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.

ciano125

Whilst I can't really comment on the tax implications, I've got a company car at the moment which I'm going to get rid of in September. I earn roughly the same as you, and I reckon the car is costing me about £400 a month. I'm planning on getting a 2 year old Vectra for about £7k and running that for four years. By putting a bit of cash into it I can pay that off in a year and then put the money towards something else.

It is nice to have a company car, no insurance to pay (which seems to be a bit of an issue for you), no tyres, servicing or annual tax disc, so it depends on how much you want a nice car to drive around in and how much you want the money to do other things with I guess.

It's just a car at the end of the day, it is a depreciating asset and I've learned (eventually!) that it is better to invest in assets that appreciate in value rather than shiny ones that depreciate. Gold is shiny though too I suppose!