Car allowance vs company car WWYD?

Red-Squirrel_2

Hello all, new to this section of the forum so hope this is the right place to post!

I'm considering a new job that involves a lot of driving, the employer offers either a company car, fully expensed (whatever that means!) or an annual car allowance of £3600.

At the moment I have a 9 year old little hatchback that is cosmetically a bit of a mess (a couple of dents from other people pranging it, a bit of rust, a missing aerial, a few scratches etc.) but mechanically pretty sound. Its always passed its MOT first time and has done less than 40,000 miles, I got it 6 years ago when it only had 4000 miles on the clock! :eek:

What option would you go for? Would you keep the little hatchback running as long as possible and take the extra cash in case of repairs, or would you go for the likely more comfortable/plush new company car but have less cash in my pocket?

Friends in real life think the newer car will be more reliable and less likely to blow up on the side of the motorway, but I've known plenty of people have loads of trouble with newer cars while my trusty little banger has never let me down, but then it has never really been tested much...

bigadaj

Well presumably you need to get the job before you need to consider whether to go for cash or car, is this a job or co,oaky that you would stay with for some time, if yes then I'd lean more towards the car, if it shorter term then cash.

The cash allowance seems quite poor, what car choices would you have for comparison. Some firms will allow you to downgrade the car choice and keep some of the difference to the car you qualify for, this can be a good choice for some.

Fully expensed means that they will pay your fuel, seemingly a good thing but you are heavily taxed on this benefit so your mileage needs to be reasonably high to justify the tax payment.

So what is your mileage likely to be, how is this split between commute to work, business mileage and private mileage?

bod1467

Does "fully expensed" include fuel? What happens with private mileage - would you have to complete a form/spreadsheet each month to offset private mileage?

If you take the allowance, what happens regarding fuel? What rate would you get for business mileage?

As above, £3,600 sounds rather low for an allowance in lieu of a company car ... £300 per month to cover the car purchase, insurance, repairs, consumables etc. Especially once you realise that this £3,600 is almost certainly pre-tax, so equates more likely to £2,400 or less.

Car_54

The job involves a lot of driving.

The company car should be reliable, but if anything goes wrong it's the company's problem, not yours.

If (when?) something goes wrong with your 9-y-o car the company will still expect you to be mobile, at your own expense. No excuses.

It's a gamble. I'd take the car.

Red-Squirrel_2

bigadaj wrote: »

Well presumably you need to get the job before you need to consider whether to go for cash or car, is this a job or co,oaky that you would stay with for some time, if yes then I'd lean more towards the car, if it shorter term then cash.

The cash allowance seems quite poor, what car choices would you have for comparison. Some firms will allow you to downgrade the car choice and keep some of the difference to the car you qualify for, this can be a good choice for some.

Fully expensed means that they will pay your fuel, seemingly a good thing but you are heavily taxed on this benefit so your mileage needs to be reasonably high to justify the tax payment.

So what is your mileage likely to be, how is this split between commute to work, business mileage and private mileage?

Thanks for your reply, yes I do need to get the job, good point! I'm at the final stage now though and reasonably confident, would need to make the decision quite soon after starting so just thinking in general now. I'd expect to be with the company at least 2-3 years, longer if it works out well.

Unfortunately I don't have a lot of details yet. Mileage would be very variable, job involves making home visits, one day they could all be within a 20 mile radius of home, the next day they could be several hundred miles away! I'm only a basic rate tax payer and none of the benefits would take me over the higher rate threshold, would I pay more than 20% tax on the fuel/car allowances?

Your idea of downgrading the car sounds like a good one if its possible, I'm not someone who's especially into cars and they're just a functional thing for me. I don't need bells and whistles as long as it gets me from A to B without costing too much, hence why I've kept the reliable economical little hatchback and was planning to for years to come if this hadn't cropped up!

Red-Squirrel_2

bod1467 wrote: »

Does "fully expensed" include fuel? What happens with private mileage - would you have to complete a form/spreadsheet each month to offset private mileage?

If you take the allowance, what happens regarding fuel? What rate would you get for business mileage?

As above, £3,600 sounds rather low for an allowance in lieu of a company car ... £300 per month to cover the car purchase, insurance, repairs, consumables etc. Especially once you realise that this £3,600 is almost certainly pre-tax, so equates more likely to £2,400 or less.

Apparently I'd get a fuel card, I'll be honest and admit I have no idea how that works! Didn't like to ask too much about benefits/money before getting an offer though!

If I went with the cash option I'd be using it to maintain and run my own current car, not to buy a new one. It doesn't cost me anything like £300 a month at the moment, in the 6 years I've had it its only been very basic maintenance and £30 MOTs.

Red-Squirrel_2

Car_54 wrote: »

The job involves a lot of driving.

The company car should be reliable, but if anything goes wrong it's the company's problem, not yours.

If (when?) something goes wrong with your 9-y-o car the company will still expect you to be mobile, at your own expense. No excuses.

It's a gamble. I'd take the car.

Good point, might be worth finding out how easy/quick it is to swap from the allowance to the company car if it becomes necessary.

bigadaj

Red-Squirrel wrote: »

Apparently I'd get a fuel card, I'll be honest and admit I have no idea how that works! Didn't like to ask too much about benefits/money before getting an offer though!

If I went with the cash option I'd be using it to maintain and run my own current car, not to buy a new one. It doesn't cost me anything like £300 a month at the moment, in the 6 years I've had it its only been very basic maintenance and £30 MOTs.

There are plenty of websites showing the relative costs of personal ownership or comoany cars, Hmrc website is also quite good. You'd be taxed on the fuel card on the assumption that you'd use maybe £2k a year in fuel, depends on the car, so more than that you're ahead and less it's costing you money. Some companies give an option of you writing then a cheque at the end of the tax year if you lose out, might be worth checking that.

The problem is that you might want to run your current car but would you be allowed to? My last comoany insisted on a car less than 7 years old and that quite generous, it can be five years or been three. Awaiting a new job offer having been made redundant and my new firm apparently insists that I run a company car so I'll have to sell the nearly new one I bought 18 months ago, somewhat annoying.

Also if your car breaks down and gets fixed you'll be hiring a car at your own expense as that's what their payment covers.

bigadaj

Red-Squirrel wrote: »

Good point, might be worth finding out how easy/quick it is to swap from the allowance to the company car if it becomes necessary.

Most companies are fairly inflexible as its a costly commitment to them. Will typically be three years as the average lease time unless there are exceptional circumstances.

Red-Squirrel_2

Thanks for the replies, it does look as though taking the company car might make more sense. I hadn't even considered that they might insist on a newer car, is that fairly common then? If the company takes responsibility for repairs and provides a hire car then at least its a weight off the mind and less stress if something does go wrong.

Its a funny situation, as the job is technically more senior and a pay rise but as I receive extra payments for working nights and weekends at the moment which I will lose, then with the tax to pay for the 'benefits' of the fuel and the car, I probably won't be any better off in terms of money in the bank for the first few years.

bigadaj

Red-Squirrel wrote: »

Thanks for the replies, it does look as though taking the company car might make more sense. I hadn't even considered that they might insist on a newer car, is that fairly common then? If the company takes responsibility for repairs and provides a hire car then at least its a weight off the mind and less stress if something does go wrong.

Its a funny situation, as the job is technically more senior and a pay rise but as I receive extra payments for working nights and weekends at the moment which I will lose, then with the tax to pay for the 'benefits' of the fuel and the car, I probably won't be any better off in terms of money in the bank for the first few years.

It's not uncommon to get a promotion and end up earning less, I've experienced it, by the time you lose overtime and potentially shift allowances. However it often gets better over a period of time, and for many people the ability to get back to semi normal hours, avoid weekends etc is also of benefit. Further promotions should be
straightforward and more obviously and immediately beneficial, so short term pain for long term gain.

To be honest the low value of the cash allowance seemingly makes this a no brainer, selling your car should add to your savings but it's worth considering that things could change, and having a few thousand in savings would be a good thing if you need to purchase your own car again in the future.

It's worth keeping an eye on your fuel useage, as above you probably need to be doing over 20000 miles a year to benefit and most of this should be personal as you'd expect to be reimbursed for your business mileage, excluding commuting.

You can reclaim mileage coast for business from Hmrc on your own car which you obviously can't for a comoany vehicle, this is normally 45p minus any money you get from your company and paid at the end if the tax year or included in your tax coding. Wouldn't have thought this will change your decision but soemthing else to consider.