Company Car: Opting Out Economics.. ::yawn::
Discussion
Looking for some help to check my maths / cost-to-me for opting in/out of my company car policy...
My CC policy provides a car list and an allowance to spec them up to £667pm lease. Generally, I am going full beans up to that limit, so i am not considering any lease payback in the following maths.
The alternative is to Opt Out of the scheme. I can opt out and get £750 Gross to buy and run a car privately. This is appealing to me, I like driving and would love to move away from the mundane company car. I appreciate this will come at some additional cost to me - primarily in one-off deposit and insurance+servicing each year.
The maths (please check)
Opting IN: I spend my allowance £667 and get taxed BIK (approx £250 for the cars i'm interested in). I do not receive the £750 opt out money, and I end up paying the BIK of £250. In my head, this is a cost to me of not getting the £750-40% tax= -£450 - £250BIK = £700 sunk cost to drive the company car.
Opting OUT: I will receive £750 each month in my pay cheque, taxed @ 40% = £450 NET.
BIK tax is not collected. So that £250BIK tax will end up in my pocket too.
So if I am calculating this correctly, opting out gives me £450allowance + £250bik = £700 NET in the pocket.
I would then have to buy, run and insure a car.
Does this sound right? Can you see any flaws here so far?
In terms of car options:
BMW X330e M sport, full spec, full allowance used and £255 BIK
Merc GLC 300e AMG line which gives me £75 net lease payback and tax of £245BIK so an effective BIK of £170 - pretty good compared to the bimmer.
Opting out:
I'm trying to get into a new LR Defender 110 which will cost me around £700pm PCP which equals the company car cost.
The additional outlay would then be deposit around 7k plus insurance/road tax/servicing i estimate around £1500py = £3833py or £319pm on top of the 700 saved from not opting in to the CC policy..
Does this maths makes sense?
I think the question I have to answer is: Given the cost of the car itself is a sunk cost (I will always be losing around 700pm regardless of option), am I willing to pay an additional £300pm for a car I would enjoy considerably more..?
As always, thoughts, opinions, suggestions would be greatly appreciated.
My CC policy provides a car list and an allowance to spec them up to £667pm lease. Generally, I am going full beans up to that limit, so i am not considering any lease payback in the following maths.
The alternative is to Opt Out of the scheme. I can opt out and get £750 Gross to buy and run a car privately. This is appealing to me, I like driving and would love to move away from the mundane company car. I appreciate this will come at some additional cost to me - primarily in one-off deposit and insurance+servicing each year.
The maths (please check)
Opting IN: I spend my allowance £667 and get taxed BIK (approx £250 for the cars i'm interested in). I do not receive the £750 opt out money, and I end up paying the BIK of £250. In my head, this is a cost to me of not getting the £750-40% tax= -£450 - £250BIK = £700 sunk cost to drive the company car.
Opting OUT: I will receive £750 each month in my pay cheque, taxed @ 40% = £450 NET.
BIK tax is not collected. So that £250BIK tax will end up in my pocket too.
So if I am calculating this correctly, opting out gives me £450allowance + £250bik = £700 NET in the pocket.
I would then have to buy, run and insure a car.
Does this sound right? Can you see any flaws here so far?
In terms of car options:
BMW X330e M sport, full spec, full allowance used and £255 BIK
Merc GLC 300e AMG line which gives me £75 net lease payback and tax of £245BIK so an effective BIK of £170 - pretty good compared to the bimmer.
Opting out:
I'm trying to get into a new LR Defender 110 which will cost me around £700pm PCP which equals the company car cost.
The additional outlay would then be deposit around 7k plus insurance/road tax/servicing i estimate around £1500py = £3833py or £319pm on top of the 700 saved from not opting in to the CC policy..
Does this maths makes sense?
I think the question I have to answer is: Given the cost of the car itself is a sunk cost (I will always be losing around 700pm regardless of option), am I willing to pay an additional £300pm for a car I would enjoy considerably more..?
As always, thoughts, opinions, suggestions would be greatly appreciated.
Whilst my opting out choice was very different to yours, I am in the process of doing the same. My 530e is going back in a week.
My cash alternative isn't quite as generous as yours, either, £7k pa / £583 pm. As you, I will be saving the BIK tax and will have somewhere in the region of £770 pm gross going in to my pay packet.
Our company is now a lot more flexible on what they expect you to run if you receive the allowance, so I have opted for a low-mileage 5 year old Octavia Estate. It suits me down to the ground. Low rate finance from the bank, I'm going to be up every month, and as my mileage is non-existent right now, I plan on keeping it for quite a while, so in theory will be coining it in once the finance is cleared.
So, I guess I didn't agree with your choice of car there, but I definitely agree with the opting out route. If you want the Defender, get it.
My cash alternative isn't quite as generous as yours, either, £7k pa / £583 pm. As you, I will be saving the BIK tax and will have somewhere in the region of £770 pm gross going in to my pay packet.
Our company is now a lot more flexible on what they expect you to run if you receive the allowance, so I have opted for a low-mileage 5 year old Octavia Estate. It suits me down to the ground. Low rate finance from the bank, I'm going to be up every month, and as my mileage is non-existent right now, I plan on keeping it for quite a while, so in theory will be coining it in once the finance is cleared.
So, I guess I didn't agree with your choice of car there, but I definitely agree with the opting out route. If you want the Defender, get it.
Having come out, then gone back in the company scheme myself, I have a couple of questions/observations:
- How many work and personal miles do you do?
- What do you get in expenses for each work mile, both inside and outside the company scheme?
- Depending on the above, have you also factored in tax releif on business miles
- How many work and personal miles do you do?
- What do you get in expenses for each work mile, both inside and outside the company scheme?
- Depending on the above, have you also factored in tax releif on business miles
hepy said:
Having come out, then gone back in the company scheme myself, I have a couple of questions/observations:
- How many work and personal miles do you do?
- What do you get in expenses for each work mile, both inside and outside the company scheme?
- Depending on the above, have you also factored in tax releif on business miles
This ^- How many work and personal miles do you do?
- What do you get in expenses for each work mile, both inside and outside the company scheme?
- Depending on the above, have you also factored in tax releif on business miles
Business miles was the killer for me, always made taking the company car the only viable option when I was an employee.
I was doing at least 30k business miles, and less than 5k personal miles p.a.
A car was essential for my job (IT field engineer), and it always annoyed me that people who couldn't do the job without a car were taxed as heavily as people who got cars as a perk. At least I could make a few quid a year by not having a fuel card and driving economically - until they forced that on us too.
The only time I actually did well out of running my own car was when I was an agency contractor. No monthly allowance, just a flat rate per mile. For 2 years, I was earning more from the mileage allowance than I was from wages. I ran old Granadas and Carltons for 5 or 6 months each, never spent a penny on them, and got shot when they showed signs of needing work.
One thing to remember:
A company car is a fixed cost. You know exactly how much it's going to cost you per month, often for the next couple of years. Your own car is hugely variable. A couple of accidents means two lots of excess to pay and maybe a big hike in your premium at renewal. Plus you might need to hire in a car to do your job if yours is off the road.
A company car is a fixed cost. You know exactly how much it's going to cost you per month, often for the next couple of years. Your own car is hugely variable. A couple of accidents means two lots of excess to pay and maybe a big hike in your premium at renewal. Plus you might need to hire in a car to do your job if yours is off the road.
Thanks All.
Mileage isn’t too big a concern. (Mainly personal miles - approx 10k py). In theory, I work all over Europe, so in reality, spend most of my time on zoom calls these days.
Indeed, this isn’t really a money saving exercise - more just tired of grey BMWs and looking for something more mid-life crisis-esque.
Mileage isn’t too big a concern. (Mainly personal miles - approx 10k py). In theory, I work all over Europe, so in reality, spend most of my time on zoom calls these days.
Indeed, this isn’t really a money saving exercise - more just tired of grey BMWs and looking for something more mid-life crisis-esque.
Not quite the same but at my last place I had a fully expensed 330e, all in Inc fuel was circa £220 a month, in my current job I'm on a manufacturer scheme so pay bik in a different way so pay less but without the fuel card and getting the gov standard rate I am probably worse off every month, especially if I do lots of travel
My car costs £70 to fill and will do 360 to a tank of petrol, so even if I did every mile as business I'm a good £25 down before any personal.
Yes I can claim back at the end of the year but it's coming out my bank now which some months is painful.
Id personally have my hybrid back tomorrow, it didn't matter how many miles I did work or other it just cost me the same.
My car costs £70 to fill and will do 360 to a tank of petrol, so even if I did every mile as business I'm a good £25 down before any personal.
Yes I can claim back at the end of the year but it's coming out my bank now which some months is painful.
Id personally have my hybrid back tomorrow, it didn't matter how many miles I did work or other it just cost me the same.
Silver Smudger said:
Is there an online calculator where you can enter your salary and allowances etc to get the actual opt in / opt out figures? I have only found pages where they use example figures, and can't acurately relate them to my situation
This sort of thing? https://comcar.co.uk/cashorcar/simple/If you go back to the site’s home page there’s a bunch on other tools.
So just to simplify my original post to check the man maths..
Am I right to use the following logic:
Opting IN means I don't get £750pm gross cash allowance = £450pm NET.
I won't pay BIK on a car I buy privately. BIK for potential CCs is around £250pm.
So I should expect to see my NET pay up by £700pm?
Am I right to use the following logic:
Opting IN means I don't get £750pm gross cash allowance = £450pm NET.
I won't pay BIK on a car I buy privately. BIK for potential CCs is around £250pm.
So I should expect to see my NET pay up by £700pm?
XplusYplusZ said:
So just to simplify my original post to check the man maths..
Am I right to use the following logic:
Opting IN means I don't get £750pm gross cash allowance = £450pm NET.
I won't pay BIK on a car I buy privately. BIK for potential CCs is around £250pm.
So I should expect to see my NET pay up by £700pm?
Pretty much, yes.Am I right to use the following logic:
Opting IN means I don't get £750pm gross cash allowance = £450pm NET.
I won't pay BIK on a car I buy privately. BIK for potential CCs is around £250pm.
So I should expect to see my NET pay up by £700pm?
I'm in a similar position, terrible company car choice, currently my hired Focus is costing around £500 p/m approx £250 BIK and loss of £250 (after 40%) car allowance.
I am considering buying 330d nearly new and running that, difference is as well as an allowance I also get 45ppm (drops to 25ppm after 10k)
Other alternative is taking the allowance and doing a salary sacrifice on a Tesla M3LR, that would be around £600p/m all in, thing is the Tesla doesn't really appeal to me the same way a 3 series touring does.
I am considering buying 330d nearly new and running that, difference is as well as an allowance I also get 45ppm (drops to 25ppm after 10k)
Other alternative is taking the allowance and doing a salary sacrifice on a Tesla M3LR, that would be around £600p/m all in, thing is the Tesla doesn't really appeal to me the same way a 3 series touring does.
white91 said:
I'm in a similar position, terrible company car choice, currently my hired Focus is costing around £500 p/m approx £250 BIK and loss of £250 (after 40%) car allowance.
I am considering buying 330d nearly new and running that, difference is as well as an allowance I also get 45ppm (drops to 25ppm after 10k)
Other alternative is taking the allowance and doing a salary sacrifice on a Tesla M3LR, that would be around £600p/m all in, thing is the Tesla doesn't really appeal to me the same way a 3 series touring does.
Diesel BIK will make you like the Tesla moreI am considering buying 330d nearly new and running that, difference is as well as an allowance I also get 45ppm (drops to 25ppm after 10k)
Other alternative is taking the allowance and doing a salary sacrifice on a Tesla M3LR, that would be around £600p/m all in, thing is the Tesla doesn't really appeal to me the same way a 3 series touring does.
DE1975 said:
It's not a massive difference to the maths, but in addition to being taxed at 40% on your car allowance, you'll also pay 2% of NI contributions as well. From next April, NI increases by 1.25%
Thanks. I just saw LR whacked up their prices/reduced the lower price options, AND lead times have been adjusted, so seriously reconsidering options..Gassing Station | Car Buying | Top of Page | What's New | My Stuff