The 1000th 'company car or car allowance' thread

renovate-plymouth

Hello all,
I do apologise for posting about this topic, I realise there are already a ridiculous amount of threads about this but I just can't seem to be able to make sense of it all.

I have just been offered my first 'real job'. I will be site-based with travel across the Dover-Southampton-Kingston triangle, expecting to drive around 25,000 miles a year.

I have been offered the choice between a company car (VW Polo until October 2015 after which I can then pick from a huge list of cars) or a £5,500 car allowance. Obviously I'd have to pay tax on the company car, but it would only be about £40 a month, so nothing too dramatic. The car allowance would be added to my salary and therefore get taxed at the standard tax rate (20% in my case).

In addition to the £5,500 car allowance I would receive 45p for every business mile traveled for the first 10,000 miles a year and 25p for every mile thereafter. These mileage rates will be tax-free as they're considered business miles (commutes included due to my site-based status). If I traveled 25,000 a year the mileage rates would add up to £8250 a year.

Now, I would need to buy/lease a new car as our old T4 is not quite up for the challenge of 25,000 miles a year, so will need to factor either a car loan or similar into the calculations. Obviously, I'd have to pay for all maintenance/MOTs etc myself, too. But the car allowance still seems a pretty good deal.


Really looking forward to hearing everyone's thoughts!

theatretony

I get a car allowance and i have just purchased a Citroen C4 for £4k, and get very good mileage out of it.

I would go for the car allowance, because after tax you will still be quids in if you save the money you do not spend.

HappyMJ

Not only do you taxed at the standard rate but you also pay national insurance contributions at the standard rate of 12%. So effectively a tax rate of 32% on the £5,500 payment. About £150 tax per month.

Personally I'd go for the all inclusive car offered by the company. It'll cost you £300 (loss of the car allowance net of tax and national insurance) plus £40 that you have to pay towards it. I really don't think you could find a car fully maintained for less than that. A car doing 25,000 miles a year will depreciate a bit quicker than one that does closer to average miles of about 12,000 miles....unless of course you would like to spend a few days every couple of years looking for a replacement to keep the odometer always reading under 100,000 miles. You also need to spend your own time maintaining the car searching for the best deal for servicing, tyres etc. Your company will be getting a car where they get these things in a bulk deal.

You also have to pay in advance for the car and it's costs and can only claim the mileage back at the end of the month when you submit your expense claim form.

caprikid1

I have to say the Cash + Miles seems quite attractive given you will pay Tax on the company car also.

Check what requirements they have for your car IE Under 3 yrs old. It could be though that after 12 months the list of cars to choose from is a dream come true and that could be the best route.

I think the question normally comes down to:-

Do you like having a new car ? YES = COMPANY CAR = No Take Cash

topdaddy_2

I enjoy peice of mind knowing that if my company car breaks down/gets a puncture/crashes/needs a service etc I wont have to arrange it/fix it and I will get a curtesy car.

renovate-plymouth

caprikid1 wrote: »

Check what requirements they have for your car IE Under 3 yrs old. It could be though that after 12 months the list of cars to choose from is a dream come true and that could be the best route.

There are no requirements re the age of the car. Though I can apply for a bonus if my car was less than 2 years old and the CO2 emissions under 90g/km.

I've already seen the list. There are some really nice ones on there. Probably similar cars to the ones I'd personally choose. Still £5,500 plus the mileage rates don't sound like a bad deal, right?

renovate-plymouth

Sorry I should probably add something. I have just been informed that the 45/25p mileage rates only apply if I opt into a business mileage salary sacrifice scheme, otherwise it is 15p per mile.

rustyboy21

I would also factor in if you get the company car, you also get a fuel card or co credit card to pay for the fuel and then get charged 15p a mile private mileage, whether that is better for you than getting your own car, pay for everything yourself and then claim it back. If you are doing say 25k a year, you will be paying out, say £200-300 a month on fuel. You will then ( if you are lucky) have to wait maybe a month to get paid back on this each month.


I job with a car is great, it seems one less thing to have to think about and a lot of people think it is a perk, which partly it is. But if you are only on £25k, have a large mortgage, kids etc , you then will have a £300 card bill for fuel on top each month, which you have to factor in, as you wont get it back straight away.


I have a co car, fuel card etc and pay 16p a mile private miles. It works out better for me as I don't have any big bills to worry about. You always seem to spend up to what you get paid.


Compromise for you, get the Polo off them, until you see that you like the job, you get past your probation period and then start having a good think on it. At least you will not be left with any big HP bills, if you jack the job in after a few months, if it doesn't suit you.