Can I get some 'real-world' company car advice
Discussion
Hope this is the right place for this type of post.
I'm after some 'real-world' company car advice. I've just been offer a new job, which I will almost certainly accept. I currently don't have a company car or car allowance, and have never had one previously, but the job offer includes a company car or an allowance.
Few questions (I am a 40% tax payer):
Broadly speaking is it better to take the car or the allowance? I understand it depends on the specific details, but broadly speaking is it fairly balanced, or in e.g. 8/10 cases it better to go for one of the other.
If I go for the allowance, what sort of thing could I get? The allowance is just shy of 7k a year (all subject to 40% tax). I don't know what the £342 (after tax) per month that might get me, especially given the need to run and insurance it etc. I guess I could do better than a Micra, but that a Ferrari is out of reach! I've got a young family, so an estate would work for us. I doubt I can spare much for a deposit right now.
How flexible do schemes tend to be? Does it tend to be viable to switch from a company car to an allowance a some point in the future (I will obviously bring this up with the company, but we're still negotiating start dates and other things).
Thanks for any suggestions, ideas etc.
I'm after some 'real-world' company car advice. I've just been offer a new job, which I will almost certainly accept. I currently don't have a company car or car allowance, and have never had one previously, but the job offer includes a company car or an allowance.
Few questions (I am a 40% tax payer):
Broadly speaking is it better to take the car or the allowance? I understand it depends on the specific details, but broadly speaking is it fairly balanced, or in e.g. 8/10 cases it better to go for one of the other.
If I go for the allowance, what sort of thing could I get? The allowance is just shy of 7k a year (all subject to 40% tax). I don't know what the £342 (after tax) per month that might get me, especially given the need to run and insurance it etc. I guess I could do better than a Micra, but that a Ferrari is out of reach! I've got a young family, so an estate would work for us. I doubt I can spare much for a deposit right now.
How flexible do schemes tend to be? Does it tend to be viable to switch from a company car to an allowance a some point in the future (I will obviously bring this up with the company, but we're still negotiating start dates and other things).
Thanks for any suggestions, ideas etc.
If you go for the company car option, what choices are available in terms of car type?
I've been in company car schemes where we've had a choice of 4 models of mundane cars, but I've also been in the position where we've been able to choose from a list of hundreds of variants from a list provided by a lease company.
I liked the company car scheme, as I didn't need to worry about maintenance, (road) tax, insurance etc...however I think it depends on the type of car you'd be able to have.
You also need to think about the implications of tax if you choose to enter the company car scheme are the differences in BIK can be quite significant depending on the type of car.
I don't think it's as black and white as one scheme is better than the other, it very much depends on the vehicle you choose to drive.
I've been in company car schemes where we've had a choice of 4 models of mundane cars, but I've also been in the position where we've been able to choose from a list of hundreds of variants from a list provided by a lease company.
I liked the company car scheme, as I didn't need to worry about maintenance, (road) tax, insurance etc...however I think it depends on the type of car you'd be able to have.
You also need to think about the implications of tax if you choose to enter the company car scheme are the differences in BIK can be quite significant depending on the type of car.
I don't think it's as black and white as one scheme is better than the other, it very much depends on the vehicle you choose to drive.
Edited by DavesFlaps on Tuesday 16th July 14:10
Edited by DavesFlaps on Tuesday 16th July 14:17
I don't know what is available yet - I haven't seen a full list.
My neighbour says he has traded down within his scheme, taken the balance as cash, and used this to pay the tax on the BIK - he reckons it works out cash neutral. I think I can do this, and it does appeal.
Thanks for the note on NI. I always forget NI...
My neighbour says he has traded down within his scheme, taken the balance as cash, and used this to pay the tax on the BIK - he reckons it works out cash neutral. I think I can do this, and it does appeal.
Thanks for the note on NI. I always forget NI...
It really depends on you.
With a 'company car' you get a car for free (sort of) and all services, insurance, tax, tyres etc paid for by the company. This is great, but you pay tax in accordance with the vehicle emissions (a Vauxhall Insignia is circa £200 a month). So a company car is great for 'hassle-free' ownership, but you pay for the privilege. Also, the type of car available to you will depend on your position within the company and their grading scheme. The lower the emissions, the cheaper the tax. some even pay you if your vehicle is a low enough emission band.
Car benefit is good if you already own a newish car or are looking to buy one that isn't within the grade scheme. The car you buy is yours, but your company will specify certain rules i.e. must be a four door, less than 5 years old etc. These rules vary from company to company. You will be paid an initial amount to buy the car, then receive a monthly sum for upkeep and wear and tear.
If you go this route, you could buy a new car on finance or look into a personal lease scheme. (I think you can get a LR Evoque for £300 a month if under 10k miles a year).
It's personal choice really. I have a company car, purely so I don't need to worry about keeping a stash of money ready just in case it goes wrong. My old man has always had car benefit, squirrels the monthly money away into an account, then pockets whatever he doesn't use on the car at the end of the year.
It's horses for courses really. HTH
With a 'company car' you get a car for free (sort of) and all services, insurance, tax, tyres etc paid for by the company. This is great, but you pay tax in accordance with the vehicle emissions (a Vauxhall Insignia is circa £200 a month). So a company car is great for 'hassle-free' ownership, but you pay for the privilege. Also, the type of car available to you will depend on your position within the company and their grading scheme. The lower the emissions, the cheaper the tax. some even pay you if your vehicle is a low enough emission band.
Car benefit is good if you already own a newish car or are looking to buy one that isn't within the grade scheme. The car you buy is yours, but your company will specify certain rules i.e. must be a four door, less than 5 years old etc. These rules vary from company to company. You will be paid an initial amount to buy the car, then receive a monthly sum for upkeep and wear and tear.
If you go this route, you could buy a new car on finance or look into a personal lease scheme. (I think you can get a LR Evoque for £300 a month if under 10k miles a year).
It's personal choice really. I have a company car, purely so I don't need to worry about keeping a stash of money ready just in case it goes wrong. My old man has always had car benefit, squirrels the monthly money away into an account, then pockets whatever he doesn't use on the car at the end of the year.
It's horses for courses really. HTH
Don't forget that if you take the allowance you still have to fund your own car, and you already say you don't have cash for a deposit. So you will be financing a car in some way shape or form. You could also take out a personal lease. Either of those could leave you hanging if you got the chop. With a company car if you leave you simply hand the car back with no other obligations. For me I 'downgraded' to an Audi A1 as it is quite kind BIK wise. you will also want to do some maths on the fuel card option if it is available.
So much depends on your circumstances and the scheme you're in.
Do you do a lot of miles? Business or personal?
Do you have some cash in the bank to spend on a car? Do you want to spend it on a car?
Is your car a simple means of A to B or do you want something a bit nice?
Do you have restrictions from the company as to what you can get if you opt out? A lot of places don't allow 2 seaters or 3 door cars.
I've done both. Started off opted out as the tax was crippling to opt in 7 years ago, compared to the miles I was doing. I bought a Golf and was very happy with it.
Last year I opted in as new car emissions are so low nowadays the tax isn't so bad. I've got a diesel Passat which, whilst not the last word in excitement, is perfectly suitable for me, comfortable, refined and cheap compared to buying and running a car of my own.
What appealed a lot was the fact that if I get made redundant or something; I just hand it back. In the financial climate of the time, I didn't fancy signing up to 3/4 years on a new car and being stuck with it if the excrement hit the fan.
I also have fixed costs of £x per month, regardless of mileage, maintenance, cost of fuel at the pumps, accident, etc, etc
Do you do a lot of miles? Business or personal?
Do you have some cash in the bank to spend on a car? Do you want to spend it on a car?
Is your car a simple means of A to B or do you want something a bit nice?
Do you have restrictions from the company as to what you can get if you opt out? A lot of places don't allow 2 seaters or 3 door cars.
I've done both. Started off opted out as the tax was crippling to opt in 7 years ago, compared to the miles I was doing. I bought a Golf and was very happy with it.
Last year I opted in as new car emissions are so low nowadays the tax isn't so bad. I've got a diesel Passat which, whilst not the last word in excitement, is perfectly suitable for me, comfortable, refined and cheap compared to buying and running a car of my own.
What appealed a lot was the fact that if I get made redundant or something; I just hand it back. In the financial climate of the time, I didn't fancy signing up to 3/4 years on a new car and being stuck with it if the excrement hit the fan.
I also have fixed costs of £x per month, regardless of mileage, maintenance, cost of fuel at the pumps, accident, etc, etc
Muzzer79 said:
So much depends on your circumstances and the scheme you're in.
Which essentially answers my question - its in the balance, with maybe a small bias to opting in due to the peace of mind. This generally confirms my expectations. Obviously I'll wait until I see the fleet list, but I'm leaning toward opting in. Something like a Passat would suit me just fine.
tjw78 said:
Muzzer79 said:
So much depends on your circumstances and the scheme you're in.
Which essentially answers my question - its in the balance, with maybe a small bias to opting in due to the peace of mind. This generally confirms my expectations. Obviously I'll wait until I see the fleet list, but I'm leaning toward opting in. Something like a Passat would suit me just fine.
Someone wil be along shortly to say the above is rubbish and you should opt out, pocket the allowance and buy an E39 5 series because theirs is faultlessly reliable.
Muzzer79 said:
Someone wil be along shortly to say the above is rubbish and you should opt out, pocket the allowance and buy an E39 5 series because theirs is faultlessly reliable.
That will be me!No seriously, look at all the costs involved including mileage allowances. I've been at firms with poor cash allowances and great mileage allowances where all the field based staff opted out to swan around in Mercs, and those where the cash allowance was good and the mileage poor so all the field team opted in, but the HQ staff often opted out.
I was forced out at last employer but chose to stay out as the cash (after tax) plus the BIK saving (based upon typical car for my grade) was enough to run a 1 yr old equivalent and make a nice profit at the end. I funded it by taking out a mortgage advance and paying in all the cash I benefitted by every month (aka paying it down as fast as possible) but by keeping it on a 25yr term the minimum payments were miniscule and therefore if I had a bill I could easily cover it from the monthly.
Also the benefit was we didn't have too many restrictions so I started with a sensible saloon but then bought a nice convertible. I could have taken a company 525d (in those days) but for some reason we werent' allowed any options other than metallic so I would have had to have cloth and couldn't spec up a lower model.
The way to make the most money is to buy a 3 yr old Mondeo and bank as much cash as you can. Or risk it with bangernomics, I covered my costs and then some (subject to tax above the HMRC mileage rules) when using my old E36 to commute when I was contracting.
Can any one shed any light on switching? Given my situation (new job, young family, another baby on the way), I think the reduced hassle of a company car would be valuable to me. But later on, when I have more head space to work the system, the balance might tip and it would make sense to take a car allowance.
DavesFlaps said:
Yes, and I'd imagine opting out would be easier than opting in, as in most cases company car schemes operate on a 2 or 3 yearly renewal basis whereas the cash allowance would be more or less perpetual, so you'd need to check the terms before you commited.
I am awaiting the details, but would it be typical to get the option to opt out at the renewal time? (I can see that doing it the other way is impractical)try www.comcar.co.uk to help with calculations
Ive had company car/allowance for 15 years but never taken the car option. I prefer to take the money and do what I like with it. Usually buying 3-5 year old cars and owning them rather than renting/paying tax indefinately. Cars is more of a hobby to me so im always spending more than bare minimum on them anyway
Its not a straight choice as others have pointed out you really need to do the maths for variety of options/circumstances
If you are going to do 15-20K miles a year or more I would go more for the company car, as buying/running your own for that mileage is getting too expensive
However if you will do say 5K business and 5k private miles a year then Id move towards taking the money and getting something a few years old, and more for your money
The Co2 based tax on any company car really makes a big difference to your tax code. Dont forget you lose your cash allowance too
So work out the tax on the proposed car and loss of cash allowance ...you really need to choose something with low emissions to minimise the tax liability....
Ive had company car/allowance for 15 years but never taken the car option. I prefer to take the money and do what I like with it. Usually buying 3-5 year old cars and owning them rather than renting/paying tax indefinately. Cars is more of a hobby to me so im always spending more than bare minimum on them anyway
Its not a straight choice as others have pointed out you really need to do the maths for variety of options/circumstances
If you are going to do 15-20K miles a year or more I would go more for the company car, as buying/running your own for that mileage is getting too expensive
However if you will do say 5K business and 5k private miles a year then Id move towards taking the money and getting something a few years old, and more for your money
The Co2 based tax on any company car really makes a big difference to your tax code. Dont forget you lose your cash allowance too
So work out the tax on the proposed car and loss of cash allowance ...you really need to choose something with low emissions to minimise the tax liability....
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