Some help needed for those with financial common sense...

[billyliar]

Hello,

I'm after a bit of advice really on what you'd do in my situation.

I'm 25 and have just been promoted to a new position.

Firstly:

Situation is, I earn circa £35k basic. I can either choose to opt in to a company car scheme, which will cost me around £100 of my own money to be able to drive the particular car I want, plus company car tax. I'm looking at a Golf GTD, as I'm limited to a choice of 3 manufacturers and diesels only. Or I can opt out and receive an extra £340 a month in my wage.

The 40% tax bracket is £37,400. So, would opting for the car mean I would have to pay my company car tax at the 40% rate, as it's a benefit in kind which is essentially the same as earning money Obviously, opting for the cash would push me into the 40% bracket, but would the car?

Secondly:

I have an 18 month old Cooper S with leather and a reasonable spec. My insurance, for various reasons, is a ludicrous £150 per month. I also pay £172 in personal loan repayments on the car, which will end in just under 2 years time. I reckon I could sell the car privately for around £14k.

I also owe circa £4000 on credit cards. So I have a combined, but manageable debt of £7k.

Now, what I'm asking is what it would make most financial sense to do, irrespective of the car I'm going to be ultimately driving. Do I sell the MINI, pay off the debt and hair a fair wedge in the bank, or opt out of the scheme, and spend the surplus on paying off the debts? After tax I reckon the £340 is likely to be £200.

Doing this would leave me with financial peace of mind - although I appreciate I'm not exactly in dire straight, and that £7k isn't a startling amount of debt - and almost no outgoings other than rent of £400 pm which includes bills, plus a few other bits and bobs such as phone bills etc.

Any advice is greatly appreciated.

Thank you.

[Emsman]

Company car- depreciation, servicing, repairs, insurance, roadtax and so on all covered by your company.
Sure you get taxed, but putting miles on your own car and maintaining it would be more?

[x type]

maybe a daft question ,but if you go to company car do you end up loosing any no claims discount you have built up ?

Does it make it difficult in a few years if you buy your own car insurance wise ?

[billyliar]

Emsman said:

Company car- depreciation, servicing, repairs, insurance, roadtax and so on all covered by your company.
Sure you get taxed, but putting miles on your own car and maintaining it would be more?

Thanks.

Forgot to mention, I have the TLC pack on the MINI so I don't have to worry about servicing for a good while yet.

I do very few business miles, certainly less than 1000 a year. And my round trip to work is 15 miles.

[Emsman]

No. When you leave the scheme your company will provide details for the period covered.
Why not downgrade to a cheaper tax bracket car through the company, save what you can and buy yourself a toy in a couple of years time???

That's what I did

[billyliar]

x type said:

maybe a daft question ,but if you go to company car do you end up loosing any no claims discount you have built up ?

Does it make it difficult in a few years if you buy your own car insurance wise ?

I think it might do, although no more difficult than it is now, as I'm just coming up to having 1 years NCB. I lost it all in a smash a few years ago. Hopefully I will be in a job in the future which will always provide the option of a company car.

Driving under the company's insurance means I accrue nothing though NCB wise.

[billyliar]

Emsman said:

No. When you leave the scheme your company will provide details for the period covered.
Why not downgrade to a cheaper tax bracket car through the company, save what you can and buy yourself a toy in a couple of years time???

That's what I did

The Gold GTD is a low bracket anyhow, emissions are low, but I spose the list price is high at around £24k.

I could pay nothing out of my own wages, and just pay the tax, but then I'd have to opt for a stty 1.9 Golf with no options on it.

I have to keep the car for 4 years.

[johnnyBv8]

Not sure if it helps, but you'll be on basic (20%) tax rate until you're up to nearly £44k, not £37.4k.

Edited by johnnyBv8 on Saturday 5th June 20:39

[billyliar]

johnnyBv8 said:

Not sure if it helps, but you'll be on basic (20%) tax rate until you're up to nearly £44k.

Cheers.

How does that work though? I had a look at the Government tax website - http://www.hmrc.gov.uk/rates/it.htm - and it says £37k.

[grumbledoak]

So, you can opt out of the scheme for £340 (gross) to keep a mini costing you £322 pcm (after tax), and you owe £4000 on credit cards?

Did you really need to ask?

[johnnyBv8]

billyliar said:

johnnyBv8 said:

Not sure if it helps, but you'll be on basic (20%) tax rate until you're up to nearly £44k.

Cheers.

How does that work though? I had a look at the Government tax website - http://www.hmrc.gov.uk/rates/it.htm - and it says £37k.

Because you also have a personal (tax-free) allowance. Lots of people seem not to realise what the tax thresholds mean - you're fine for a while! Hang on, I'll find a website.

[johnnyBv8]

Here you go....... http://listentotaxman.com/index.php

Personally, I'd stick with your Mini if you like it, and use your opt-out to clear your debt. Your insurance should start to come down at 25 too.

[billyliar]

grumbledoak said:

So, you can opt out of the scheme for £340 (gross) to keep a mini costing you £322 pcm (after tax), and you owe £4000 on credit cards?

Did you really need to ask?

Your point is genuinely lost on me... I'm not taking the piss.

[billyliar]

johnnyBv8 said:

Here you go....... http://listentotaxman.com/index.php

Personally, I'd stick with your Mini if you like it, and use your opt-out to clear your debt. Your insurance should start to come down at 25 too.

Thanks for the help.

I should have 1 years NCB next week I think, so next year shouldn't be too bad all being well.

[the-photographer]

billyliar said:

Emsman said:

Company car- depreciation, servicing, repairs, insurance, roadtax and so on all covered by your company.
Sure you get taxed, but putting miles on your own car and maintaining it would be more?

Thanks.

Forgot to mention, I have the TLC pack on the MINI so I don't have to worry about servicing for a good while yet.

I do very few business miles, certainly less than 1000 a year. And my round trip to work is 15 miles.

Definately opt-out and take the cash!

[the-photographer]

billyliar said:

x type said:

maybe a daft question ,but if you go to company car do you end up loosing any no claims discount you have built up ?

Does it make it difficult in a few years if you buy your own car insurance wise ?

Driving under the company's insurance means I accrue nothing though NCB wise.

I managed it... after leaving the car scheme, I requested a letter from HR stating no accidents. Co-op insurance accepted this and I recieved 5 years NCB.

[billyliar]

the-photographer said:

billyliar said:

Emsman said:

Company car- depreciation, servicing, repairs, insurance, roadtax and so on all covered by your company.
Sure you get taxed, but putting miles on your own car and maintaining it would be more?

Thanks.

Forgot to mention, I have the TLC pack on the MINI so I don't have to worry about servicing for a good while yet.

I do very few business miles, certainly less than 1000 a year. And my round trip to work is 15 miles.

Definately opt-out and take the cash!

So financially you reckon I'd be better off?

[grumbledoak]

billyliar said:

Your point is genuinely lost on me... I'm not taking the piss.

Opting out has you net down before you even start to consider running costs and depreciation. And, you are paying interest on an expensive CC loan.

How much do you like the Mini?

[billyliar]

the-photographer said:

billyliar said:

x type said:

maybe a daft question ,but if you go to company car do you end up loosing any no claims discount you have built up ?

Does it make it difficult in a few years if you buy your own car insurance wise ?

Driving under the company's insurance means I accrue nothing though NCB wise.

I managed it... after leaving the car scheme, I requested a letter from HR stating no accidents. Co-op insurance accepted this and I recieved 5 years NCB.

Ah, good tip. Thank you.

The other point that I forgot to make is that should the absolute worst happen, and the car gets smashed up, then the cost of the car comes out of my work site's profit pot, which directly effects bonus payments to all managers.

I'd hardly be Mr Popularity if this happened and there's £25k less to go around.

[the-photographer]

billyliar said:

the-photographer said:

billyliar said:

Emsman said:

Company car- depreciation, servicing, repairs, insurance, roadtax and so on all covered by your company.
Sure you get taxed, but putting miles on your own car and maintaining it would be more?

Thanks.

Forgot to mention, I have the TLC pack on the MINI so I don't have to worry about servicing for a good while yet.

I do very few business miles, certainly less than 1000 a year. And my round trip to work is 15 miles.

Definately opt-out and take the cash!

So financially you reckon I'd be better off?

Yes, in two years time you will own a (depreciating) asset, partly paid for by your employer. Which won't have taken a big hit because of high business mileage.