Company car - opt in our out?

danieljwood

Hello,

Apologies of this is in the wrong thread...

I'm after a bit of advice really on what you'd do in my situation.

I'm 25 and have just been promoted to a new position.

Firstly:

Situation is, I earn circa £35k basic. I can either choose to opt in to a company car scheme, which will cost me around £100 of my own money to be able to drive the particular car I want, plus company car tax. I'm looking at a Golf GTD, as I'm limited to a choice of 3 manufacturers and diesels only. Or I can opt out and receive an extra £340 a month in my wage.

The 40% tax bracket is £37,400. So, would opting for the car mean I would have to pay my company car tax at the 40% rate, as it's a benefit in kind which is essentially the same as earning money Obviously, opting for the cash would push me into the 40% bracket, but would the car?

Secondly:

I have an 18 month old Cooper S with leather and a reasonable spec. My insurance, for various reasons, is a ludicrous £150 per month. I also pay £172 in personal loan repayments on the car, which will end in just under 2 years time. I reckon I could sell the car privately for around £14k.

I also owe circa £4000 on credit cards. So I have a combined, but manageable debt of £7k.

Now, what I'm asking is what it would make most financial sense to do, irrespective of the car I'm going to be ultimately driving. Do I sell the MINI, pay off the debt and hair a fair wedge in the bank, or opt out of the scheme, and spend the surplus on paying off the debts? After tax I reckon the £340 is likely to be £200.

Doing this would leave me with financial peace of mind - although I appreciate I'm not exactly in dire straight, and that £7k isn't a startling amount of debt - and almost no outgoings other than rent of £400 pm which includes bills, plus a few other bits and bobs such as phone bills etc.

Any advice is greatly appreciated.

Thank you.

nearlyrich

I have moved this to the Motoring section as more people look here who can advise on the car situation.

In your position this is what I would do:

Take a company car, wait 3 years (usual company car renewal time) for the GTI keep your £100 in your pocket.
The company car will cost you in PAYE but how much would it cost you to insure a performance car at your age for business use?

Earning £35k you should be able to pay off that credit in a few months especially with the low overheads.

Once the debt has gone set up a substantial standing order into the best paying savings account you can find (ISA first) and give yourself a good cushion of savings so you can afford to drive a flash car and afford to insure it.

Well done on getting a £35k job at 25 don't blow the chance to make the most of it...


edited to add

The company car or the allowance would count as taxable income so if it pushes you over the higher tax limit you will pay tax at 40% on the difference not on all your earnings....