People who have Car Allowance

[jonwm]

Maybe wrong section but thought I'd try here:

Background:
40% tax payer
Company car the last 20 years
current car 330e monthly BIK £179ish

Been with current company 15 years, been offered an external position with another company who offer company car on great terms (auto manufacturer)
Discount that for now.

Current company have offered me a position in another part of the business at exactly the same wage as the new place, except they don't run cars (smaller division) i keep all my service etc the only contractual difference is the car. Car allowance isn't amazing and may go up shortly but its £4800 for now.

I make this a net of circa £440 in comparison to the new role after I take my car out.

Now the question, do people run and insure/ maintain 15k mile a year cars for this and still get a half decent car? I'm struggling to make it work unless its just me trying to keep with a new car.

New 1 series 128Ti I looked at (cant make a 3 series work)

PCP £390
Deposit £2k (got to find, may have to sell my cooper S to fund)
12k miles
then a 12k balloon
Insurance £60 a month.

This takes me over my allowance and leaves nothing for servicing / tyres etc

Be interested in your car buying experiences for a "work" car.

I've got 3 young kids so tend to have a "family" car for the wife

First world problems and all in current climate I know just keen to hear peoples views, keeping the 15 years service is tempting me currently too considering the state of the economy.

[914Phil]

You need to add in your BIK that you won’t be “paying” anymore. I have done both co car and allowance over the last 15 years and the main advantage of the allowance for me was the ability to run more interesting cars than the std. co cars particularly as the BIK rules became more punitive. I could easily run a decent car for the same cost as allowance plus previous BIK cost and I know others who traded down to cars which allowed them to “make money”. Most companies insist now (as a condition of the allowance) that you buy a car less than a couple of years old and if you have a customer facing role often that it’s 4 or 5 door etc. PCP can replicate the co car experience but equally a pre registered car bought with a bank loan on manufacturer warranty is a fairly safe option. I ran a mk7 GTI and a m135i with minimal hassle or additional cost on an allowance in that way. Best part for me was that I could change regularly rather than the usual 3 or 4 year co. car replacement cycle. It’s important that you put aside an amount each month to fund any R&M or depreciation if you go the purchase route. The one caveat that would make co car or PCP more attractive is that if you do “big” miles on business then the calculation is harder as depreciation curve may be ahead of the repayment of the loan on a purchase. Of course some prefer the no hassle co car route and at times in my working career that suited me but every time I did the sums I felt the allowance could give me the car I was happy with at equal or less cost. The times I really felt that were when my role had a prescriptive list rather than the times when my employer offered a wide choice of car up to a certain value.

[jwilco]

I've been with companies that offered both. The thing is, looks like you are trying to make the car allowance literally pay for the whole car, including ongoing costs... where in reality, most car allowances are more designed to ensure you're not out of pocket for using your own car for business use.

Where I work now I get neither, but my last job was about £300 a month car allowance. At that time, I chose to get a personal lease for about £250 a month. Obviously what was left didn't quite cover additional costs but to be fair at that time, I did very few business miles anyway.

If you're willing to go with something a couple of years old then you'd obviously make it stretch a lot further.

[abzmike]

What rate per mile will they pay for business travel? That will help offset servicing and insurance at least.

[jw673]

I am sure companies love car allowances (vs. company cars):

1. The main incentive - push a long-term liability (the car; lease/finance/etc commitments) onto the employee.
2. Rarely (if ever) increase the car allowance, pretend inflation does not exist.
3. Yet still get to enforce, by way of a car allowance car-policy, minimum standards on the cars that may be used (e.g. no older than three years). The car allowance car-policy being something that they can change at will (e.g. year 1 - no constraints on car age. Company changes their mind in year 2 - new constraints on car age).
4. Much easier to reduce or withdraw a (non-contractual) car allowance at will, vs. taking back a company car mid-term (which they may still be on the hook for regardless; less incentive to remove the car).

Though every situation/deal should be judged upon its merits, points that I suspect are seldom considered in these situations:

1) What happens if you lose your job in month 6?

1. Company car - give the car back. Your choice as to what you replace it with.
2. PCP with car allowance - potentially stuck with a car that's underwater on payments (vs. residual value) and may now be unsuitable for your needs (e.g. paying for 20kPA vs 5kPA).
3. Lease with car allowance - even worse - potentially stuck with long term payments (or high cost to terminate) on a car that may now be unsuitable for your needs (e.g. paying for 20kPA vs 5kPA).

2) I would wager that (on average) car allowances are rarely increased and almost certainly not on a regular/annual basis. In direct contrast I suspect that, excluding upgrades due to promotion over time, an employee in the same role with a 330e or equivalent in year one will likely still be provided with a 330e or equivalent in year 10. The likelihood that the car allowance has increased appropriately in this time, to afford the 330e in year 10, is minuscule.

3) Change of mileage circumstances (increase or decrease) due to work situation:

1. Company car - not your problem, for the company to sort out.
2. Car allowance - good luck getting that increased by an appropriate amount (if at all), "computer says no" from the finance department.

I am not saying opting out is bad - just be careful to consider the potential downsides. As always, the devil is in the detail (e.g. mileage payments/tax situation/etc).

Edited by jw673 on Saturday 16th January 09:53

Edited by jw673 on Saturday 16th January 09:54

[hepy]

I am now back in the company scheme with an EV - no brainier with the savings.

Up until June last year, I ran a Cupra 4drive estate, so ticks the family and hopefully, the interesting boxes.

Very cheap to service, even in the delayer network, and insurance was fine.

Why not look at a lease with only one months deposit?

As with all leasing, timing is everything.

[jonwm]

Thanks for all the replies.

I ran my own car for 3 months prior to getting the 330e.
I was running the lease down on a cupra 290 as we'd had the 3rd child so a 5008 lease was in order.
I did it over Christmas so mileage was minimal and I came out of a A5 tdi so bik saving was quite considerable.

New role with current company is home based but the office is 215 mile round trip. In the early days I think expectation after Covid is that 2 to 3 days a week are there. They are paying normal HMRC rates so 9p and 11p for diesel.

Role with external company is home based too but office if needed is 21 miles away.

Both are national roles so mileage is difficult to judge especially with what the world looks like after Covid.

Previously I was doing 20 to 25k in a company car with fuel card but used it for most personal too due to the fuel.

External role is you keep the car 6k miles and pay bik on the finance amount not the co2 as you technically own the car, then they buy it off you for the same amount or something. Rinse and repeat

[55palfers]

Don't buy a new car.

I used to buy low miles approved used with 12 months warranty and chop it every year.

Haggle hard. You may even make a a small profit or have free private mileage.

I used to cover 35K per year.

[jw673]

jonwm said:

New role with current company is home based but the office is 215 mile round trip. In the early days I think expectation after Covid is that 2 to 3 days a week are there. They are paying normal HMRC rates so 9p and 11p for diesel.

If you consistently spend 2/3 days in the office over a prolonged period HMRC* may judge you, based on the facts of the case (i.e. your ongoing regular trips to the office) and irrespective of your contract, to be based equally in the office as at home. Those mileage payment may then be subject to BIK (taxed) as it’s not business travel (it’s your “commute”). Not only that but any genuine business mileage may “need” 215 miles deducting from them and you only get your mileage paid on the difference (unless BIK is paid on the 215).

This being a moot point if you have/will have, and paid BIK on, a fuel card for personal mileage.

*Your employer may realise this anyway and stop you claiming for your office trips and/or subject them to tax.

[Sheepshanks]

jw673 said:

3) Change of mileage circumstances (increase or decrease) due to work situation:

1. Company car - not your problem, for the company to sort out.
2. Car allowance - good luck getting that increased by an appropriate amount (if at all), "computer says no" from the finance department.

I am not saying opting out is bad - just be careful to consider the potential downsides. As always, the devil is in the detail (e.g. mileage payments/tax situation/etc).

We got our car allowance rolled into our salaries a few years ago, and they switched to paying the full HMRC 45p/25p rates. Most guys doing around 25K/yr business miles.

There's been much wailing and gnashing to teeth recently as no-one is doing any business miles! Some of the guys just won't accept that we do still get the monthly allowance, it's just not shown separately.

[Tall_Blk]

In the last 20 years, I’ve only accepted a company car in lieu of allowance for 4 years and during that period, I still had to pay to upgrade as not only the cars in my band were too small, they weren’t exciting enough.

I always buy ex demo / 6 months old cars from the main dealership and touch wood never had any issues and my current car is the only car I have purchased brand new due to the deals that was offer at the time.

Yes it cost more than driving a company car. It I drive what I like and change it when I like which for a petrolhead is manna from heaven

[Boringvolvodriver]

When I worked, I have been with different companies that offered different schemes of company car or allowance and it all hinged on how much the allowance was and the mileage rate paid combined with how many miles I did.

The best was £6,000 pa and 45p a mile so happy days for my own car, bought 6 -12 months old.

The worst for own car was geared towards having a company car (links to car finance company) and as I did a lot o miles, went for the best I could get without being too penal on tax - ended up with an Alfa Guiletta 170 automatic.

In the OPs situation, I think running a new car on the allowance is probably not possible unless you accept that you will have to effectively pay towards it and have less disposable income.

12 month old purchase with a low rate bank loan is what I would do, and have done in the past. You have the flexibility to change as you want and circumstances demand.

[PeteinSQ]

I get £600 a month car allowance which after tax works out at about £360. As others have said you have to factor in the fact you're not paying bik and on a lot of cars that is a huge saving.

I lease a BMW 420i GC for £280 a month and then fund the insurance on top.

Next time if a Tesla Model 3 was on the car list I might opt in for the first time ever.

I'm also lucky to work for a company that couldn't care less what sort of a banger you drive provided you don't work in sales. So I could go the other way and get something cheap, second hand and dull considering the car hardly gets used.