New car scheme at work - Thoughts?

[FreeLitres]

Sales and service organisation - lots of driving involved visiting customers (around 30k miles/year)

Currently - Everyone gets a company car (diesel estate Passat of equivalent) for personal and business use. Pay company car tax. Buy own fuel, claim business miles at the HMRC guided rate of around 14p/mile for company car drivers. Workers grumbling about company car tax rates.

New scheme - Company cars removed. From the money you save in company car tax, you have to fund your own personal lease hire diesel estate for personal and business use. Buy own fuel and claim back HMRC guided rate of 45p/mile. (Note - not the usual car allowance system)

Would you be happy with this change? Anyone one else at a company that is going down this route?

[edc]

Many employees simply want the choice which they can flex to suit their own circumstances and which has the highest value to them.

[MitchT]

FreeLitres said:

New scheme - Company cars removed. From the money you save in company car tax, you have to fund your own personal lease hire diesel estate for personal and business use.

From the money you save in company car tax? That's hardly going to cover the cost of leasing a car, surely? Is there an allowance as well?

Also, are they going to indemnify people against the cost of getting out of the lease in the event that they lose their job and no longer have a use for the car or a means of paying for it?

[Hashtaggggg]

Get a lease quote with a 30000 mile pa limit.

Calculate the “tax” saving and the 45p allowance, that reduces to 20p after 20000 miles ? Or is taxed?

Ask your employer where the significant shortfall is coming from

Depending on the answer: -

Look for a new job that you are not subsidising the employer

[AndyAudi]

FYI I think the HMRC guided rate of 45p is only applicable for first 10k miles, drops to 25p after that.

(If they do keep paying you 45p I think the 20p diff might become taxable)

https://www.gov.uk/government/publications/rates-a...

[Sporky]

On the surface it sounds stingy. I'd do the sums.

[Trailhead]

Errrr so basically they are saying pay for your own car to do their business in.

Sounds rubbish.

You should be aware that only the first 10,000 miles are at 45p and then it drops to 25p per mile.

A better scheme might be an electric car with zero BIK......

[Trailhead]

Just done the maths. So over 30k miles you are averaging a payment of 31p per mile.

There are some cars you may be able to run for this inclusive of fuel, ins, tax, service etc.

Not a new lease car though.....

[FreeLitres]

MitchT said:

From the money you save in company car tax? That's hardly going to cover the cost of leasing a car, surely? Is there an allowance as well?

Also, are they going to indemnify people against the cost of getting out of the lease in the event that they lose their job and no longer have a use for the car or a means of paying for it?

No allowance will be paid. The employer excepts there will be a shortfall, but "you will make up for it" with the 45 ppm.

The lease is a personal lease. The employer will not have anything to do with it should you decide to change jobs (or get fired)

[ruggedscotty]

something like this happened to a friend, its not good at all....

no two schemes are the same but he did the sums and was straight into indeed and all the other job sites...

they wont be doing this for your benefit and you will be out of pocket at 30k miles a year.

[Hashtaggggg]

Trailhead said:

Just done the maths. So over 30k miles you are averaging a payment of 31p per mile.

There are some cars you may be able to run for this inclusive of fuel, ins, tax, service etc.

Not a new lease car though.....

Assuming the car is paid for, so no monthly payment

[cowboyengineer]

So I bought a pre Reg high spec diesel estate with 150ho for £23k. I traded it in 3 years later with 92k on the clock for £11000.

In that time I averaged 50mp, had 6 services at £400 a Pope, nee pads and discs £600 and then about 10 tires. I work on building sites so got punctures at £200 a tire

12k depreciation
£2k tires
£3k service and maintenance
£10k for fuel based on 50mpg and 120 a litre
£1.8k insurance an tax

£28.8k over 3 years

You should get £8.5k a year from the company based on 10k @ 45p and 20k at 20p which means you’ll almost break even on mileage payments alone

However you’ll have no company car tax to pay. So you should come out ahead just.

Obviously all the risk is yours.....

If your employer pays 45p a mile and you get taxed on the additional25p for 20k miles you’ll definitely be ahead

Edited by cowboyengineer on Monday 24th May 21:53

Edited by cowboyengineer on Monday 24th May 21:53

[Sheepshanks]

AndyAudi said:

FYI I think the HMRC guided rate of 45p is only applicable for first 10k miles, drops to 25p after that.

(If they do keep paying you 45p I think the 20p diff might become taxable)

Correct.

Critical for the OP to establish if the company is going to pay 45p for all mileage. If not, then sounds like a bit of a disaster.

It's some years since our company offered the option to opt out - we were also 30K/yr users. We got £600/mth taxable car allowance, plus business fuel paid. As well as the tax saving on the car and fuel for private use. Even then, for a similar car, it was very marginal. And 30K/yr is hard on a car.

[Pit Pony]

I use my own car for business use.

In 2019 I did 20k business miles in a 3.2 petrol Omega which cost me £525 in 2016.

I reckon that I made a slight (tax free) profit after repairs, servicing and depreciation.

[phope]

Just a thought - if the employees are funding the car payments themselves, it could impact upon their borrowing ability for other things like mortgages and remortgages, as it will be regarded as a personal commitment that has to be met from their their income

Can't think of mortgage lenders that would take mileage claims into account for affordability purposes

Would the employees be happy/willing to be potentially offered smaller mortgages than before?

[Funk]

It's a stitch-up - the employee might just possibly make it work financially but they bear all the risk and running costs - both anticipated and unanticipated. All it'll take is one large, unexpected bill to upset the money apple cart. What if it's off the road for repair? Employees' costs for their cars will instantly be 20% higher than the cost to a business as they'll be paying inc VAT and they won't be able to leverage the bulk deals and discounts a company can.

I'd be heading to the job sites and getting ready to move pronto...

[Terminator X]

FreeLitres said:

Sales and service organisation - lots of driving involved visiting customers (around 30k miles/year)

Currently - Everyone gets a company car (diesel estate Passat of equivalent) for personal and business use. Pay company car tax. Buy own fuel, claim business miles at the HMRC guided rate of around 14p/mile for company car drivers. Workers grumbling about company car tax rates.

New scheme - Company cars removed. From the money you save in company car tax, you have to fund your own personal lease hire diesel estate for personal and business use. Buy own fuel and claim back HMRC guided rate of 45p/mile. (Note - not the usual car allowance system)

Would you be happy with this change? Anyone one else at a company that is going down this route?

They should be offering a car allowance in lieu of company car imho. Take the car away then say you need to fund your own

TX.

[Funk]

Terminator X said:

They should be offering a car allowance in lieu of company car imho. Take the car away then say you need to fund your own

TX.

Holy st, not even giving an allowance? I missed that. DEFINITE stitch-up!

I use my own car for very occasional business use and get the 45p/mile rate reimbursement but there's no way I'd be trying to run one at 20-30k miles/year on that money...

[cowboyengineer]

Terminator X said:

They should be offering a car allowance in lieu of company car imho. Take the car away then say you need to fund your own

TX.

Mig they offered a company car allowance then you would not get the 45p

[Chozza]

The next move in the playbook is that they offer you vans that you collect from the depot.

Then everyone will accept this offer.