Company car vs Car allowance - which is better

MoneyMagician · 13 July 2009 at 3:37PM

Hello,

Hope someone here might be able to help me.

I'm about to start a new job and have the choice between:

* A company car provided for me (certain type of car from a selection with everything paid for except fuel)

* A car allowance of £6,350 taxable.

Does anyone know how to work out which is the better option? I'm assuming that it is better to take the car allowance up to a point of a number of miles - which I don't know at this stage - but any guidance gratefully received.

FYI - I'm a higher rate taxpayer.

JayZed · 13 July 2009 at 3:49PM

Personally, I've always taken the allowance, and would never take the company car - largely because I've never spent more than £1.5K on a car.

It really depends on how much you would otherwise spend on a car. Do you own a car already? If not, do you need one for your new job?

Bear in mind that the company car is also taxable (at a rate of between 10% and 35% of the car's list price, depending on its emissions).

Any · 13 July 2009 at 3:51PM

Do a search on company car and you will find that this question has been asked many times.

There is a lots of factors to consider. Main once are - would you be buying a new car if you take the allowance and what is the car the company is offering you?

Any · 13 July 2009 at 3:57PM

http://forums.moneysavingexpert.com/showthread.html?t=1755613&highlight=car+allowance

here is one

http://forums.moneysavingexpert.com/showthread.html?t=1710911&highlight=car+allowance

and another one

http://forums.moneysavingexpert.com/showthread.html?t=1168235&highlight=car+allowance

and one more

Any · 13 July 2009 at 4:00PM

Otherwise...

To calculate the company car option - find out what the List price of the car would be and what the CO2 of the car would be. Also type of fuel.

Let's say Ford Mondeo 154 CO2, list price 21600 and it is petrol.

there is a special table (you will find it on HMRC website) with % to be applied to the list price according to the CO2 levels.

In this case it is - 154 CO2 on petrol car is 19%. Apply 19% to £21600.

Taxable benefit is £4104 per annum.

So you pay 40% tax on £4104...

FluffyFiFi · 13 July 2009 at 4:21PM

Hi, We had a company car, a Vectra it was top of the range and worked out at about £225 per month. We decided to get our own car and take the money, however we worked out the depreciation on the car, tax, mot, AA and repairs it was probably costing us about £150 per month and we also had a lot older car that started to need more work doing to it so would be costing us more. We went back to the company car and have a Mondeo, it's got all the extras, is reliable and if it does need anything doing it gets picked up and another car left for us to use. I also like not having to worry about leaving it anywhere, if it gets damaged it will get fixed, if it gets scratched I don't have to worry about it as its not our car, next year it is up for renewal and we will have another new car to use. We found that as long as we go for the lower emission cars than the tax is not too heavy and as we don't use the complete allowance we get some of the money back.

TighterThanTwoCoatsOfPain · 13 July 2009 at 9:32PM

I went for company car option.. got a brand spanking BMW M Sport which costs me £95 per month including all trade up...

Yeah, I could have taken 4k cash option instead (before tax!), but the car was a perk i got ontop so only actually sacrificed the £95 for a car that'd cost 23.5k to buy brand new.

Dont have to worry about Road Tax (although somehow its only £35 per year - gotta love the cake and eat it dynamics!), the tyres (near on £800 a set and expect to do a set every 12-19 months), the insurance and of course the cost of servicing. Also get full european roadside / home recovery.

I would only take the cash option if you really didnt want / need a brand new motor or you already had one. Guess you have to do the sums and pick a CO2 efficient car to get the best out of it... An Astra costs more in tax than the diesel 1 series M Sport. Madness

doshunta · 14 July 2009 at 4:28PM

I'm a director in an IT company, who had driven company Mercs for years until the car scheme was scrapped. I get just over £500 per month allowance and have taken it. I was horrified at teh tax I was paying annually for something I never owned.

But...as I've been renovating a house and trying to pay the mortgage over a shorter term, ended up using the cash for other stuff. As a result I'm driving an old Passat. It's a bit embarrassing, but I paid £1250 for it and it's still worth a grand and has never let me down.

Mixed feelings...

Company car vs Car allowance - which is better

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