Swapping my Company Car for Car Allowance

steven_norfield

Hello all,

I have a current lease on a company car (I am a director) that expires in september 2010.

Rather than renew a lease on a £30k car, I am looking at buying a 3 year old version for about £18/20k and giving myself a car allowance.

Can anyone advise on whether this is better for me than the company car (which I get nailed on quite heavily, it's a Mercedes SLK 1.8 kompressor 184gm/km ) if I swap to a Z4 Coupe (3 years old, 3.0, 223gm/km).

I don't know which way to go, as director I can do either.

Thanks in advance, Steve

PowerDresser

Hi Steve,

Interesting question. Personally, I see some benefits with you renewing the lease on the car, although I would consider the following factors:

(Forgive me if you've already considered these).

1. Annual Mileage and type of mileage (town vs motorway).
This will obviously impact the servicing intervals, tyre wear/tear, etc. If you're covering more mileage annually, I'd say you're better off renewing the lease.

2. Your position. You're a director of your company I assume, so it's win-win. With leasing, you'll no doubt claim a certain amount of tax back on the lease. In addition to this, the car could be accounted for as "Purchased Services" in your Balance Sheet, rather than an "Asset" that is depreciating by 20%-25% (I think?) each year.

3. How dependable you are on the vehicle. Is it worth risking an older vehicle, which has a increased potential for failure?

Engine size will also impact the Road Tax. How about Insurance?

Hope this helps.

pawl1577

Hi Steve

I'm in a similar position to you. My car lease finishes in July and will be going back and won't be replaced.

The personal tax is so high and based on the at new price so not worth having an older car, and leasing a bit high for new at the moment. Instead we are going to get a 3 year van on lease. Tax value for own use of that including fuel is £3550 instead of the £18,000+fuel for my car.

My parents have taken on the leasing cost of their vehicle (can't send it back year still to go) and they charge mileage to business @ 40p per mile for first 10,000 miles. They can charge an additional 5p per mile for each passenger in vehicle. They have to record all mileage and can't claim for commuting to and from work.

Have you spoken with your accountant for advice.