Company Car Buy Out

neil_deluxe65

Hi there

My company is going through a round of cutting company cars from peoples packages and I believe I will be next, so want to ask some of advice in terms of what would be a fair deal to opt out, they will offer effectively a salary increase (which will be taxed at 40%)

it will cost approx £280-300 per month to lease an equivalent vehicle, plus I'd have to insure (I've been covered by company insurance for the last 10 years) and running costs etc. (I did not claim a fuel allowance as I do not do enough miles to warrant the tax).

latest P11D states Cash equivalent is £9,375.

I believe a £6k salary increase would cover the lease costs of an equivalent vehicle (£3.6k after Tax - £300 a month), but what do you good forum people think in terms of a fair offer?

Thanks!

foxy-stoat

Can you not just buy a cheaper older car outright instead of leasing a new one - say take out a loan with a monthly payment of £200.

forgotmyname

My previous car cost me £50 a month over 5 years, thats everything servicing, repairs, MOTs etc. Not insurance but everything else.

Anything over £85pm would be money in your pocket.

Why does it need to be an equivalent vehicle?

doningtonphil

I think the OP wants to make a comparison between what he is driving now and what it would cost to drive the same but 'buying privately'. So buying an old cortina and hoping it makes it through the week is not going to be a direct comparison to him driving his late plate repmobile.

OP, I went through this dilema. I asked our accountant to prepare a brief comparison to basically tell me how much I needed to be paid as salary so I wasn't worse off. I am sure there are websites that can help you make the calculation (I looked at comcar.co.uk/cashorcar). You might need to reverse engineer the figures to come up with the salary you need

DrEskimo

Agree with the above. Whilst it seems logical to replace the company car with a lease deal to maintain a similar car, it would be far better economically to buy something cheaper and then pocket the additional car allowance.

The issue with getting into a personal lease or even finance using the car allowance from work is that the agreement is with you personally. If you take on say a 36month lease agreement, but subsequently lose your position 12-months later, you are left with the lease agreement. They are not cheap to exit from early, and you are not only left without a job, but also having to use crucial savings to pay to get out a lease agreement, as you can no longer service the monthly expense....

Ideally you want to pay for something reliable and cheaper outright as a personal car that is not tied to your job income, where you can allocate the car allowance to cover the additional costs of using that personal car for business use. The net effect is you will ultimately earn more from the car allowance than you spend on additional wear and tear from using it for work.

sheramber

neil_deluxe65 wrote: »

Hi there

My company is going through a round of cutting company cars from peoples packages and I believe I will be next, so want to ask some of advice in terms of what would be a fair deal to opt out, they will offer effectively a salary increase (which will be taxed at 40%)

it will cost approx £280-300 per month to lease an equivalent vehicle, plus I'd have to insure (I've been covered by company insurance for the last 10 years) and running costs etc. (I did not claim a fuel allowance as I do not do enough miles to warrant the tax).

latest P11D states Cash equivalent is £9,375.

I believe a £6k salary increase would cover the lease costs of an equivalent vehicle (£3.6k after Tax - £300 a month), but what do you good forum people think in terms of a fair offer?

Thanks!

You will gain the tax on the £9375 that you are paying now.

neil_deluxe65

Hi All,

Thanks for the responses

I probably won't replace like for like! - but looking at what is a fair deal for having the option taken away, and present back what that actually means in terms of "if I was to Private lease the exact same vehicle.....and insure / tax etc"or even based on what it costs the company to lease, basically I do not want to lose out and be treated fairly.

DrEskimo

neil_deluxe65 wrote: »

Hi All,

Thanks for the responses

I probably won't replace like for like! - but looking at what is a fair deal for having the option taken away, and present back what that actually means in terms of "if I was to Private lease the exact same vehicle.....and insure / tax etc"or even based on what it costs the company to lease, basically I do not want to lose out and be treated fairly.

Ah apologies, I misunderstood.

That makes sense. £6k certainly sounds reasonable, but sorry can't offer any further advice about how you can get a more accurate figure.

Have they offered anything yet?

neil_deluxe65

Not yet - a colleague was offered £3k until he pointed out that originally he was offered the choice of a car or a £5k allowance - he has since been offered £3k salary increase + £2k bonus just for yr 1. of course will be taxed on both portions.

neil_deluxe65

opting out will make me £4k better off (approx)

DrEskimo

neil_deluxe65 wrote: »

Not yet - a colleague was offered £3k until he pointed out that originally he was offered the choice of a car or a £5k allowance - he has since been offered £3k salary increase + £2k bonus just for yr 1. of course will be taxed on both portions.

Hmmm...well I guess it makes sense. Presumably they are getting rid of the company car scheme as part of a cost cutting exercise. Wouldn't make sense to cull the company car to only provide a car allowance worth a similar cost. Appreciate this is not your concern though!