Another car allowance vs company car

Adamyounguk

Hi all,

Apologies for another one of these threads, however there are a few situational aspects to my situation that makes it somewhat different to the others i have read.

I have accepted a new job offer with a basic annual salary of £40K, with a possible £10K annual bonus opportunity. Additionally I have been offered either a company car - or £7K car allowance.

Now the situational elements. My wife and I have one car - a small Fiat 500 which is 2 years old (we pay £150 a month for it, with 2 years left on the deal), and really for us personally we don't need two cars, however my new job requires me to have access to a car to travel to meetings. Which means we'll have to get another.

However my in laws have kindly offered to give us their 3 year old Mini Cooper or pay off the remainder of the lease on the fiat - as a wedding present to us.

So my question is do I take the Mini & use that for work - and cover the cost of insurance, tax, and maintenance from my car allowance, and continue to pay the fiat as usual.

Or do I opt to take a company car (likely would be a BMW 1 Series or Audi A3 - something around £27K) and have the security of the costs (tax, insurance etc) being covered and having a fuel card and get the fiat paid off.

I'm really confused with the tax on a company car and want to make sure I make the right call... We're expecting a kid this year so want to make sure I make the right decision which allows us the best mix of reliability and importantly the most pounds in our pockets!

Any help is much appreciated! :beer:

CLAPTON

if you are having a kid next year think about getting a car that can hold a child's car seat, a buggy, pram, kids stuff : fiat 500 is useless, must be 5 doors

dano17439

Its a decent car allowance, I would take that and ask the in laws to pay off your Fiat. You'll be nearly £500 NET a month better off (plus what ever pay increase the 40k was from your previous job), then you could by yourself another car that you wanted. Remember you'll get business mileage for all your journeys to meetings aswell

martinsurrey

When I was in a similar position, I went with the cash allowance, and bought a new £10k car, over the 5 years I had it, my car allowance was over £20k after tax, and inc insurance, mot, service repairs (well tires lights and wipers) the car cost around £17k but had a resale of £4k so a £13k cost net cost or a net £7k in my pocket inc my allowance.

The alternative was a BMW £28k list price (I couldnt take a cheaper car if I took the company option) with a company car tax rate of 20%. Annual tax bill of £2,128 but the lease cost would only have been £4k, and my employer would have given me the difference, so £3k per year before tax or £1740 after tax. Meaning a net cost of £400 a year, £2000 for 5 years.

The difference in 5 years, £9,000 better off with car allowance, but 5 years of driving a cheaper car.

you take your pick.

HHarry

If you take the allowance you're going to pay 40% tax on most (possibly all of it depending on your bonus) of it. So the £7k, becomes closer to £4.2k.

If you take the company car, and pick the right one, you can minimise your company car tax bill and possibly not have to give HMRC a load of money.

It can be a difficult decision. Ten years back I'd have taken the cash so that I could buy whatever I wanted. Now, I'd take the car and run around in a 1.2 Polo or something so as not to pay a load of tax.

Jon_B_2

Also depends on the mileage you would be doing. I do close to 40,000 miles a year, so company car scheme makes much more sense.

Also I commute 60 miles to work, so the fuel benefit is good as you can't claim commuting miles on car allowance.

nearlyrich

Company car all the way for me it makes for an £8k ish tax bill at 40% but I can't get my new BMW every 2 years with the service and insurance tyres etc etc for the tax I pay and the allowance after 40% tax isn't enough to lease a new car as I would have to pay the VAT and I do high mileage so it's expensive on a lease.

Linton

It depends on whether you want a new car now and replacement every few years. If you werent bothered you could own and run a car on less than £7K gross/year. So what do you want to spend your money on? I dont believe either the car or the cash is inherently the better deal.

If your job involves you visiting customers your employer may be not too happy about you turning up in something inappropriate.

nearlyrich

My company insist on less than 4 years old no convertibles etc. we get new cars every 2 years so no contest really...