Company car or allowance?

Sara21

Hi all!

Sorry if I've posted this in the wrong place!

I've been offered a job and have been given the choice of a car allowance or company car, but I have no idea what it means! In their offer it states:

There is the option to either “opt out” of the Company Car Scheme where £500 per month gross, coupled with mileage in respect of business travel paid in accordance with the published HMRC rates or you will be provided with a company car and fuel card. Private mileage will be declared and costs for fuel usage will be recovered via salary payments.

Can anyone tell me what that means or which is the better deal please?

Thanks!

Dazed_and_confused

Only you know which is the better deal, we have no idea what company car is involved and what the tax owed on that might be.

There is a huge difference in tax due on company cars, a lot depends on the car list price (not what is paid for it), C02 emissions and various other factors.

The £500 is a little easier. That is essentially just extra taxable salary. From which tax and NI will be deducted as normal for any extra pay of £500. You may find the £500 car allowance doesn't add anything to your company pension.

You need to find out a lot more about the company car options before you can begin to understand the financial impact i.e. extra tax you will have to pay.

System

It depends on a lot of things...can you tell me:


Your salary:
Company cars available:




It might be worth taking the money, however you then have to pay for your own car and the depreciation of such an asset. Each company car has a BIK (Benefit in Kind) and this is calculated at your tax rate (20 or 40%). If you have a look at Select Car leasing, for each car they have the company tax calculator.


So, say you look at taking a £20,000 VW Golf. The petrol one litre has a BIK of 22% which is good. It means at 20% tax rate your taxable rate is about £900 per year or less than £100 pcm. Your fuel card is where it will hit you. We had one and unless you are doing in access of 20K private miles per year the odds don't stack up. A fuel card at 20% tax would set you back around another £125 pcm. So £500 allowance is looking quite good yes? Actually, you have to factor in the annoyance, the car tax, MOT, service, tyres which are ALL INCLUDED in a company car scheme. Also, what I've just worked out for you is the basest of base model car too. Perhaps you'd like to sit in something more comfortable and economical.

BrassicWoman

I prefer the cash as I can then run the oldest cheapest thing that still goes and save up for a car I will replace it with. Also if you lose your job you don't also lose your wheels.

I don't like fancy cars
I like to spend on holidays and retirement saving instead
Minor tax benefit calculations wouldn't sway me.

System

BrassicWoman wrote: »

I prefer the cash as I can then run the oldest cheapest thing that still goes and save up for a car I will replace it with. Also if you lose your job you don't also lose your wheels.

That's how I would be, however we're doing close to 1k miles per week sometimes so a banger wouldn't cut it.

SensibleSarah

I've been in this position before (although not so generous an allowance) and took the money. The car they offered was not what I had chosen, I preferred my own at the time.
I would always take the cash in the future too tbh - unless there was a stipulation about driving a posh car

indianabones

I found myself in exactly the same situation a while ago. For me it was a no brainer. I took the £500 whilst driving an old Honda which continued to run and run and run. I then bought a 2nd hand BMW 5 series and it's comfortably better than all the company cars my colleagues had.

Sara21

Thanks all. I have another week off before starting but as I haven't been offered a car/allowance before I wanted to have an idea of what to do before I start.

@andydownes123, the salary is high thirties but I haven't received the contract yet so I'm not sure what cars are available.

There's the opportunity to work from home after the settling in period, so I'm not sure if the car allowance would still be valid then (obviously I'd want to pocket the allowance in that case!). I have a fairly economical 4yo Kia with 3y left on the warranty so I'd probably hang onto it for a while.