Car Allowance or Car??

chris.tarry85 · 26 Jan 2016 at 08:44

I've been eligible for a company car for several years, but due to doing virtually no business miles, I have always taken the allowance and continued to pootle to and from work (ten miles each way) in my little Polo each day.

This is basically used as a second car with very little use at weekends etc.

The allowance is £4,500 PY, obviously with Tax etc. taken off thru payroll.

I'm now debating whether to change though, some of the options available to me are:

XC60 D4 R Design
418 Sport
Various 3 series Sport or SE models (salon or touring)
A5 TDI Ultra SE (or 1.8T FSI)
Various A4's (all saloons)
C220 SE

There are also loads of 1 series, A class etc., but I think if changing I would want to go for something a bit bigger than these.

The tax implications of these are between £90 and £110 per month in the 20% bracket, so more than the Polo costs to run currently but manageable.

I have no idea about company cars, so have no idea if these are a good deal? At face value the amount over four years looks to be less than the running costs quoted on Autocar for example?

Would perhaps even leasing privately get me a better deal?

Thanks!

Axeboy · 26 Jan 2016 at 08:48

What mileage rate will you get if you take the allowance? And what sort of mileage you will be doing

That's really needed to see if its worth it

chris.tarry85 · 26 Jan 2016 at 08:51

Axeboy said:
What mileage rate will you get if you take the allowance? And what sort of mileage you will be doing

That's really needed to see if its worth it

In terms of business mileage, almost non - certainly in the hundreds rather than thousands per year.

The rates are the same for company car as car allowance and are basically the standard inland revenue rates I think.

wassap · 26 Jan 2016 at 09:54

Its almost always better to opt out if you can, dependant upon what stipulations the company puts on the type of car that you can run yourself.

But your list isnt bad, i'd discount the A5, but all of the others arent bad cars at all. The 4 series, is nice looking car, as is the current 3 series.

Jez · 26 Jan 2016 at 10:11

I have a similar situation to you, my car allowance is slightly larger but the same principle applies - i opt out and take the cash. Running a car really doesn't cost very much unless you absolutely must have a brand new one (which is a mindset totally lost on me). The cash i receive easily pays for a cars which would be totally financially impractical as a company car.

iaind · 26 Jan 2016 at 10:15

You're not comparing apples with apples here - the tax impact of a company car shouldnt be comapred to the cost of running the polo, as you'll not have the allowance.

With the allowance, you knock your PAYE off so you have £3600 per annum which you could spend on a PCH or similar, which would pretty much completely pay for something like this.

http://www.hotukdeals.com/deals/mer...0k-miles-yr-lease-7872-inc-vat-target-2309262 - the actual cost to you would be about £28 per month. Not reccomending that as a particular car but goes to show what you can get for a PCH when there are offers around.

Whereas with the company car, you're talking up to £110 a month for something smaller - so if the mileage allowances are the same then paying for something yourself seems like a better bet. You could also consider a loan/pcp on something used

chris.tarry85 · 26 Jan 2016 at 11:25

iaind said:
You're not comparing apples with apples here - the tax impact of a company car shouldnt be comapred to the cost of running the polo, as you'll not have the allowance.

With the allowance, you knock your PAYE off so you have £3600 per annum which you could spend on a PCH or similar, which would pretty much completely pay for something like this.

http://www.hotukdeals.com/deals/mer...0k-miles-yr-lease-7872-inc-vat-target-2309262 - the actual cost to you would be about £28 per month. Not reccomending that as a particular car but goes to show what you can get for a PCH when there are offers around.

Whereas with the company car, you're talking up to £110 a month for something smaller - so if the mileage allowances are the same then paying for something yourself seems like a better bet. You could also consider a loan/pcp on something used

The logic I took was to take the post tax figure of car allowance over 4 years (£14,400), add the tax implication (£100 per month say, so £4,800) which would give a four year cost of £19,200.

I guess the question is perhaps then if you had the choice of one of the above for that, or looking to buy or lease privately (working on the basis that the circa £4k PX for the Polo would pay for maintenance, tax etc. on a private car over four years) which would you choose?

If you take interest into account (so keeping the equivalent monthly payment the same) it would give something like 17.5k to play with..

Has this just become a spec me thread?!?

rodenal · 26 Jan 2016 at 14:02

Bit of an aside but your allowance doesn't really match up with the cars on the list from my experience. When I had a £4.5k allowance the types of cars available to me were Focus sized/ class cars. I know it's merely a salary bump in reality, but are you being bent over a bit with the allowance?

You need to look at what specific cars you would be happy to run around in over the term then compare the "cost" of taking the allowance to run them vs the deductions for having the company car (+ the net allowance)

Axeboy · 26 Jan 2016 at 14:05

So many variables, depends on if you want a new car with no worries or additional costs, or save some money with something older and the running costs associated with it

Best bet is a spreadsheet as always and run the scenarios. Insurance, tax, maintenance and purchase costs versus company car tax etc etc

chris.tarry85 · 26 Jan 2016 at 14:41

rodenal said:
Bit of an aside but your allowance doesn't really match up with the cars on the list from my experience. When I had a £4.5k allowance the types of cars available to me were Focus sized/ class cars. I know it's merely a salary bump in reality, but are you being bent over a bit with the allowance?

You need to look at what specific cars you would be happy to run around in over the term then compare the "cost" of taking the allowance to run them vs the deductions for having the company car (+ the net allowance)

Yeah - the allowance sucks, I think it's done to make the car option look more attractive.

It's fixed by band across the company though, so the chances of it changing are slim to non!