Ditching the company car - No Brainer?

[JD]

My company car is due for renewal, our budget is not great and doing up to 30k year (10 personal, 20 work) means nothing decent falls within it (Astras, Kia sportage etc.)

For the first time it looks like opting out and taking a car allowance makes a lot more sense, but it seems too good to be true.

A company car in the 12% BIK bracket is going to cost about £150 a month, and personal miles are at the government rate (17p/mile at the moment)

Car allowance is 9k p/a so about £430 a month after deductions? and then paid business mileage at the government rate (45p/mile as has been for ages)

We are allowed anything up to 8 years old, and it needs to be at least a PHEV for emissions.

Aside a bit of risk of needing a lot of tyres or rising insurance costs, I can't see what I might be missing and why I shouldn't take the allowance?

[2 sMoKiN bArReLs]

If you have a smash or huge engine blow up the balance tips to company car.

Those are the major risks really.

[Ilovejapcrap]

The fact the car is yours and not works would sway it for me even if it was a couple of quid more. Silly I know but I'm just being honest.

I'd also keep each one as long as I was allowed.

[Watchthis]

Potentially the biggest risk is losing your job for whatever reason and being stuck with a car that you pay a lot of money per month for

[randlemarcus]

And the 20K a year of business mileage is a factor - the mileage rate drops off a cliff after 10K miles, but the insurance when you tell them you do 30k doesn't, the servicing and tyres don't, and (depending on your proclivities) the frequency of chopping in when the mileage looks just shy of high doesn't. If you dont do huge miles, and you have a relaxed policy, it makes perfect sense to take the money. Actual business need users aren't so easy.

[AndyXF]

Business mileage allowance: 45ppm up to 10k miles, 25ppm thereafter.

Fuel cost @ 50mpg, £1.50/litre: £0.14 / mile

Allowance option:
£0.45*10000=£4,500
£0.25*10000=£2,500
-£0.14*30000=-£4,200
£4,500+£2,500-£4,200=£2,800


£430*12 = £5,160
£2,800+£5,160=£7,960

£7,960 / 12 = £663 / month.

Company car option:
-£0.17*10000=-£1,700
-£150*12=-£1,800
-£0.14*10000=-£1,400
-£1,800-£1,700-£1,400=-£4,900

£-4,900 / 12 = -£408 / month

Delta between the two:
£7,960-(-£4,900)=£12,860

£12,860 / 12 = £1,071

The difference between you taking car allowance and you paying for company car is £1,071 / month or £12,860 per year, not including insurance & maintenance.

It’s an absolute no-brainer as far as I can tell.

Edited by AndyXF on Thursday 2nd February 21:08

[JD]

AndyXF said:

Business mileage allowance: 45ppm up to 10k miles, 25ppm thereafter.

Fuel cost @ 50mpg, £1.50/litre: £0.14 / mile

Allowance option:
£0.45*10000=£4,500
£0.25*10000=£2,500
-£0.14*30000=-£4,200
£4,500+£2,500-£4,200=£2,800


£430*12 = £5,160
£2,800+£5,160=£7,960

£7,960 / 12 = £663 / month.

Company car option:
-£0.17*10000=-£1,700
-£150*12=-£1,800
-£0.14*10000=-£1,400
-£1,800-£1,700-£1,400=-£4,900

£-4,900 / 12 = -£408 / month

Delta between the two:
£7,960-(-£4,900)=£12,860

£12,860 / 12 = £1,071

The difference between you taking car allowance and you paying for company car is £1,071 / month or £12,860 per year, not including insurance & maintenance.

It’s an absolute no-brainer as far as I can tell.

Edited by AndyXF on Thursday 2nd February 21:08

Ok that's a very good way of laying it out, thank you very much I appreciate it. It kinda tallies with my thoughts. (although I think the 0.14 x 10000 int eh company section is misplaced as I don't pay for fuel, just pay the 17p back to the company for personal miles)

So that leaves me with £955 a month, if I opt for a PHEV that can give me 50mpg (overall equivalent) which I know is no problem at all.

This leads me on to the next bit, and that if I went with an EV, It should be even more favourable toward the allowance? As I believe the mileage rate is fuel agnostic.

[JD]

2 sMoKiN bArReLs said:

If you have a smash or huge engine blow up the balance tips to company car.

Those are the major risks really.

Yes that makes sense, as I would need to still be mobile in the meantime, so I either stick with a car in warranty, or invest in some very comprehensive insurance cover with hire vehicles?

Watchthis said:

Potentially the biggest risk is losing your job for whatever reason and being stuck with a car that you pay a lot of money per month for

I feel this is a double edged sword, as I would like to try and buy a car rather than lease, and then if I did lose my job at least I wouldn't be carless!

[AndyXF]

JD said:

Ok that's a very good way of laying it out, thank you very much I appreciate it. It kinda tallies with my thoughts. (although I think the 0.14 x 10000 int eh company section is misplaced as I don't pay for fuel, just pay the 17p back to the company for personal miles)

So that leaves me with £955 a month, if I opt for a PHEV that can give me 50mpg (overall equivalent) which I know is no problem at all.

This leads me on to the next bit, and that if I went with an EV, It should be even more favourable toward the allowance? As I believe the mileage rate is fuel agnostic.

Yeah if you can get away with 7.5p / kWh overnight rate on Octopus Go then you can “profit” significantly on your fuel mileage allowance.

[anonymous-user]

Are they definitely, 100% going to pay 45 per mile? At my company, those who took the car allowance instead of the company car were paid the exact same amount as those with company cars.

My company then got bought and the new owners didn't do company cars so they just added the car allowance to our base salary. I now get paid 45p a mile to drive my 16 year old shed to visit customers.

[worsy]

Joey Deacon said:

Are they definitely, 100% going to pay 45 per mile? At my company, those who took the car allowance instead of the company car were paid the exact same amount as those with company cars.

My company then got bought and the new owners didn't do company cars so they just added the car allowance to our base salary. I now get paid 45p a mile to drive my 16 year old shed to visit customers.

This - I get a CC allowance but weirdly company don't do company cars anymore. As a result I get a much lower fuel allowance.

[JD]

Joey Deacon said:

Are they definitely, 100% going to pay 45 per mile? At my company, those who took the car allowance instead of the company car were paid the exact same amount as those with company cars.

I guess this is the decider, the company still has company cars (maybe 100+).

Policy states "The cost of fuel will be reimbursed at the current HMRC milage rate"

[jonwm]

I recently opted out of a really good manufacturers scheme company car (not that good as it was Peugeot or Citroen mind!)

Peugeot 5008 cost me £114 a month in tax (classed as a loan not BIK) and work paid Government recommended £0.14 at the time, had a company car 20 odd years so big decision to leave but was offered £7200 per annum.
For me it nets out £465 a month, I got a loan for £420 a month and had a Transporter Kombi, got 3 kids, wife, dog and like camping & outdoors stuff.

I see it as work are paying off my loan and I'm paying for the insurance (£350 a year) and servicing but no way I would ever have got a transporter through work, for now it suits us.

They have now gone all electric which has thrown a spanner in the works as I can get a Model Y Tesla and I really want one! However we also want to go to France camping in August and the transporter would be great for this, balancing act at the moment but may well jump back into the scheme depending on what contribution they want towards the tesla.

I should add any distance I take my wife's car as the transporter is terrible on fuel! I probably do 5k a year business miles so nothing major, at 30k a year it wouldn't work for me to have the money.

[LeeM135i]

I opted out 7 years ago and its worked out well. At the time I had a Golf GTD which was a really nice car but costing a small fortune in BIK, when it came to chose a replacement the rules had changed and you could only chose the colour and not add any options and that killed it for me.

My milage was reducing significantly so I took the £6,500 a year allowance and bought a 18 month old M135i for £22,500. I took a personal loan for £20k over 5 years, the car allowance covered the loan, tax and insurance. The 25p a mile covered the fuel and 90% of the maintenance. I P/Xed the car after 5 years and got £12,500, in my mind it made me £10k. I was very lucky, I had no accidents or unscheduled maintenance.

Doubled down and bought a C63S 2 years ago, mostly work from home now so my work milage is probably only 4/5k a year. Similar to the above P/Xed the M135i for £12,500, I had £15k in savings and borrowed the remaining £20k. Car allowance is now £7k so covers loan, tax and insurance. The 25p a mile more or less covers the fuel so I put aside £100 a month for service / maintenance. I have had a couple of small maintenance things come up so spending around £500 a year on bits and pieces on top of the annual service. In the world of man maths I run a C63S for £100 a month, in reality it's more but I sit in the car and rev it to drown out reality.

At some point work will discover I don't drive enough to warrant the allowance but that's another topic of conversation.

I think so long as don't run into any mechanical issues you will be fine. If relevant to your part of the country I would check if work will pay any ULEZ or solution restrictions if you use your own car, Im thinking London, Bristol, Birmingham etc etc with a diesel.

[Hitch]

If I was doing 30k miles a year with those scheme parameters I'd think twice.

You're going to need to buy a four year old car with less than 50k miles on to minimise your costs, which for a PHEV is the best part of £20k at the moment. And then you're going to sell it in three years with 140k on it for what? £10k? Add in servicing, tyres, maintenance etc and there can't be much upside.

[Hitch]

AndyXF said:

Business mileage allowance: 45ppm up to 10k miles, 25ppm thereafter.

Fuel cost @ 50mpg, £1.50/litre: £0.14 / mile

Allowance option:
£0.45*10000=£4,500
£0.25*10000=£2,500
-£0.14*30000=-£4,200
£4,500+£2,500-£4,200=£2,800


£430*12 = £5,160
£2,800+£5,160=£7,960

£7,960 / 12 = £663 / month.

Company car option:
-£0.17*10000=-£1,700
-£150*12=-£1,800
-£0.14*10000=-£1,400
-£1,800-£1,700-£1,400=-£4,900

£-4,900 / 12 = -£408 / month

Delta between the two:
£7,960-(-£4,900)=£12,860

£12,860 / 12 = £1,071

The difference between you taking car allowance and you paying for company car is £1,071 / month or £12,860 per year, not including insurance & maintenance.

It’s an absolute no-brainer as far as I can tell.

Edited by AndyXF on Thursday 2nd February 21:08

Where is depreciation factored in to this?

[JD]

JD said:

I guess this is the decider, the company still has company cars (maybe 100+).

Policy states "The cost of fuel will be reimbursed at the current HMRC milage rate"

I checked and fuel is reimbursed at the 14p (less than 1.4) 17p (1.4-2.0) or 8p (electric)

Now it does not seem like such a no brainer.

[Hitch]

You can claim the difference from HMRC

[JD]

Hitch said:

You can claim the difference from HMRC

The difference or just the tax on the difference?

[worsy]

JD said:

Hitch said:

You can claim the difference from HMRC

The difference or just the tax on the difference?

Tax on difference