Company Car - Cash equivalent

[rst99]

Would anyone have an idea what the equivalent car allowance should be when compared against a BMW 320d Coupe worth £30k.

The BMW would be maintained, taxed and insured by the company. The car would be replaced after 3 years.

I know all companies are different but any advice would be appreciated.

[kambites]

Something between 350 and 400 quid a month gross, I think.

[rallycross]

At our company if you got offered one of those level bmw's the alternative car allowance would be about £6k pa pre tax (maybe slightly more or less depending on your position).

[edc]

Based on our car lists and structure £6500 to £7200 per annum for equivalent 4 door diesels.

[Matt UK]

kambites said:

Something between 350 and 400 quid a month gross, I think.

Is that not a bit mean for a £30k car?

I'd be saying nearer £7.5k gross

[DickSkruttock]

edc said:

Based on our car lists and structure £6500 to £7200 per annum for equivalent 4 door diesels.

I think you're pretty much spot on. My previous car allowance was £6k pre tax and you could barely get a poverty 3 series.

[heppers75]

There are two distinct elements to consider on the company car vs allowance perspective.

1) The amount of the allowance net of tax.

2) The effect on your tax code (therefore take home pay) of your car choice.

So picking a couple of generic figures - if you get a K100 code and you are on £40k a year the difference is £240ish a month just on your take home pay from a tax code perspective (try it out on http://www.listentotaxman.com on your wages) then factor in a car allowance of say net £300 a month the the cost is £540 a month out of your take home.

The of course factor in the mileage charges etc you can make for company journeys vs operating costs and or deprecation etc of your own car - or maybe personal lease costs.

I have found from my own perspective the best way you can "make it pay" is to take an allowance over a company car and go for a bangernomics approach and get a circa £2k-£4k something and do a decent amount of business miles @ (now) 45p a mile.

[otherman]

Matt UK said:

kambites said:

Something between 350 and 400 quid a month gross, I think.

Is that not a bit mean for a £30k car?

I'd be saying nearer £7.5k gross

You can lease one for around £50 a month so why would the cash equivalent be any more than that. Cash equiv isn't really anything to do with the purchase price, its based on depreciation + service and maintenance cost.

[Matt UK]

otherman said:

You can lease one for around £50 a month so why would the cash equivalent be any more than that. Cash equiv isn't really anything to do with the purchase price, its based on depreciation + service and maintenance cost.

Sorry, you're saying a BMW 320d Coupe worth £30k can be leased for £50 a month?

Got a link to that deal?

[Deva Link]

otherman said:

You can lease one for around £50 a month so why would the cash equivalent be any more than that. Cash equiv isn't really anything to do with the purchase price, its based on depreciation + service and maintenance cost.

Insurance? Could be a huge amount for someone with an iffy record and a dodgy address. There's no tax penalty for the cost of insurance on a company car - your premium could be 3 grand and it wouldn't cost you a penny.

Plus car park dents, damaged tyres, windscreen replacements, etc etc, never mind insurance excessa nd increased premiums if you do bend it. etc etc. I used to reckon you need to be at least £100/mth better off to opt out, especially if you're going for a similar car.

[kambites]

otherman said:

You can lease one for around £50 a month so why would the cash equivalent be any more than that. Cash equiv isn't really anything to do with the purchase price, its based on depreciation + service and maintenance cost.

And tax, which is the big thing, which ought to be quite low on a small diesel engined BMW. My company car allowance is something like 350 a month and from memory, will just pay for get a poverty spec 3-series diesel.

Edited by kambites on Tuesday 12th April 21:54

[otherman]

Deva Link said:

otherman said:

You can lease one for around £50 a month so why would the cash equivalent be any more than that. Cash equiv isn't really anything to do with the purchase price, its based on depreciation + service and maintenance cost.

Insurance? Could be a huge amount for someone with an iffy record and a dodgy address. There's no tax penalty for the cost of insurance on a company car - your premium could be 3 grand and it wouldn't cost you a penny.

Plus car park dents, damaged tyres, windscreen replacements, etc etc, never mind insurance excessa nd increased premiums if you do bend it. etc etc. I used to reckon you need to be at least £100/mth better off to opt out, especially if you're going for a similar car.

Fat Fingers. I meant £350.

[JQ]

My equivalent cash allowance is £6k pa. Last company car was a 330d Msport, everyone these days is getting 520d SE's for around £500pcm as company cars, I'd probably do the same if I opted back in.

[Deva Link]

JQ said:

My equivalent cash allowance is £6k pa. Last company car was a 330d Msport, everyone these days is getting 520d SE's for around £500pcm as company cars, I'd probably do the same if I opted back in.

So you're getting £300/mth after tax and saving, what, £200/mth in BIK tax by not having a company 520d?

OK, it's worth it if you want a car that's different to what you could have from the company car list, but take into account other costs of running your car and there's no way that makes any sense from a purely financial point of view. But then lots of things in life don't.

[sparks_E39]

What companies do you guys lease from?

[Amateurish]

Cash allowance option here is £5k pa and we can get a 320d coupe if we opt for a company car. They are trying to encourage more company cars so I think they have weighted the finance in the company car's favour.

[Deva Link]

Amateurish said:

Cash allowance option here is £5k pa and we can get a 320d coupe if we opt for a company car. They are trying to encourage more company cars so I think they have weighted the finance in the company car's favour.

Very much so - they're saving on the cost of insurance, running repairs, end of lease charges (which csn be significant) etc.

At the same car level, our guys were offered £9000/yr. What I thought was slightly bizzare is that some people went out and got personal leases with full maint on the same car. The economics of that are very questionable.

The people who really made money were the ones who took the cash and then bought nearly-new economical mid-sized diesels - Peugeot 308HDi's were quite popular - and who had short commutes and did reasonable (10-15K) business miles.

[JQ]

Deva Link said:

JQ said:

My equivalent cash allowance is £6k pa. Last company car was a 330d Msport, everyone these days is getting 520d SE's for around £500pcm as company cars, I'd probably do the same if I opted back in.

So you're getting £300/mth after tax and saving, what, £200/mth in BIK tax by not having a company 520d?

OK, it's worth it if you want a car that's different to what you could have from the company car list, but take into account other costs of running your car and there's no way that makes any sense from a purely financial point of view. But then lots of things in life don't.

Your calcs are a bit out there - the company car tax on my BMW was £260pcm, plus £50 top-up means I was more than £500pcm (net) better off taking the cash. But yes, it wasn't a particularly pleasant decision to make but the allowance now pays for 2 far cheaper cars plus a fair bit more to help with the fact that I now have 2 kids and wife that's given up work and is now planning on doing her second degree. As you say, taking the cash to buy a similar car makes no sense at all, but plenty of people in my company do, despite my protestations and spreadsheets evidence.

However, my costs savings seem to be going out of the window, much to the dismay of my wife, I pick up the Supercharger Kit and Water Injection kit for MX5 next week. Next on the shopping list is a Megasquirt to replace the ECU.

[texasjohn]

You're also entitled to 45p per business mile travelled (up to 10000 miles, 25p thereafter) if you are taking the cash. Company may pay less than that if you have opted out, but you can claim back the difference from HMRC. You need to consider that in any 'cash for car' calculation too.

In our scheme the monthly lease rates for certain cars are a touch lower than the examples quoted above, 118d is about £330 a month, 320d about £400 a month and 520d is about £460 a month. Our scheme is 4 years / 80k miles however.

I am just about to start opting out, it has been a long four years. On the flip side, it has been four years of not worrying about dings, dents and the cost of tyres!

[Matt UK]

Deva Link said:

Very much so - they're saving on the cost of insurance, running repairs, end of lease charges (which csn be significant) etc.

At the same car level, our guys were offered £9000/yr. What I thought was slightly bizzare is that some people went out and got personal leases with full maint on the same car. The economics of that are very questionable.

The people who really made money were the ones who took the cash and then bought nearly-new economical mid-sized diesels - Peugeot 308HDi's were quite popular - and who had short commutes and did reasonable (10-15K) business miles.

Agreed. At my last place I took the cash and ran a £6k BMW 530i plus claimed the difference from the HMRC 40p/25p and it worked out very well for me.

I could never understand those who took the cash to lease the same car and then started to fret when their milage started to creep up vs their PCP agreements. Why bother?