Company Car Allowance

Scrutinize · 1 May 2008 at 15:45

I have got a new job much closer to home reducing my 124 mile daily commute by over half.

Upsides,

1) It’s just down the motorway from me.

Downsides

2) It’s not accessible by train / bus so I have to drive.

In light of this, I have been given the option of a company car or car allowance.

The final amount or car is to be agreed once I start, so I am still in the dark on the amount.

However, I get the choice of a fully expensed, maintained, insured company car or the equivalent in monthly car allowance. Or even a lesser car with a part allowance / cash top up. Anyone know how the tax works on car allowances and if it just get lumped onto salary and ends up as Payee wrt tax/ni?

Now as for the company car, I know that I would have to pay company car tax so this would cause my salary to go down by what ever that is per month.
In terms of allowance, I am guessing it would be a few hundred so I could purchase / lease hire something with this of my choosing.
Alternatively, I could keep my Astra, pocket the allowance and not pay company car tax but then as I have to use the car for business could put quite a lot of mileage on it. Equally if anything major breaks, I would have to fork out.
It’s difficult without knowing amounts but over the year, I am guessing pocketing the allowance would be the financially beneficial option unless the Astra went badly wrong.

So any thoughts, or useful insights? Would be appreciated….. :cool:

Scrutinize · 1 May 2008 at 15:59

clv101 said:
Google will tell you exactly how the tax system works. In my experience taking the cash alternative is a no-brainer. But then I don't really do any business miles except a few trips to the airport and my allowance is enough for a new 320d yet I choose to drive a 4 year old Fabia VRS and pocket the difference!

Did you have any limits on the age / type of car you could choose when you got the VRS? Is it on lease hire / finance?

Scrutinize · 2 May 2008 at 09:52

Just checked my policy with Churchill and it automatically covers business use as long as your not in the motor trade, sportsman etc etc. So thats good.

I think I will take the allowance then and stick with the Astra. I have done the sums and although close, the allowance should work out better.

On a side note, I am £25pm better off with the new 20% tax system

It all helps.

Scrutinize · 2 May 2008 at 11:04

Scottly said:
Personally I preferred the company car over the allowance. When I compared the total costs, there wasn't much in it either way, but I was persuaded by a couple of things.

Firstly, the company car was insured by the company and the lease included all maintenance, so the only cost to myself was the added tax hit. I doesn't matter what goes wrong with the car, I never have to pay more than that. .

After looking at the figures, if I didn't already have a decent car then taking the company car is much better than buying one. I don't expect to be doing huge company mileage either. Even allowing for 1k of servicing costs per year the allowance is marginally better. Not to mention the salary boost which will come in handy for a mortgage application.

[TW]Fox;11613146 said:
Thing is Scottly your experiences are only true if your position in the company is high enough to allow the selection of a good car. I suspect if you were lumbered with a Golf diesel or a Toyota Auris you'd think differently.

Agreed

If I was being offered a 3 series or something then I would probably sell mine and take the company car. However I am not expecting anything over a family hatch diesel.

Scrutinize · 2 May 2008 at 11:58

[TW]Fox;11613412 said:
It wouldn't bother me - depreciation is not a concern for me becuase the cost of ownership I calculated factored in a residual value of zero. Increased running costs would be funded by the mileage allowance the company car allowance. Running a 5 year old used car does not cost more than leasing a brand new car.

[TW]Fox;11613483 said:
Where does this notion that to get a decent car you'd have to spend £20k come from?

Ah but, like me you already have the car and a nice one at that.

The thing is, assuming you don’t have a suitable car which is covered under the allowance terms and conditions (e.g. 4 years old, 4 seats etc differs between schemes/companies), thus if you had to buy a car outright to use as a company car + pick up all the expenses, it becomes much more expensive.

For example on a PCP on a new 20k car (As to make this work you need manufacturers warranty, curtsey car, road side recovery etc to get similar benefits to the company car and to be equal to a reasonable company car scheme car)

Deposit ~ 10% = £2000 (may or may not be needed)

Monthly repayments over 2 years = £400pm assuming a 0% APR and 8k residual value.

PCP limited mileage options ~ 20-30k miles per annum usually

Fuel = Private not expensed ~ 1.5k per year = £125 pm

Servicing = £70 per month (fair figure allowing for tyres etc)

Insurance = £50pm with business cover (requirement for this will be part of allowance T&C)

Total monthly = £645pm not including the deposit.

Say your salary is 25k = take home pay of £1,578 per month after tax.

Now if you get a car allowance of 300-400pm then your annual salary becomes £29k (max in this case)

Now your take home = £1,808 per month after tax

Take off the car costs -£645 = £1163 per month.

Now if you take the company car, the only payment is company car tax on £1,578 which at say £3000 per annum = £250pm. Take that off your salary and you are left with

£1,328pm (I am not taking private fuel mileage off on the company car scheme as depending on the scheme it seems you can virtually get this covered)

So in this instance you are ~£180pm better off.

Scrutinize · 2 May 2008 at 12:14

Jez said:
FWIW i run one of the most expensive to run saloons available (Mercedes S-class V8 with air suspension)

Yer but your a pimp

Just had a look at lease hire and that works out better than my last posts PCP rates.

Actually £500pm gets you a nice lease hire car with maintenance, tax etc. As long as you don't do moon mileage.

Scrutinize · 2 May 2008 at 12:29

[TW]Fox;11613693 said:
It depends how they are used - for long journeys 40k miles is far easier than 20k miles of average use.

Also depends on the car. But 40k per year for 3 years is still a lot of wear and tear and annual servicing costs could be huge so a fully maintained car if doing this mileage is a must.

Not that many cars can come out of 120k miles in 3 years looking great.

Scrutinize · 2 May 2008 at 12:50

[TW]Fox;11613842 said:
I've bought 2 of them now and one was just a Ford

The 5 Series didnt even have a single trolley dink!

Ah yer but for the ones you have found many many more have fallen by the wayside.

Scrutinize · 3 May 2008 at 23:29

Right, I am definately keeping my own car for now and taking the allowance. Been a useful thread, cheers guys

.

Bit worried that there may be a requirement to clean my car though