering fuel and expecting you to fund the increased depreciation, wear, servicing etc

If you can just claim back mileage at the government rate of 45p/25p instead of an allowance you will get £7k per year that isn't taxed or £583 per month.

If you can't id be having serious words with your employer about how they can justify you having to subsidise business mileage
 
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£4100 nets down to about £2800, and you aren't going to make anything on the mileage.

You can claim £880 tax relief on 20k business miles.

You will also pay company car tax at the moment, so add that in as well. Bear in mind this will increase over the next few years. Let's guess £1200/yr.

That gives a pot of £4880/yr or £14640 over 3 years.

A Mondeo 2.0 TDCi Titanium 180 can be had for £345 a month on 3+35 with 25k miles as an example.
 
Abyss has a point, it might actually be cheaper for your employer to just pay you 45/25p as they won't have to pay any on costs like employers NI if they did that.
 
Would I be needing business insurance also? My company literature also mentions something about class II and class III insurance as I will be transporting and temporarily storing expensive parts.
 
cyber69 said:
Would I be needing business insurance also? My company literature also mentions something about class II and class III insurance as I will be transporting and temporarily storing expensive parts.
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I had to, but I can't say it made a massive difference, just a bit more. Not sure what class though.
 
It's been about a year since I first posted this thread and the company I work for have not changed their mind about ditching all the company cars and giving us a cash allowance. Our company works council have been involved but they don't carry any weight whatsoever, they just passed on our feelings towards the company's decision. This affects about 24 employees some of whom have stated they will have to resign as they have no saved money to put down towards a car.

I have been saving up for the past 12 months and have around 5k cash now I can put down as a deposit and then finance the rest on HP. I am moving away from a PCP or lease as I want the flexibility of not being tied into a fixed contract should I be made redundant or I if was able to find a job more closer to home that suits me.

So I am looking for car options now, I drive a VX Insignia tourer at the moment and it's pretty big so I would be looking for a family sized hatchback.

I've narrowed it down to a 1.5TDci Ford focus titanium, Skoda Rapid spaceback 1.6TDI, VX Astra 2.0cdti elite or Sri, Volvo V40 D2 1.6 or at a push a Skoda Octavia 1.6Tdi.

I'm looking for a car which is reliable firstly doing around 20k miles a year, my Insignia has 140ps but not too bothered about a drop in speed, I stick to the limits on urban roads and just follow the flow of traffic on motorways.

Any recommendations please?
 
booyaka said:
Octavia would me pick assuming it's a new model. 20k in an astra would do my head in.
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All my options would be around a 14 or 15 plate with around 25-30 miles already on the clock. The Astra would be the cheap option at around £9k and the Octavia would be at the top end of my budget.
 
That would be the way I'd order them though. Astra at the bottom of the heap, with the Octavia at the top, in terms of what I'd want to drive. At the end of the day, you are doing a significant amount of miles in the car, so you want something comfortable at least surely? The Insignia was no doubt a reasonable car for this driving due to it's size. The smaller you go, the less comfortable it will be on the longer drives. The Volvo might be ok too, but I'd still prefer the Octy.

cyber69 said:
Would I be needing business insurance also? My company literature also mentions something about class II and class III insurance as I will be transporting and temporarily storing expensive parts.
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With respect to this statement. Surely your insurance cost can be claimed back as an expense? I mean, if it weren't for the business use, you wouldn't need this more expensive insurance. And you certainly wouldn't need it to cover that many miles. For example, for me, I travel with work, for which I need a passport. So I put in an expense claim for renewing my passport. I wouldn't "need" it if it weren't for my work requiring me to travel, so it is a legitimate business expense. As is you requiring business insurance.

Your work sounds like a bunch of cowboys though. If it were me, I'd seriously be considering moving too. If all 24 of you handed you notices in a month before the new "rules" came in, I'm sure they would change their minds.
 
The new Astra is actually a very good car, i wouldnt discount it without driving it, i must be the only one that doesnt see the octavia as some uber motor, the 1.6 tdi is a horrid engine, and they are pretty drab inside unless its a top spec model. I would also take a look at some of the korean offerrings and maybe the Civic and Mazda range.
 
Abyss said:
£4100 and 13p per mile is ludicrously low is you are doing 20k business miles per year. Can you not opt out and claim a higher mileage rate?

As an example I do similar business miles and with a high mileage supplement get a total of £7,080 per year plus 16p per mile.

£4100 will give you £273 per month after tax then you will get around £73 per month in tax relief, a total of £346......
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Can someone explain how the tax relief works on Business Mileage.

I've recently been provided with an option of a company car or the cash alternative, given I do minimal business miles and Company Car Tax rates are nuts I took the money.

My company pays me 12p for every company mile I do in the car, to cover the fuel costs. How is it that you can then claim tax relief on this amount ?
 
The government allow tax relief at a rate of up to 45p a mile so if your company pay you 12p a mile you'll be able to claim the difference from the government, so 33p a mile. Once you've put together a spreadsheet totalling up all the miles and multiplied it by 0.33, you'll be able to submit a claim to get tax back on that amount. For example, if you did 12000 miles, at 33p that's £3960. If you pay 40% tax you'll get £1584 from that.

I do around 20-25k business miles a year in my own car which I aim to change every 3 years or so and I usually look to buy a ~3 year old car for around 10k. I get £4800 car allowance which gives me £14,400 over 3 years, or £8640 after tax, but the mileage claim more than covers the rest of it. At the moment it's working out quite well for me because I've now had my car for 3 years and 3 months and although it's now got a fair few miles on it (bought on 57k, now on 156k), it's still going fine so I'm just going to drive it into the ground to maximise the savings. I suspect I'll buy another ~3 year old car when it is time to move on, too.
 
Phemo said:
The government allow tax relief at a rate of up to 45p a mile so if your company pay you 12p a mile you'll be able to claim the difference from the government, so 33p a mile. Once you've put together a spreadsheet totalling up all the miles and multiplied it by 0.33, you'll be able to submit a claim to get tax back on that amount. For example, if you did 12000 miles, at 33p that's £3960. If you pay 40% tax you'll get £1584 from that.

I do around 20-25k business miles a year in my own car which I aim to change every 3 years or so and I usually look to buy a ~3 year old car for around 10k. I get £4800 car allowance which gives me £14,400 over 3 years, or £8640 after tax, but the mileage claim more than covers the rest of it. At the moment it's working out quite well for me because I've now had my car for 3 years and 3 months and although it's now got a fair few miles on it (bought on 57k, now on 156k), it's still going fine so I'm just going to drive it into the ground to maximise the savings. I suspect I'll buy another ~3 year old car when it is time to move on, too.
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The first part of your post is misleading...you can claim the tax relief on the difference, not the difference itself. In the example about the OP (who has already told us he is a 20% tax payer) could claim back 20% of the difference between the 45p/25ppm rate and what he's actually paid.

HMRC say you can be paid up to 45ppm for the first 10,000 miles without it being considered a taxable benefit, and 25ppm thereafter.

This means that for 20,000 business miles, paid at 12ppm the OP would be entitled to:10,000 x £0.33 x 0.20 + 10,000 x £0.13 x 0.20 = £920.
 
That's what I said? If his company pays him 12p a mile he won't be claiming the 33p/mile difference from the government, but he'll claim the tax from the 33p difference back. Hence my example of 12k miles being £3960 at 33p a mile but giving back £1584 if you pay 40% tax.

Or is it the case that you can claim the tax relief on the 12p that the company was paying too?
 
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