What to do with new Car Allowance

01.matthew

Hi,

I need a bit of advice as come Jan 2014 I will find myself in a awkward situation.

In a nutshell this is what's happening.

Moving to a new job where the commute is from Leeds to Biddulph (near stoke). Higher salary etc so it is worth the long commute.

Currently I have a company car and the lease is due to end as of the end of Dec 2013. Now due to company "policy" I have been advised that after that I cannot have a company car, but must instead have a car allowance of £400.00 per month.

Now my problem is that the commute is around 150 miles per day. Not a problem in a company car, but in a personal car that is really going to rack up the mileage and depreciate the value.

Ideally I was thinking to lease a car myself, and then just renew it every three years or so. However when looking at the personal lease prices for a half decent car (for example looked at Volvo V40 1.6 as it can do 70-80mpg) the prices were really high, because the mileage was going to be so high.

The only option I can see is maybe getting cheap old car on which the mileage can be ran up on, but then I know I won't be happy with it, I do like having a half-decent car

Any suggestions on the most cost effective way to spend the allowance. Any loopholes where I can make it work better for me? I haven't had a car allowance before, and really not sure the best way to go about it.

Any help or advice would be really appreciated - thanks.

Prothet_of_Doom

Leeds to Biddulph ? EVERY Day ? Madness. You will crash at some point, in the dark, on a patch of ice, because you are rushing.

In Stoke on trent you can get B&B for £25 a night, or maybe you could rent a room 4 nights a week locally. Try www.spareroom.co.uk Previously I've paid £250 a month for a double room near Kidsgrove because I did not want to spend the best part of 3 hours every day commuting 68 miles each way.

Anyway to the car. Just because a car is old, does not mean it will be unreliable, but it will be out of warranty.

This is what I would do. I'd fund a £1000 on a 1.6 petrol mk4 astra, which will do 40 mpg on a run.
I'd Stick £400 a month into my car fund, and after a year, I'd spend £5K on a more modern diesel, which I would run into the ground for 2 years, and then I'd spend £10K on a more modern deisel.

Actually I probably wouldn't. I'd probably spend £1000 on a mk4 astra or similar. And spend the £400 a month on a decent holiday, and then have to buy another £1000 car about 2 years later, and wonder where my car allowance was going.

closed

car allowances moves the risk from them to you. Buy or lease something special, lose job, it becomes your problem. A 4 hr+ commute in traffic will probably get wearing after a month or two.

claret_mike

Do you know if there will be any associated conditions with age of the car. I.E. they are paying you to have a safe/reliable car.

£400 is not a lot by the time you factor in insurance, maintenance etc. I would double check with the company that there are no "conditions" attached to the car allowance.

PCP seems to be the way a lot of our guys do it. Put a deposit down, monthly payments over 3/4 years and trade in for a new deal. They say that it's possible to keep doing this as you can negotiate a lower future value on the car to ensure you have equity in the car when it comes back to changing it. They also claim that a lot of the time, if you go through main dealer that they will try and buy you out in 2 years time to help with their figures, which means that they will offer good deals again.

Not being part of the scheme myself but looking at getting into a position to do so at some point, I will be in a similar position to you.

comeandgo

Is that car allowance taxed and NI'd? Ours is so that brings the value down a good bit but we also get a mileage allowance. What some of our staff do is go HP as once you have paid half of the HP back you hand the car back and get another one.

easy

Two additional things to consider

1 - How will your tax situation change?
If you have had a nice, smart company car up to now, my guess is that you have been paying a shed-load of tax for the privilege. Check how much you will be saving in tax, and you could choose to add some of that saving to your monthly £400.

2 - Does your employer have any arrangements with a manufacturer or dealer to give you a discount on purchases/leases. My other half could get a 15% discount from the Sytner group, negotiated by his employers.

Personally I would take the £400 (maybe plus some of the tax saving) per month, cut some off the top for maintenance/insurance, then look at 1 year-old or ex demo nice models which you can buy within that budget. Don't be tempted by brand new cars, yes they smell nice and have a prestigious number on the registration plate (for 6 months), but you will lose a HUGE chunk as soon as you drive off the forecourt.
Personally I wouldn't lease, I would buy. If you have some savings, buy outright with those and then put the money back into savings with the car allowance month by month. If you have to finance, find a low interest loan BEFORE you go out to buy, so you don't get woo'ed by a car salesman into signing up to a higher interest deal just because you've gone all gooey eyed over a LOVELY car.

Good luck.

01.matthew

Yeah I know the commute is going to be hard. My new boss has agreed to be flexible with the start /finish times so I can avoid the rush hour traffic.

I'll see how it goes, if it is really bad nothing to stop me looking closer to home in the future.

PCP sounds interesting, isn't there a mileage cap on that? If not that might be a decent route to go.

claret_mike

There is a mileage cap on it but you can choose the mileage allowance - which obviously will affect the future guaranteed value.

I would recommend looking closer at this - maybe checking motor forum on here or the honest john forum or something but when speaking to one of the guys on this scheme said that he always went for 10k miles, knowing that it would be exceeded. He said that because they normally want to buy you out after a few years it didnt really make much difference. He said it was 7p a mile to pay if it ever became an issue so for 10k miles over it was £700 to pay so if he had negotiated a lower guaranteed value, it wasn't an issue. He did have a decent deposit for his car - I have him on my list of people to speak to again when I know for certain I will be in the position to need to look at this.