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  • FIRST POST
    • Supadupa
    • By Supadupa 5th Jan 18, 8:16 PM
    • 103Posts
    • 495Thanks
    Supadupa
    Company car vs cash allowance decisions
    • #1
    • 5th Jan 18, 8:16 PM
    Company car vs cash allowance decisions 5th Jan 18 at 8:16 PM
    Hi,

    The time has come to renew my company car or not and Iím going around in circles trying to decide what is best so would appreciate some views of others on what you would do in this position. So-:

    - I currently pay around £150 a month benefit in kind for a Mercedes (the tax has increased gradually each year.) I pay my own private miles and work pays for business miles (fuel card)
    - I do approximately 5k business miles per annum and 7k personal so approx 12k in total.
    - Iíd be paying around £170 a month bik on a new car with this increasing with the tax over the next three years.
    - instead of the company car, I can take an allowance instead which works out around £225 per month net. I will need a car for business use but thereís no restrictions on it although I do have three children so two seater sporty numbers will not be an option.....sadly. The company car has allowed me to have a brand new Mercedes in the driveway which has somewhat converted me into a badge snob.

    Iím weighing up the following options-:

    1. Take out a personal lease instead that costs well below £395 per month (saved bik and allowance combined). This would allow for a new car with a warranty but I would have to insure, tax and maintain it and have the added worry that I go over the mileage allowance or scratch it.

    2. Buy a used car around £4000. I could buy this outright and the money from the allowance and bik saved would mean it was paid back to me in a year. This would also mean I have an asset. Again Iíd need to pay tax, insurance and maintenance but no mileage worries. Instead Iíd just worry that it has problems with it. I may also be tempted to buy an older BMW to satisfy my badge snobbery and this might not be a good use of funds.

    3. Buy a nearly new car on PCP. This would mean I would have a warranty on it, use my allowance to pay the monthly payments and then the option to buy it at the end. Again I need to factor in tax, insurance and maintenance and be careful I donít go over the mileage allowance or cause extra expense through scratches. Iíd also be paying interest on the PCP deal which seems like money wasted.

    4. Sod it all, save myself these headaches and order another company car. Pay more than I want to through bik but have peace of mind with no further insurance, tax and maintenance costs and drive as many miles as I please!

    So wise people of the internet, what would you do and why?
    £10 a day challenge
    £100.16/£310
Page 1
    • kevc1985
    • By kevc1985 5th Jan 18, 11:20 PM
    • 17 Posts
    • 2 Thanks
    kevc1985
    • #2
    • 5th Jan 18, 11:20 PM
    • #2
    • 5th Jan 18, 11:20 PM
    I am in a similar position, can opt out of company car scheme and after tax will have about £425 a month to run my own car.

    After looking at the options I thought PCP was not for me, if the company car gets damaged the company pay for it, with PCP I might get a bill at the end along with other things (mileage etc)

    I am thinking of either HP or staying in - a big benefit of staying in is the worry free motoring, no excess and no insurance premium rises, flat tyres etc all covered and a replacement car if it's off the road. Benefit of my own car is I get to choose a better make/model, change it whenever I want and there is talk of telematics/dash cams coming in all company cars (some already have them) I had one before and want to avoid that.

    You will need the car for work so you would need something reliable, so an older car may leave you better off in the short term but if something goes wrong any extra money you earned will be paid out again.

    So that said.....I am still in the same position, in or out, worry-free over comfort....
    Last edited by kevc1985; 05-01-2018 at 11:23 PM.
    • Supadupa
    • By Supadupa 7th Jan 18, 10:43 AM
    • 103 Posts
    • 495 Thanks
    Supadupa
    • #3
    • 7th Jan 18, 10:43 AM
    • #3
    • 7th Jan 18, 10:43 AM
    Thanks for replying, itís good to hear that Iím not the only one with this type of dilemma. Your allowance sounds far more generous than mine and I imagine youíll have quite a healthy budget (and increased choices) when you add your allowance and bik savings together. Iím not sure if that makes the decision any easier though!

    I have booked three test drives to see if that helps me decide. One of the cars I can lease privately for the net value of my allowance and would have bik savings on top so that seems like a no brainer. For the other two I would be cheaper taking the company car option so we shall see.

    I have decided Iíd rather have peace of mind through a manufacturers warranty either way than risk buying a used car and the depreciation that goes with it. At least thatís today thoughts-that may change again by tomorrow!
    £10 a day challenge
    £100.16/£310
    • kevc1985
    • By kevc1985 7th Jan 18, 12:00 PM
    • 17 Posts
    • 2 Thanks
    kevc1985
    • #4
    • 7th Jan 18, 12:00 PM
    • #4
    • 7th Jan 18, 12:00 PM
    Sorry my BIK and allowance payment was added together for my monthly figure. After looking into my current mileage buying my own car would not be a good option.

    If you are looking at a car a few years old, say a 15 plate which would be 3 years old this year and keep it for 4 years it would be about 7 years old by the time you gave it back, you would have been on to your second or third 'new company car' by then.

    I've made up my mind - staying in. High mileage, insurance excess, insurance increases , brake pad changes and wear and tear are too much of a risk for me. Plus if something goes wrong with my personal car I need to get it fixed at the weekend, with the company car it's classed as works time and a relief car provided for however long it take.

    Be interested to hear how you get on.
    Last edited by kevc1985; 07-01-2018 at 12:39 PM.
    • jimjames
    • By jimjames 7th Jan 18, 12:14 PM
    • 12,341 Posts
    • 10,922 Thanks
    jimjames
    • #5
    • 7th Jan 18, 12:14 PM
    • #5
    • 7th Jan 18, 12:14 PM
    £170 per month for a brand new fully funded car seems a bargain. I'd stick with that.

    We don't have the choice as it's allowance only but fortunately no stipulation on age of car that can be run/bought on the car allowance
    Remember the saying: if it looks too good to be true it almost certainly is.
    • sillygoose
    • By sillygoose 7th Jan 18, 9:04 PM
    • 4,235 Posts
    • 5,064 Thanks
    sillygoose
    • #6
    • 7th Jan 18, 9:04 PM
    • #6
    • 7th Jan 18, 9:04 PM
    op, you are aware of the changes to company car tax for anyone getting a new/replacement company car from April 2017 aren't you? (it doesn't affect your existing arrangement)

    Basically for people like you who are offered either a company car *or* a cash car allowance things have changed, in effect whichever choice you take you will be taxed on whichever gives HMRC the most tax, despite which you choose!

    This actually DISINCENTIVES people to pick cleaner company cars as if you do so to pay less BIK, they will tax you as if you took the cash instead! - its very bizarre!

    There are two ways around this, if your company withdraws the cash option and insists you must only have a company car, the new rule doesn't apply. (or vice versa)

    Or if you pick an ULEV (ultra low emission vehicle 75g/km or less CO2) for your company car then you are also exempt so I suppose there is the 'Green' policy bit.

    This last option will be good for sales of Prius and Mitsubishi Outlander hybrids!

    So before signing up for a company car, you need to work out the cost as usual (voluntary contribution, BIK etc) for it...

    And then work out the tax you would pay on the alternative cash being offered at your applicable standard tax rate.

    You will end up paying the higher of the two.

    Where this new tax policy falls down is vehicle CO2 doesn't affect the tax you pay on a cash allowance its fixed, so you might as well spend it on an old 4.6 litre petrol Jeep churning out buckets of pollution, the income tax bill will be the same as if you buy a zero emission electric car. They really didn't think this one through..

    https://www.clm.co.uk/company-car-tax/
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