Company car or car allowance?

Emski43

Apologies...same old same old, but everyone's situation is different so doesn't give me a clear idea on the decision I am trying to make, any advice gratefully received as I do not fully understand it all...

New Job, 40k basic with company car. I have just been asked whether I want the car or cash allowance equivalent.

The car is not what I want, a Mondeo and I live down country lanes and am a woman :-) but at renewel time I can switch to a Fiesta which is more suited to me and my nippy driving (6-12 months until renewal time) and I get a fuel card. I am a single mum and therefore this has been what everyone thinks is the best option as the car is just taken care of.

But, the car allowance is £7910 (£659 per month) which actually I thought was really rather good.... I understand I will get taxed on it, presumabably that also tips me over into the 40% bracket. But I have looked at Vauxhalls PCP plan, I have a small deposit to put down and can do their Corsa package at £159 per month, plus the £51 care plan which includes servicing and general wear & tear, brake pads, etc etc. So I could basically do all that for under £250 and still have money leftover. They pay business mileage at 39p.

It will be an area role and my business mileage estimated roughly 30,000 a year, personal mileage not a lot... if you were me, what would you do???

Darksparkle

Emski43 wrote: »

Apologies...same old same old, but everyone's situation is different so doesn't give me a clear idea on the decision I am trying to make, any advice gratefully received as I do not fully understand it all...

New Job, 40k basic with company car. I have just been asked whether I want the car or cash allowance equivalent.

The car is not what I want, a Mondeo and I live down country lanes and am a woman :-) but at renewel time I can switch to a Fiesta which is more suited to me and my nippy driving (6-12 months until renewal time) and I get a fuel card. I am a single mum and therefore this has been what everyone thinks is the best option as the car is just taken care of.

But, the car allowance is £7910 (£659 per month) which actually I thought was really rather good.... I understand I will get taxed on it, presumabably that also tips me over into the 40% bracket. But I have looked at Vauxhalls PCP plan, I have a small deposit to put down and can do their Corsa package at £159 per month, plus the £51 care plan which includes servicing and general wear & tear, brake pads, etc etc. So I could basically do all that for under £250 and still have money leftover. They pay business mileage at 39p.

It will be an area role and my business mileage estimated roughly 30,000 a year, personal mileage not a lot... if you were me, what would you do???

Have you worked out how much the benefit would be on the company car?

singhini

As mentioned in this thread, different people have different circumstances. If you opt out of the car scheme and take the allowance some employers might restrict you with regards to which cars you can get yourself for work. Some employers might restrict the age of the car i.e. you are not allowed to get a car that is more than 5 years old. Also if your using it for work you will have to get business insurance and not just for pleasure. Some employers who give you a company car might not give you choice yet other companies might have a car list and allow you to get whatevers on that list (also allowing you to trade up to a better spec car but you might have to pay for it).

if your young, your a 20% tax payer, do a lot of private mileage and the company car scheme has things like Mercedes, BMW and Audi you might want to get a company car since it might be cheaper and easier than you opting out of the scheme and trying to finance it yourself.

if your older, your employer dosent care what car your provide for work and dose not restrict you on things like age of the vechicle and you already have a car at home within your family, you might want to opt out and use that as a company car and pocket the car allowance.

Last point from me (and this has been covered in this tread) but I just want to make sure your all clear. the HMRC mileage rates for cars currently are 45p for the first 10,000 miles and 25p per mile thereafter. So if your employer pays you 25p flat rate on all mileage you can claim the tax relief on the missing 20p i.e. 45p less 25p already paid by employer = 20p times your tax rate (lets say 40%) = 8p per mile on the 10,000 miles = £800 (I didn't want people thinking they could claim 10,000 miles times the missing 20p i.e. claiming £2,000). big difference between thinking you could get £2,000 and actually getting £800 as in this example

ruperts

If you're a basic tax rate payer pre-car allowance, the tax on the fiesta will be about £80-ish per month. If the car allowance pushes you into the higher rate it would translate into a take home of about £400 per month (would advise you double check that figure by putting your actual salary and salary + car allowance into a salary calculator and comparing the two). So the difference is £480 and the question becomes, can you buy and run a car which meets your employers criteria for less than £480 per month? If a Corsa meets the criteria and you're happy with a Corsa then I'd say the answer is definitely yes. You could easily fund a Corsa through PCP or HP or a personal loan and cover repairs and maintenance for £480 per month. You could probably do it with less than half of that and pocket the rest. The only risk would be if something severe goes wrong which costs thousands to repair, but that shouldn't happen on a new car.


Nearly £8k on a car allowance is quite good, people run much more expensive cars than Corsa's on less.