Company Car or Cash

[MBadders]

Im sorry to ask this as I know its been done to death a bit...

A question really for those who understand the system better than I do, as at the moment im confused!

Current situation:
BMW 330d M Sport on PCP, which is up in Sept 2012. Deal agreed at 16,000 miles per year which I thought would more than cover work and social.

However, new role in the company means im going to be doing c.25,000-28,000 miles a year. Obviously this will have an impact on the 'agreed value' of the Beemer in Sept 2012 as the mileage will be much higher. Also, cost of tyres, servicing etc will be more.

The company much prefer to give a car allowance and 21p, than a company car and 21p and so im currently taking the car allowance (which covers the cost of the PCP payment).

My question is, with everything becoming more expensive (fuel, servicing etc) should I consider trying to hand back the BMW in April (18 months will be up on the agreement, and I know i'll then be left with nothing) and try and take a company car which will be cheaper in the long term?

My only problem is the company car will not be anything like as nice as the 330 to drive...

Dilemma....thoughts welcome.

Edited by MBadders on Saturday 5th February 17:26

[MattOz]

I've always taken the allowance. I'm certain you could get in touch with BMW finance and alert them to the fact that you're doing increased mileage. They may alter the monthly payments accordingly. Alternatively, estimate how much you're going to be over on the mileage and save that amount.

If it was company Vectra/Mondeo/Laguna or a 330d, then it's a no brainer if you enjoy driving.

[edo]

If you can have, or don't mind an older car, then cash works out better. What people tend to do is compare a BRAND NEW, fully paid for, zero expense company car with buying a second hand car with running costs, insurance, bills, depreciation and surprises.

The only way to do it is spreadsheet the options.

I just gave back a company car after 2 years and we are doing our own thing, but there is a lot to be said for fixed outgoings, and just making a call is anything needs doing...

[MBadders]

Thanks both. My thinking was that the tax payable on the company car will be much lower than the PCP payment, servicing, tyres etc in the current setup.

A spreadsheet is a good idea, is there one on the net that you can alter?

[alcovrugbyfan]

I take the allowance and run my own car, a 2001 Volvo. All paid for so no HP.

Dont forget you can also claim the tax back on your business miles at 40ppm for the first 10k and 28p for anything above that. So you tend to get a nice sum back as well which usually pays for a years tax and MOT.

Works for me but its not for everyone. Also you will get taxed on your allowance.

Look on the HMRC website for calculators and if you google "company car or cash" you will find calculators there.

[edo]

MBadders said:

Thanks both. My thinking was that the tax payable on the company car will be much lower than the PCP payment, servicing, tyres etc in the current setup.

A spreadsheet is a good idea, is there one on the net that you can alter?

Not that I have found. I think doing nearly 30k a year, the company car may be a good choice - esp. if you go for something with low emissions (and thus low BIK rate) like the "ED" 320d.. (only 13% BIK).

[survivalist]

It will depend entirely on which company car and what car allowance you get now. Downsides to the car allowance is that you pay tax on it, so for example £600 a month becomes more like £350. On some of the new 4-cylinder diesel BMWs tax seems to be around the £150 mark so the real cost difference is £500/month.

I looked at this and decided that for 6K a year I didn't want to pay for finance, road fund licence, servicing, tyres and insurance, so a company 320d was better deal. Then I changed jobs anyway, Doh.

Downside is that to make the numbers work you really do need a diesel, ideally with only a few options so you don't push the list price up too much. Also, if you have a company car I think the Inland Revenue set a maximum rate for fuel reimbursement per mile. Last time I looked it was 11p for diesel so if the employer pays more it becomes a taxable benefit - not 100% on that anymore though.

[davidjpowell]

look carefully at handing back.

It's not 50% in time it's 50% in payments. Given that this will also include the residual, and depending on the amount that you put in, it's unlikely that you will achieve this much before the end.

You may be better renegotiating the PCP and looking to ensure that your company covers this as part of the role change.

[Matt UK]

I always took the cash and ran a 2002 BMW 530i - I was quids in. From about month 9 the car owed me nothing and the next 2 yrs was a cash generator.

New company rules are now pretty tight re tyope pf car / age of car, so I'll have to break out the spreadsheet again. Still confident that I can do it cheaper than the co car route. Plus don't forget that co car tax based on co2 is on an upwards escaltor at the moment, so cost over more than just the current year.

[MBadders]

Re the PCP, i'll be over 50% in payments come April (in that i'll have paid back over half).

I might in the first instance speak with BMW about the PCP contract, however I think that'll be met with a big fat no.

[WOO5IE]

MBadders said:

Im sorry to ask this as I know its been done to death a bit...

A question really for those who understand the system better than I do, as at the moment im confused!

Current situation:
BMW 330d M Sport on PCP, which is up in Sept 2012. Deal agreed at 16,000 miles per year which I thought would more than cover work and social.

However, new role in the company means im going to be doing c.25,000-28,000 miles a year. Obviously this will have an impact on the 'agreed value' of the Beemer in Sept 2012 as the mileage will be much higher. Also, cost of tyres, servicing etc will be more.

The company much prefer to give a car allowance and 21p, than a company car and 21p and so im currently taking the car allowance (which covers the cost of the PCP payment).

My question is, with everything becoming more expensive (fuel, servicing etc) should I consider trying to hand back the BMW in April (18 months will be up on the agreement, and I know i'll then be left with nothing) and try and take a company car which will be cheaper in the long term?

My only problem is the company car will not be anything like as nice as the 330 to drive...

Dilemma....thoughts welcome.

Edited by MBadders on Saturday 5th February 17:26

I financed mine a few years ago by taking the car allowance and bought a second hand XJ6 4 litre.

The car allowance after tax covered a personal loan. I was quids in as I wasnt paying car tax and got a tax rebate every year due to the mileage allowance that has been previously mentioned.

10000 miles @ 40p less 21p allowance £1900
18000 miles @ 26p les 21p " £900
Total £2800 off yor personal tax code

You should be claiming this amount already

So I was drining around in a fully financed 4 year old XJ6 and was quis in with no car tax and a rebate as well which covered all of the running costs.

I also owned the car as well after the loan was paid up.

Edited by WOO5IE on Monday 7th February 15:00

[john_p]

Are there any stipulations on what sort of car you can have, if you buy your own with the car allowance?
Some employers have certain rules eg. no more than 3yo, 4-door etc

[MBadders]

john_p said:

Are there any stipulations on what sort of car you can have, if you buy your own with the car allowance?
Some employers have certain rules eg. no more than 3yo, 4-door etc

There are some, but only very basic, i.e. no cabrios, no 4x4, no turbo petrols, must seat 4 people and must be new.

[ukzz4iroc]

WOO5IE said:

10000 miles @ 40p less 21p allowance £1900
18000 miles @ 26p les 21p " £900
Total £2700 off yor personal tax code

My word. I have never claimed tax back on my business mileage. Got the 40p per mile in my wages but never claimed anything back. What do I do to rectify? DOH!

[WOO5IE]

ukzz4iroc said:

My word. I have never claimed tax back on my business mileage. Got the 40p per mile in my wages but never claimed anything back. What do I do to rectify? DOH!

If you get 40 per mile then you cant get any tax back. Its only if you only get less than 40p per mile that you can claim the difference. 40p for first 10,000 the 26p for all the rest

This is an allowance, so if you get 40pm in your wages you shouldnt pay any tax on it.

If you got 60p pm then the 20p would be taxable

[ukzz4iroc]

WOO5IE said:

If you get 40 per mile then you cant get any tax back. Its only if you only get less than 40p per mile that you can claim the difference. 40p for first 10,000 the 26p for all the rest

This is an allowance, so if you get 40pm in your wages you shouldnt pay any tax on it.

If you got 60p pm then the 20p would be taxable

Thanks for taking the time out to help me there. No mountains of cash await me then

[MBadders]

Isnt it only the tax on the difference you can claim back?

I.e. If you get 21p and you are entitled to 40p, you can only claim the tax on the remaining 19p?