Car Allowance and Ne Vehical Funding Help
Discussion
I’m in need of a little bit of help to select the best funding method for a new car (BMW 330d circa £26,000).
Backstory is that I’m about to take a new job, which mean handing back my current company car and taking a car allowance. Taking a 330d as a company car is something stupid like £340/month is BIK.
I have toyed with getting a lease of something similar (430d GC 330d) and they work out over 4 years more expensive by £10,000. Even the super keen lease deals on a Skoda Superb is £3,000 more over the 4 years. The issue I’ve got is I will be doing 30,000 per year, which makes leasing very expensive.
I’ve come to the conclusion that buying a 6 months old 330d at £25-27k, running it for 4 years and changing at that point is the most cost effective method (even taking into account servicing, breakages and consumables). At the end I’ll also have a car with some value (maybe not lots, but £6-8k).
My question is twofold, am I missing a trick or have I come to the correct conclusion?
Next is how do I fund the £26,000, the BMW dealers clearly want to sell me a PCP, as apparently it will cut my monthly payments in half….. However I’ll have the large balloon at the end and be paying a larger amount overall and the APR is a crazy 10.9%
Current favourite is a bank loan of £19,999 with Nationwide @ 2.8% (over 36 months) and using cash for the rest?
This appear to be the cheapest option over the duration.
Thanks
(If I need to be provide more details please shout)
EDIT: Can anyone correct the typo in the title
Backstory is that I’m about to take a new job, which mean handing back my current company car and taking a car allowance. Taking a 330d as a company car is something stupid like £340/month is BIK.
I have toyed with getting a lease of something similar (430d GC 330d) and they work out over 4 years more expensive by £10,000. Even the super keen lease deals on a Skoda Superb is £3,000 more over the 4 years. The issue I’ve got is I will be doing 30,000 per year, which makes leasing very expensive.
I’ve come to the conclusion that buying a 6 months old 330d at £25-27k, running it for 4 years and changing at that point is the most cost effective method (even taking into account servicing, breakages and consumables). At the end I’ll also have a car with some value (maybe not lots, but £6-8k).
My question is twofold, am I missing a trick or have I come to the correct conclusion?
Next is how do I fund the £26,000, the BMW dealers clearly want to sell me a PCP, as apparently it will cut my monthly payments in half….. However I’ll have the large balloon at the end and be paying a larger amount overall and the APR is a crazy 10.9%
Current favourite is a bank loan of £19,999 with Nationwide @ 2.8% (over 36 months) and using cash for the rest?
This appear to be the cheapest option over the duration.
Thanks
(If I need to be provide more details please shout)
EDIT: Can anyone correct the typo in the title
BoostMonkey said:
I’ve come to the conclusion that buying a 6 months old 330d at £25-27k, running it for 4 years and changing at that point is the most cost effective method (even taking into account servicing, breakages and consumables). At the end I’ll also have a car with some value (maybe not lots, but £6-8k).
This was always the route I took, not a 330 but similar budgets. Bank loan for the paymentI always took the option to spend the equity on something else at replacement rather than upping the spec of the new car or having a lower payment each time.
Don't forget if you are using the car on company business, you may be able to claim a tax rebate depending on how much the employer pays you per mile that can add to your budget
Edited by mfmman on Tuesday 26th January 13:37
mfmman said:
This was always the route I took, not a 330 but similar budgets. Bank loan for the payment
I always took the option to spend the equity on something else at replacement rather than upping the spec of the new car or having a lower payment each time.
Don't forget if you are using the car on company business, you may be able to claim a tax rebate depending on how much the employer pays you per mile that can add to your budget
Good point on the tax rebate, I had not put that into my calculations so thats a bonus.I always took the option to spend the equity on something else at replacement rather than upping the spec of the new car or having a lower payment each time.
Don't forget if you are using the car on company business, you may be able to claim a tax rebate depending on how much the employer pays you per mile that can add to your budget
Edited by mfmman on Tuesday 26th January 13:37
BoostMonkey said:
Next is how do I fund the £26,000, the BMW dealers clearly want to sell me a PCP, as apparently it will cut my monthly payments in half….. However I’ll have the large balloon at the end and be paying a larger amount overall and the APR is a crazy 10.9%
PCPs works best on new cars - have you looked at deals on those?Have you been doing 30K/yr in your current car? I used to do that kind of mileage and it gets quite hard on the car - I wouldn't want to be doing it in a car I owned. However the BIK levels do make having a decent car very expensive now.
I was is in a similar situation to you and ended up buying a 1 year old Jag on a PCP.
£3k deposit then a sizeable monthly payment. Balloon payment will be just shy of £10k but the plan is to just hand it back (so in effect treating it like a lease).
It worked out at about £50 p/mth more than the brand new Mazda 6 tourer I was looking at (due to the higher residuals).
£3k deposit then a sizeable monthly payment. Balloon payment will be just shy of £10k but the plan is to just hand it back (so in effect treating it like a lease).
It worked out at about £50 p/mth more than the brand new Mazda 6 tourer I was looking at (due to the higher residuals).
Sheepshanks said:
PCPs works best on new cars - have you looked at deals on those?
Have you been doing 30K/yr in your current car? I used to do that kind of mileage and it gets quite hard on the car - I wouldn't want to be doing it in a car I owned. However the BIK levels do make having a decent car very expensive now.
Yes, however the if it was a new car it would be £35,000 rather than £25,500 so it blows the sums. Have you been doing 30K/yr in your current car? I used to do that kind of mileage and it gets quite hard on the car - I wouldn't want to be doing it in a car I owned. However the BIK levels do make having a decent car very expensive now.
I'm happy with the 6 month old for the saving.
I think i'll take the plunge with a personal loan and get the car.
Edited by BoostMonkey on Wednesday 27th January 16:49
How much is your allowance before tax? are you a basic or higher rate tax payer and how much per mile does your employer pay.?
I assume your car allowance is paid for before tax so the taxman will take a slice, not so bad if your basic rate but kind of stings if your a higher rate payer.
£340 p/m seems like a good deal actually, if the co-car scheme is based on value in terms of what you can have then a 330e is only 5% BIK and similar in list price so far lower on BIK.
20k over 36 months is what £570 p/m (ish) with maintenance on top? The big question is really how much it'll cost for 120k of running and what residual value will be left. You are admittedly going to keep for 48 months making the effective cost say £420 p/m.
I assume your car allowance is paid for before tax so the taxman will take a slice, not so bad if your basic rate but kind of stings if your a higher rate payer.
£340 p/m seems like a good deal actually, if the co-car scheme is based on value in terms of what you can have then a 330e is only 5% BIK and similar in list price so far lower on BIK.
20k over 36 months is what £570 p/m (ish) with maintenance on top? The big question is really how much it'll cost for 120k of running and what residual value will be left. You are admittedly going to keep for 48 months making the effective cost say £420 p/m.
I have been in this position in the past, and had company cars/allowances for 20 years
They way co cars are taxed now, for more than say 20-25K miles a year, I would take a company car, diesel or hybrid of course
If you dont have that choice and have to buy your own car, you are going to pay loads of depreciation on new, or PCP, or lease, whatever....the first owner loses 50-60% in the first few years regardless...thats you
To throw away say £15K on a £30k car every 3 years, think about how much you need to earn to cover that ...say £25K gross...thats nearly £700 a month you need to earn gross just to throw away. And how much is the car allowance? can you really afford a new car every 3 years?
So I buy at least 3 year old lower than avg mile examples, usually from the main dealer with their warranty and run them for 3-4 years. It minimises the biggest cost of ownership i.e. depreciation
They way co cars are taxed now, for more than say 20-25K miles a year, I would take a company car, diesel or hybrid of course
If you dont have that choice and have to buy your own car, you are going to pay loads of depreciation on new, or PCP, or lease, whatever....the first owner loses 50-60% in the first few years regardless...thats you
To throw away say £15K on a £30k car every 3 years, think about how much you need to earn to cover that ...say £25K gross...thats nearly £700 a month you need to earn gross just to throw away. And how much is the car allowance? can you really afford a new car every 3 years?
So I buy at least 3 year old lower than avg mile examples, usually from the main dealer with their warranty and run them for 3-4 years. It minimises the biggest cost of ownership i.e. depreciation
I'm with Bogie.
I used to do 35K miles with car allowance and pence per mile.
Always bought 4 (ish) year old, low mileage "approved used" from MB, BMW, SAAB.
Shop carefully, usually in mid-December, for a very low miles, well specced cruiser. 12 months AUC warranty is gold.
Haggle for a free service if possible. Be ruthless in always wanting good tyres to be fitted.
At little or no cost to me, at one time I even managed to run a CL 500.
Factor in BIK cost of similar company car. Just aim to break even if you want a nice car.
Folk I know did drive round in bangers and financed other things. Just depends on company policy really.
I retired recently and already had a decent car (all paid for) on the drive. No need to spend £15K on car when you turn the company car in!
Do your sums and experiment.
I used to do 35K miles with car allowance and pence per mile.
Always bought 4 (ish) year old, low mileage "approved used" from MB, BMW, SAAB.
Shop carefully, usually in mid-December, for a very low miles, well specced cruiser. 12 months AUC warranty is gold.
Haggle for a free service if possible. Be ruthless in always wanting good tyres to be fitted.
At little or no cost to me, at one time I even managed to run a CL 500.
Factor in BIK cost of similar company car. Just aim to break even if you want a nice car.
Folk I know did drive round in bangers and financed other things. Just depends on company policy really.
I retired recently and already had a decent car (all paid for) on the drive. No need to spend £15K on car when you turn the company car in!
Do your sums and experiment.
Ok, a few more details.
Allowance is £7,500, so £4,350 after tax and £352/month.
Car has to be less than 5 years old, so 6 month old 330d is £25K (rather than £40K new, avoding the depreciation).
Total cost of the vehical over 4 years is around £31,000 with insurance, servicing etc.
Total income from the allowance and saving on BIK is £32,500.
Plus any tax allowance up to 45p from the 15p the employer will pay.
As i've said in my posts above, if the car's worth anything at the end of the 4 years, then great.
My sum's work on it being worth £0.
I really can't see how a "nice" company car for a 40% tax payer is a good solution, despite from a low risk point of view.
I did consider a 330e, but i'd need to drive one to make sure it was ok and not a wallowy beast with all the batteries. There not out and the lead time is 20/30 weeks, which makes it a no.
Allowance is £7,500, so £4,350 after tax and £352/month.
Car has to be less than 5 years old, so 6 month old 330d is £25K (rather than £40K new, avoding the depreciation).
Total cost of the vehical over 4 years is around £31,000 with insurance, servicing etc.
Total income from the allowance and saving on BIK is £32,500.
Plus any tax allowance up to 45p from the 15p the employer will pay.
As i've said in my posts above, if the car's worth anything at the end of the 4 years, then great.
My sum's work on it being worth £0.
I really can't see how a "nice" company car for a 40% tax payer is a good solution, despite from a low risk point of view.
I did consider a 330e, but i'd need to drive one to make sure it was ok and not a wallowy beast with all the batteries. There not out and the lead time is 20/30 weeks, which makes it a no.
BoostMonkey said:
I really can't see how a "nice" company car for a 40% tax payer is a good solution, despite from a low risk point of view.
I used to reckon the "peace-of-mind" value of a company car was £100/mth so if the sums show you being better off by at least that then go for it.Going back a few years it amazed me that people would opt out of our scheme, buy a similar car as they could have got through the scheme and find that, overall, the cost was about the same.
However I guess what's changed is the BIK tax is now much higher.
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