Spending Car Allowance

fatrab

Car_54 wrote: »

You're not better off! You've got more money, but you've lost a car with free fuel, insurance, maintenance, tyres, etc.
To be better off, you need to find a car which will cost you less than your net car allowance, including all expenses.
I'd be inclined to purchase outright with a bank loan. £250 a month may get you a loan of about £8,000 over 3 years, depending on your credit rating. That could buy you a decent car, and leave £100 a month for insurance etc.
Others will have different advice!

This exactly ^^^


I take car allowance because it allows me to
a) drive whatever car I want
b) have an asset (you still "pay" for a company car even though you never own it)
c) have control over who/what/where my car gets maintained

foxy-stoat

Rusty_Russ wrote: »

Thanks all for replies so far. Reading this I should be better off then?

Any advice of purchasing a vehicle using the allowance?

Well the allowance is paid into your bank so you use it the same way you would your salary.

fatrab

Rusty_Russ wrote: »

Thanks all for replies so far. Reading this I should be better off then?

Any advice of purchasing a vehicle using the allowance?

If you do low mileage then you will be better off than if you were a higher mileage driver, purely down to running costs and depreciation.


It makes no odds that you're purchasing a vehicle with car allowance. As mentioned above, probably best you don't tell the garage that, they'll just milk you for £300/month for a car you probably don't need!


Work out how much you can afford (bear in mind if you change jobs you'll be left paying for the car unless you sell it) and finance it through the cheapest means possible, which will probably be a bank loan (3% - ish interest, car finance is rarely competitive)

fatrab

And I wouldn't go for a PCP/PCH deal either. You'd be far better just buying something outright (loan or HP) that you can afford and not something the dealer surrounds with smoke and mirrors!

DoaM

Car_54 wrote: »

but you've lost a car with free fuel, insurance, maintenance, tyres, etc.

OP mentioned a fuel card, not necessarily free fuel. Bear in mind also that if it IS free fuel then OP will be paying BIK on that too, on top of the BIK for the vehicle. (Free fuel is typically valued at £6k+ per year URL="https://comcar.co.uk/fuel/benefit/?make=Vauxhall&model=Insignia+Grand+Sport&derivative=1.6+%28136PS%29+Tech+Line+Nav+Turbo+D+Blueinjection"]example[/URL, depending on vehicle, and OP would be paying the tax on that amount at their marginal rate).

Rusty_Russ

So it turns out I have two options.. as listed below. Which would seem the most financially sound decision?

My initial thoughts are the first option as I’ll loose out in tax via 2nd option.

4800.00 per annum in my salary and you have to provide my own car (within the criteria of the driver policy), insure the vehicle, pay for any maintenance, pay for the fuel and claim back business mileage at 45p per mile.

Alternatively the company will lease me car of my choice with a maximum fully maintained lease value of £ 400 PCM and a vehicle value of no greater than £ 30k, they will insure and pay for the fuel however I am then charged for personal mileage at 11p – 14p per mile (subject to vehicle), with this option I’ll pay personal tax against the value of the vehicle with the tax level dictated by the emission rating of the car..

Your helpful responses are appreciated! I cannot work out which way I’ll be better off. I won’t be doing much business miles, if any..

foxy-stoat

Buy a secondhand car worth £5-6K using a loan.

AdrianC

Rusty_Russ wrote: »

My initial thoughts are the first option as I’ll loose out in tax via 2nd option.

4800.00 per annum in my salary and you have to provide my own car (within the criteria of the driver policy), insure the vehicle, pay for any maintenance, pay for the fuel and claim back business mileage at 45p per mile.

Alternatively the company will lease me car of my choice with a maximum fully maintained lease value of £ 400 PCM and a vehicle value of no greater than £ 30k, they will insure and pay for the fuel however I am then charged for personal mileage at 11p – 14p per mile (subject to vehicle), with this option I’ll pay personal tax against the value of the vehicle with the tax level dictated by the emission rating of the car..

Your helpful responses are appreciated! I cannot work out which way I’ll be better off. I won’t be doing much business miles, if any..

Don't forget you pay income tax on the £4,800, too. If you're a 40% tax payer, that's just £2,880 in your pocket.



You really need to do the sums - but I suspect you'll find the numbers work out pretty close, if you start comparing apples with apples (new private car vs co.car), but if you're happy with a 5-6yo car, the numbers will be strongly in favour of that. The low-hassle approach, though, is the co.car.

DoaM

Assuming the OP was being genuine about the £30k base salary then he'll not be in the 40% tax bracket, so £4,800 will result in £3,840 after income tax. (There'll be NI, pension contributions etc. still to come off *).

I have a company car (Insignia Grand Sport Tech Line Nav 1.6 diesel 136PS). It has a P11D value of £22,360 and yields a monthly BIK (no fuel allowance) of £503. I pay tax on the £503 value. I claim business miles at 11p per mile.

At basic rate I'd be paying about £100 per month for a funded vehicle. (No maintenance, VED, etc. - just add fuel). With a £4,800 allowance that's £400 per month on which you'd pay £80 tax, so would have £320* per month to fund a vehicle.