Is a company car better for me?

charliechopstick

Hi all, would really appreciate some advice.

I am starting a new job and have been offered the choice of company car or car allowance.

I will be a 40% taxpayer.

Car allowance is £4800 gross pa, so I think that’s £233 pcm net.

Company car - Looking at a VW Golf TDI as an example, the tax charge would be £2677 pa, or £233 pcm.

So a company car would cost me £466 per month.

I have to pay for my own fuel, and would be doing about 22k miles commuting per year, plus private miles on top

Ordinarily I would opt for the allowance but does my high mileage make the option of having a fully maintained car more attractive? Advice appreciated, thanks.

bigadaj

I'd definitely go for the comoany car with that commute.

The car may be costing you £466 per month, but you need to allow for insurance, servicing, maintenance, repairs, depreciation etc so the amount you have to spend on a car is far less than that.

You would get some money back from business mileage on your own car, excluding your commute, from the tax man, but you're presumably looking at doing well over 30,000 miles a year which is significant for any privately owned car.

Depending on your financial situation if you could contribute to a pension to get below higher rate tax then that would halve the car cost and make it an absolute no brainer, that is dependent on your earnings level and expenditure though so may not be possible.

AdrianC

Only you can do the maths and answer the question to your own satisfaction. You can do the basic maths, with a few assumptions for maintenance/insurance etc costs, but then there's the intangibles.

How much value, for instance, do you put on being able to throw the keys at somebody else if there's a problem? Or on being able to choose what you drive?

Car_54

charliechopstick wrote: »

Hi all, would really appreciate some advice.

I am starting a new job and have been offered the choice of company car or car allowance.

I will be a 40% taxpayer.

Car allowance is £4800 gross pa, so I think that’s £233 pcm net.

Company car - Looking at a VW Golf TDI as an example, the tax charge would be £2677 pa, or £233 pcm.

So a company car would cost me £466 per month.


No it wouldn't. You have to deduct the costs of finance, depreciation, maintenance, insurance, tax etc from the £233 (£240?) car allowance to get a fair comparison.


I have to pay for my own fuel, and would be doing about 22k miles commuting per year, plus private miles on top



Commuting is private miles.How many business miles will you do?


Ordinarily I would opt for the allowance but does my high mileage make the option of having a fully maintained car more attractive? Advice appreciated, thanks.

See comments above.

charliechopstick

I don’t think I’ll be doing any business miles whatsoever.

I did think about using pension contributions to reduce tax band but I’m the only earner in the household so I just can’t put that much into the pension at the moment.

sheramber

Do you need a second car or will the company car be your only car?

Jonesya

You should have a look at electric vehicles because the Benefit In Kind tax on them is being cut to zero in April making them an incredibly good deal if they meet your needs.

An eGolf, Nissan Leaf or electric Kona or Niro would be close to zero cost motoring, as the BIK tax will be zero, then a couple of percent, so huge saving over diesel and petrol, then there's the fuel savings of a thousand or more each year.

DoaM

charliechopstick wrote: »

I have to pay for my own fuel, and would be doing about 22k miles commuting per year, plus private miles on top.

Will you be commuting 90-100 miles per day? (Based on 48 weeks x 5 days per week = 240 days per year).

charliechopstick

The company car would be my only car. Unfortunately my company doesn’t offer any of the electric models listed at the moment. That would really be a double win as it would also give me a huge personal saving on fuel. Yes I will be doing 90ish miles per day.

DoaM

Bear in mind that the BIK value of the car is based on the list price and emissions category. Example:

List price £24,000
Category 25%
BIK = £6,000 or £500 per month

You then pay tax on that BIK value at your marginal rate. If you're in the 40% band on salary alone (i.e. don't forget about personal allowance) then your monthly tax bill for the car would be £200, so that's how much it would be costing you.

Check out the Comcar website.