Should I opt out of a company car?
Discussion
Long story short, I like performance cars and there isn't one available for me with the company at present.
If I opt out of my scheme, I get £200pm more from the company, and obviously pay less tax (the vehicle I pay on is circa 18k presently)
I am looking at a Clio 197 on finance (which I can get for about £105pm, plus insurance @ £50pm) or a Megane R26 (around £135pm)
I don't get any fuel allowance at the moment, so paying for my own makes no change.
repairs/servicing are obviously to be taken into account, but I am good friends with the technicians so would all be done in the evenings etc.
So, tell me PH, am I thinking the right thing? Or just stick with the company scheme and get a basic 5 door diesel?
If I opt out of my scheme, I get £200pm more from the company, and obviously pay less tax (the vehicle I pay on is circa 18k presently)
I am looking at a Clio 197 on finance (which I can get for about £105pm, plus insurance @ £50pm) or a Megane R26 (around £135pm)
I don't get any fuel allowance at the moment, so paying for my own makes no change.
repairs/servicing are obviously to be taken into account, but I am good friends with the technicians so would all be done in the evenings etc.
So, tell me PH, am I thinking the right thing? Or just stick with the company scheme and get a basic 5 door diesel?
You need to know:
Your marginal income tax rate (20% or 40%)
The Co2 tax band & list price of your alternate company car.
Expected depriciation, interest charges, VED, service and insurance costs of private car.
Best way to look at it is the real cost over a 3 year period of one vs the other.
1)For your company car the cost to you is the extra tax per month x 36. Pretty easy to work out.
2) For your own car it is:
The value of £200 per month after tax x 36
Less:
The cost of insurance, maintenance + car tax.
The depriciation you'll face plus the interest charges on the finance for your car. (Or interest lost if you buy from savings)
Do the sums, see what the price difference is and then you can see if alternate options are worth it.
Your marginal income tax rate (20% or 40%)
The Co2 tax band & list price of your alternate company car.
Expected depriciation, interest charges, VED, service and insurance costs of private car.
Best way to look at it is the real cost over a 3 year period of one vs the other.
1)For your company car the cost to you is the extra tax per month x 36. Pretty easy to work out.
2) For your own car it is:
The value of £200 per month after tax x 36
Less:
The cost of insurance, maintenance + car tax.
The depriciation you'll face plus the interest charges on the finance for your car. (Or interest lost if you buy from savings)
Do the sums, see what the price difference is and then you can see if alternate options are worth it.
But he isn't choosing a similar car on co car v private purchase.
The question should be does he want tp spend no more on a private car of his choosing for the same total cost of co car.
I can give you my example (40% tax) I could have selected a golf bluemotion or bmw 318d instead for the same total monthly outgoing I could have a 3year old 330d msport with pro nav Bluetooth leather heated seats auto one owner. So I choose going private.
Now I had calculated it would be similar however so far a few costs have come up which were not forecasted in my costs (ie unplanned repairs). So far it is costing more than I had estimated but I think it's worth it.
Sure I could have bought a lesser car for less capital or an even better car but much much older but I didn't.
One other thing to remember is if you do opt out there is a max age of car you can run usually 3/5/7 years and then you have to buy another car. So running a £100 scrapper and zero servicing will not wash. Also you need to provide your ins cert mot cert and evidence of routine servicing (this bit may not be in every company but it has been for at least two which I have worked for)
The question should be does he want tp spend no more on a private car of his choosing for the same total cost of co car.
I can give you my example (40% tax) I could have selected a golf bluemotion or bmw 318d instead for the same total monthly outgoing I could have a 3year old 330d msport with pro nav Bluetooth leather heated seats auto one owner. So I choose going private.
Now I had calculated it would be similar however so far a few costs have come up which were not forecasted in my costs (ie unplanned repairs). So far it is costing more than I had estimated but I think it's worth it.
Sure I could have bought a lesser car for less capital or an even better car but much much older but I didn't.
One other thing to remember is if you do opt out there is a max age of car you can run usually 3/5/7 years and then you have to buy another car. So running a £100 scrapper and zero servicing will not wash. Also you need to provide your ins cert mot cert and evidence of routine servicing (this bit may not be in every company but it has been for at least two which I have worked for)
Welshbeef said:
But he isn't choosing a similar car on co car v private purchase.
The question should be does he want tp spend no more on a private car of his choosing for the same total cost of co car.
I can give you my example (40% tax) I could have selected a golf bluemotion or bmw 318d instead for the same total monthly outgoing I could have a 3year old 330d msport with pro nav Bluetooth leather heated seats auto one owner. So I choose going private.
Now I had calculated it would be similar however so far a few costs have come up which were not forecasted in my costs (ie unplanned repairs). So far it is costing more than I had estimated but I think it's worth it.
Sure I could have bought a lesser car for less capital or an even better car but much much older but I didn't.
One other thing to remember is if you do opt out there is a max age of car you can run usually 3/5/7 years and then you have to buy another car. So running a £100 scrapper and zero servicing will not wash. Also you need to provide your ins cert mot cert and evidence of routine servicing (this bit may not be in every company but it has been for at least two which I have worked for)
I first opted out 5 years ago, so bought a 407 to be safe, great car and cheap to run. After 4 years and 130,000 miles I needed to changed so decided to opt for a 3 year old C320 Merc, fantastic car. However as with the above post I got with some extra running costs, destroyed the tyres in about 10,000 miles, plus the cost of fuel kept on rising.The question should be does he want tp spend no more on a private car of his choosing for the same total cost of co car.
I can give you my example (40% tax) I could have selected a golf bluemotion or bmw 318d instead for the same total monthly outgoing I could have a 3year old 330d msport with pro nav Bluetooth leather heated seats auto one owner. So I choose going private.
Now I had calculated it would be similar however so far a few costs have come up which were not forecasted in my costs (ie unplanned repairs). So far it is costing more than I had estimated but I think it's worth it.
Sure I could have bought a lesser car for less capital or an even better car but much much older but I didn't.
One other thing to remember is if you do opt out there is a max age of car you can run usually 3/5/7 years and then you have to buy another car. So running a £100 scrapper and zero servicing will not wash. Also you need to provide your ins cert mot cert and evidence of routine servicing (this bit may not be in every company but it has been for at least two which I have worked for)
I get a decent car allowence, am 35+ & have max no claims for insurance, and a good fuel allowence, yet still found running a decent car cost me more. I'm about to change jobs and have now negotiated a large family company car (Audi A6), it will cost me £240 a month in tax to have a nice shiny new car, fully maintained sitting on my drive. Not as exciting to drive, but as I spend most of my time on the motorway a big cruiser will be fine.
I reckon that with the cost of fuel and insurance continuing to increase sticking with company cars is now the way to go.
I've taken the cash and run my own car for a few years now. This suits me for several reasons, the main one being that I like to chop and change my cars pretty regularly, and taking the cash allowance enables me to do this. In the past three years I've gone through the following:
Subaru Impreza PPP
Mini Cooper S JCW
Alpina D3 BiTurbo
Porsche Boxster S
...and just changed to an Audi S4 Avant.
I just couldn't bring myself to pay tax every month for a VW Bluemotion-type thingy. I work on the (perhaps flawed) basis that if I'm going to have to pay for a car, I may as well get something I like instead of being taxed for a euro-bore-o-box.
Maybe I've been lucky in that I've managed to avoid (touch wood) big bills, and I also spend most of my time on trains (so can avoid the big depreciation hit that would come from 20k+ miles/year). As per the previous comments, you'll have to do the sums, then weigh the results up against your inbuilt petrolhead desire to own something entirely inappropriate...
Subaru Impreza PPP
Mini Cooper S JCW
Alpina D3 BiTurbo
Porsche Boxster S
...and just changed to an Audi S4 Avant.
I just couldn't bring myself to pay tax every month for a VW Bluemotion-type thingy. I work on the (perhaps flawed) basis that if I'm going to have to pay for a car, I may as well get something I like instead of being taxed for a euro-bore-o-box.
Maybe I've been lucky in that I've managed to avoid (touch wood) big bills, and I also spend most of my time on trains (so can avoid the big depreciation hit that would come from 20k+ miles/year). As per the previous comments, you'll have to do the sums, then weigh the results up against your inbuilt petrolhead desire to own something entirely inappropriate...
Bob Fossil said:
you'll have to do the sums, then weigh the results up against your inbuilt petrolhead desire to own something entirely inappropriate...
To jump in on this question as well: are there any online tools/calculators where you can try to weigh up the cost/benefit of taking the car vs allowance?I might be interested in the reduced hastle of taking the car (and therefore insurance/tax/maintenance etc being dealt with) vs the allowance, but not sure if the pain in the pocket of tax + allowance being exchanged for the car exceeds that and I'd be able to get something better by doing as you have and just buy my own wheels somehow - although I doubt I'd be chopping them in as often as it sounds you have!
I found it boils down to the mileage you'll be doing. I do 30,000 business miles a year and if I had my own car, the tyres/servicing/insurance/road tax/depreciation/maintenence/etc would make it completely uneconomical to opt out.
Don't forget if you can contribute extra and get a better spec/model, then these monthly contributions will decrease your P11D taxable benefit.
Don't forget if you can contribute extra and get a better spec/model, then these monthly contributions will decrease your P11D taxable benefit.
I opted out to get a better car than I could with my allowance but will be taking a car next time - the "extra" costs skew it too far in favour now. Paying for the car is fine, but tyres, insurance, servicing, MOT all mean that over the next two years I'll be facing a few big bills if I kept the car.
With smaller cars, it made more sense (cheap servicing on Mini for example when i had them) made it fairly neutral, plus the tyres were cheaper.
I'm holding off for the new model of 3 series to come out and swapping then, at least I'll be able to enjoy the chassis if not the noise of the 6 cylinder I had in my e46.
With smaller cars, it made more sense (cheap servicing on Mini for example when i had them) made it fairly neutral, plus the tyres were cheaper.
I'm holding off for the new model of 3 series to come out and swapping then, at least I'll be able to enjoy the chassis if not the noise of the 6 cylinder I had in my e46.
aberdeeneuan said:
I opted out to get a better car than I could with my allowance but will be taking a car next time - the "extra" costs skew it too far in favour now. Paying for the car is fine, but tyres, insurance, servicing, MOT all mean that over the next two years I'll be facing a few big bills if I kept the car.
With smaller cars, it made more sense (cheap servicing on Mini for example when i had them) made it fairly neutral, plus the tyres were cheaper.
I'm holding off for the new model of 3 series to come out and swapping then, at least I'll be able to enjoy the chassis if not the noise of the 6 cylinder I had in my e46.
The unknown costs or assumed normal running/no breakdown is a flaw in my calculations. With smaller cars, it made more sense (cheap servicing on Mini for example when i had them) made it fairly neutral, plus the tyres were cheaper.
I'm holding off for the new model of 3 series to come out and swapping then, at least I'll be able to enjoy the chassis if not the noise of the 6 cylinder I had in my e46.
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