Company car or allowance - views please
Discussion
Hi all,
My 1st post here and am in a bit of a dilemma of what to do about company car vs allowance but think I've finally got my head around the sums..
By taking the allowance, buying my own used car (say 18 months old max therefore having a sensible annual depreciation figure) it looks like I'd be roughly £1,800 a year better off however would appreciate some views on this in case I've forgotten anything!
Allowance = £740 per month (40% tax payer)
Business miles per year = 10,000
Personal miles per year = 10,000
Car i would have if a company car (new) = BMW 520d M Sport+
Car i would have if taking allowance (purchase outright) = 12-18 month old BMW 530d M Sport+
Calculation for taking allowance scenario as follows:
car allowance after tax per year £5,328
business miles 10,000 @ 0.13 from company = £1,300
Tax relief on difference between 0.13 & 0.45 = £1,280
Total 'income' per year = £7,908
Per year costs 20,000 miles:
Fuel cost = £2,667 based on 45MPG
Tyre cost = £800
Service cost = £450
Wear & tear cost = £450
'other' costs i.e. minor repairs etc. = £300
Insurance =£1,000
Tax = £180
Depreciation = £6,000
Others = £400
Total = £12,547
Therefore the above scenario (Total income vs total costs) would cost me £4,639 per year
This compares to £6140 per year if i took the company car option instead (BIC tax plus fuel at standard rate, no servicing, mileages as per above etc.),
therefore i calculate being approx £1,500 better off from having my own car and much better off then that IF the depreciation is less than the £6,000 per year i am assuming!
Yes there would be a bit of hassle and i wouldn't be getting anew car however i would be getting a MUCH better car IMHO!
any comments welcome..
My 1st post here and am in a bit of a dilemma of what to do about company car vs allowance but think I've finally got my head around the sums..
By taking the allowance, buying my own used car (say 18 months old max therefore having a sensible annual depreciation figure) it looks like I'd be roughly £1,800 a year better off however would appreciate some views on this in case I've forgotten anything!
Allowance = £740 per month (40% tax payer)
Business miles per year = 10,000
Personal miles per year = 10,000
Car i would have if a company car (new) = BMW 520d M Sport+
Car i would have if taking allowance (purchase outright) = 12-18 month old BMW 530d M Sport+
Calculation for taking allowance scenario as follows:
car allowance after tax per year £5,328
business miles 10,000 @ 0.13 from company = £1,300
Tax relief on difference between 0.13 & 0.45 = £1,280
Total 'income' per year = £7,908
Per year costs 20,000 miles:
Fuel cost = £2,667 based on 45MPG
Tyre cost = £800
Service cost = £450
Wear & tear cost = £450
'other' costs i.e. minor repairs etc. = £300
Insurance =£1,000
Tax = £180
Depreciation = £6,000
Others = £400
Total = £12,547
Therefore the above scenario (Total income vs total costs) would cost me £4,639 per year
This compares to £6140 per year if i took the company car option instead (BIC tax plus fuel at standard rate, no servicing, mileages as per above etc.),
therefore i calculate being approx £1,500 better off from having my own car and much better off then that IF the depreciation is less than the £6,000 per year i am assuming!
Yes there would be a bit of hassle and i wouldn't be getting anew car however i would be getting a MUCH better car IMHO!
any comments welcome..
I’ve just done something similar and my company car goes back next week.
It is more hassle, but I’m paying worst-case the same as now for a better car that I’ll own in a few years time
One thing - don’t forget that road tax is £450 per year from year 2 if your car has a list price of over £40k
It is more hassle, but I’m paying worst-case the same as now for a better car that I’ll own in a few years time
One thing - don’t forget that road tax is £450 per year from year 2 if your car has a list price of over £40k
Muzzer79 said:
I’ve just done something similar and my company car goes back next week.
It is more hassle, but I’m paying worst-case the same as now for a better car that I’ll own in a few years time
One thing - don’t forget that road tax is £450 per year from year 2 if your car has a list price of over £40k
Ah yes thanks - unless i get a car registered before April 2017 i suppose..It is more hassle, but I’m paying worst-case the same as now for a better car that I’ll own in a few years time
One thing - don’t forget that road tax is £450 per year from year 2 if your car has a list price of over £40k
Also, how stable is your employment. I'm in an industry that 20 years ago was job for life. Now it is 70% contract. Lat round of redundancies got rid of a layer of management, no exceptions. So we in the next tier down got our allowances taken off us and given the company cars that were still in lease from the recently departed!!!! (Or be put in the redundancy pools ourselves - not ethical but as a "company car" is a perk * probably within employment law **).
Make sure you check the spec of the car and it's quirks if you get forced into the company one - see my parallel post of tonight!!!
Make sure you check the spec of the car and it's quirks if you get forced into the company one - see my parallel post of tonight!!!
- when I first had a company car or car allowance, switched many times over the last 10 years, I was doing 30 - 40k on business. Now it is 1-2K due to a) location of contracts and b) Company H&S is no person should drive more than 2 hrs on a point to point journey without swapping drivers and do no more than 4 hrs driving in a 24 hr period. So as usually there are a few of us travelling together I couldn't take a car allowance as I couldn't get insured for "any driver for business on my own vehicle" so had to take the company car under the company insurance scheme.
A company car is a fixed cost. Your own car could end up costing you far more than you expect. As someone said, an accident, the excess, increase insurance, funding your own replacement whilst yours is off the road.
A couple of punctures, unexpected engine problem.
I wouldn't be running my own car doing 10k business miles. But I wouldn't take a BMW 520 as a company car. I'd opt for something with far lower list price and hence lower BIK, some dull thing. A Golf diesel Bluemotion or similar.
A couple of punctures, unexpected engine problem.
I wouldn't be running my own car doing 10k business miles. But I wouldn't take a BMW 520 as a company car. I'd opt for something with far lower list price and hence lower BIK, some dull thing. A Golf diesel Bluemotion or similar.
First I wouldn’t take the tax hit for private fuel. Normally cheaper to pay for your own.
Depreciation could be worse if you are putting that many miles on it.
Remember tyres, breakdowns, windscreens etc.
I do the sum every 3 years and go back to a company car, zero hassle, and you get a brand new car.
May be see if you can get a PHEV as BIK really low.
Depreciation could be worse if you are putting that many miles on it.
Remember tyres, breakdowns, windscreens etc.
I do the sum every 3 years and go back to a company car, zero hassle, and you get a brand new car.
May be see if you can get a PHEV as BIK really low.
The benefits of a company car (to me) outweigh any potential savings in tax from taking the allowance.
Company car breaks down/involved in an accident? Call the leasing company who arrange all the recovery, hire car and repairs.
Your employer goes bust/you get sacked/you get made redundant/you want to change jobs? Just hand over the company car keys on your way out of the door.
Company car needs a service? I call the leasing company who arrange the booking, collect my car, bring me a hire/courtesy car and return my car once serviced.
VED? Leasing company deal with it.
Insurance? Employer deals with it and emails me a copy of the policy each year it's renewed.
Tyres? Drop by any Kwik Fit and they liaise with the leasing company while I sit in the waiting area.
Every 3 years, I return the car to my office and pick up the keys to another brand new car.
The only negative to me is that I can't pick what car I want but everything else is hassle-free.
Company car breaks down/involved in an accident? Call the leasing company who arrange all the recovery, hire car and repairs.
Your employer goes bust/you get sacked/you get made redundant/you want to change jobs? Just hand over the company car keys on your way out of the door.
Company car needs a service? I call the leasing company who arrange the booking, collect my car, bring me a hire/courtesy car and return my car once serviced.
VED? Leasing company deal with it.
Insurance? Employer deals with it and emails me a copy of the policy each year it's renewed.
Tyres? Drop by any Kwik Fit and they liaise with the leasing company while I sit in the waiting area.
Every 3 years, I return the car to my office and pick up the keys to another brand new car.
The only negative to me is that I can't pick what car I want but everything else is hassle-free.
There is also the aspect of forget the money (to an extent) and just think about what car you want and the one you have to drive round in.
My options are an astra or a car allowance. I bought a golf r. Makes absolutely no financial sense but I'm enjoying it. Its a car forum after all.
My options are an astra or a car allowance. I bought a golf r. Makes absolutely no financial sense but I'm enjoying it. Its a car forum after all.
XDA said:
Your employer goes bust/you get sacked/you get made redundant/you want to change jobs? Just hand over the company car keys on your way out of the door.
That's often mentioned, but the other side of it is you immediately find yourself without a car. Fine if you have access to a spare car, but could leave some pretty isolated.XDA said:
Tyres? Drop by any Kwik Fit and they liaise with the leasing company while I sit in the waiting area.
Not having to deal with Kwik-Fit (and the maintenance controllers behind them) was a significant benefit in opting out. Doing 1000 miles some weeks it's tough to time it right but they'd agree to change one tyre and then knock back the other as they measured it at 3mm (but it'd look worn to the tread-wear indicators). And they'd never fit like-for-like tyres - often it was a mid-range tyre, or a crappy one of the car was near the end of its lease.danfitzjohn said:
Hi all,
My 1st post here and am in a bit of a dilemma of what to do about company car vs allowance but think I've finally got my head around the sums..
By taking the allowance, buying my own used car (say 18 months old max therefore having a sensible annual depreciation figure) it looks like I'd be roughly £1,800 a year better off however would appreciate some views on this in case I've forgotten anything!
Allowance = £740 per month (40% tax payer)
Business miles per year = 10,000
Personal miles per year = 10,000
Car i would have if a company car (new) = BMW 520d M Sport+
Car i would have if taking allowance (purchase outright) = 12-18 month old BMW 530d M Sport+
By my sums I personally would get the 530i over the 530d, you'd end up better off... My 1st post here and am in a bit of a dilemma of what to do about company car vs allowance but think I've finally got my head around the sums..
By taking the allowance, buying my own used car (say 18 months old max therefore having a sensible annual depreciation figure) it looks like I'd be roughly £1,800 a year better off however would appreciate some views on this in case I've forgotten anything!
Allowance = £740 per month (40% tax payer)
Business miles per year = 10,000
Personal miles per year = 10,000
Car i would have if a company car (new) = BMW 520d M Sport+
Car i would have if taking allowance (purchase outright) = 12-18 month old BMW 530d M Sport+
danfitzjohn said:
Fastdruid said:
By my sums I personally would get the 530i over the 530d, you'd end up better off...
Is that due to depreciation Fastdruid? You *have* to do the maths though, you can't just assume a diesel will be better. I generally assume btw that I'll achieve about 85% of the claimed "extra urban" as my work avg (personal average is 85% of the avg).
The trouble with the 530d is that 85% of the claimed is only a smidge over the recharge rate. It's not going to take much before you are *paying* the company per mile for the privilege of driving round for them!
I would not buy *any* car for "business" use (well unless only 1-2k) unless in it's size category it was managing to be more efficient than the applied MPG that HMRC uses:
https://www.gov.uk/government/publications/advisor...
For example, mine. 2.5T Claimed "extra urban" 41.5mpg, real 34-36mpg but it doesn't matter as it only needs to hit 24mpg!
Edited by Fastdruid on Thursday 23 August 22:36
WestyCarl said:
I guess you've already considered it but what about the 530e as a company vehicle? The saving in company car tax is over 50% compared to 520d (with similar performance to 530d)
Yes the issue is though it’s slightly above my banding (would need to contribute towards it) there’s a long lead time and the boot size is supposed to be rubbish ! A good alternative though especially from a BIC perspective..
I'm in a similar boat to the OP.
I take the allowance rather than the car for a few reasons:
1. If I lose the job, I don't have to give the car back. I can't imagine the stress of losing your job, plus also trying to find new employment travelling to interviews etc in hire cars or public transport.
2. Along the same lines, If I change jobs, which I hope is more likely than losing my job, I don't have to worry about buying a car quickly during my notice period. I'll have the new job on my mind and don't want to be car hunting.
3. Should the need arise, I can "boost" my monthly income by trading down to a bit of a banger (or at least a cheaper car). This could be helpful if you found yourself in sudden financial difficulty (i.e. lost a partner's income) or simply wanting to improve your savings rather than spending your income on depreciation of an expensive 18 month old BMW.
4. I'm pretty sure in my situation it works out marginally better financially too, even when I'm leasing a new vehicle at 15-20k miles per annum. Unless you are fortunate enough to find something with a really low BIK the tax really stings.
FWIW my car allowance has virtually no stipulations on the age or type of car that you need to drive, so effectively the money is mine to do as I wish. I know someone who drives a £500 polo, pocketing £800 car allowance. Personally I wouldn't have such an old car as my commute is rather long so I favour reliability.
I take the allowance rather than the car for a few reasons:
1. If I lose the job, I don't have to give the car back. I can't imagine the stress of losing your job, plus also trying to find new employment travelling to interviews etc in hire cars or public transport.
2. Along the same lines, If I change jobs, which I hope is more likely than losing my job, I don't have to worry about buying a car quickly during my notice period. I'll have the new job on my mind and don't want to be car hunting.
3. Should the need arise, I can "boost" my monthly income by trading down to a bit of a banger (or at least a cheaper car). This could be helpful if you found yourself in sudden financial difficulty (i.e. lost a partner's income) or simply wanting to improve your savings rather than spending your income on depreciation of an expensive 18 month old BMW.
4. I'm pretty sure in my situation it works out marginally better financially too, even when I'm leasing a new vehicle at 15-20k miles per annum. Unless you are fortunate enough to find something with a really low BIK the tax really stings.
FWIW my car allowance has virtually no stipulations on the age or type of car that you need to drive, so effectively the money is mine to do as I wish. I know someone who drives a £500 polo, pocketing £800 car allowance. Personally I wouldn't have such an old car as my commute is rather long so I favour reliability.
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