Reduced mileage - buy or lease?

Jwiltshire85

I receive a generous car allowance and for my last car, nought a Merc C Class with a 3% loan. I was doing around 24k miles per year but due to Covid, am now able to work from home, commuting once a week so expect my overall mileage to roughly half to 12k. I am not too bothered about owning a car but more interested in keeping monthly costs down. Would I be better off selling my car and getting a lease? Or any recommendations of good comparison sites?
Thanks 

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If the Merc is paid for then surely anything else is going to cost you money?

It won't make any difference to your tax what you do, as a car allowance is just extra salary, and you pay N.I. and Tax on it.  I'd just use the extra salary to improve my pension and retire earlier and stick with what I had got personally.

AdrianC

If you don't have a car, do you still receive the allowance?

NottinghamKnight

What are the minimum requirements your company specify to pay the car allowance, especially age. If you want to keep the money work out what you are happy with and meets the requirements, so maybe a five year old focus, look for a good example and sell your car and pocket the difference. There's risk of repairs on an older car obviously but you need to factor that into your maintenance and running figures.

Grumpy_chap

The OP is driven to achieve the lowest monthly cost.
That will mean keeping the C Class, which is paid for, thus avoiding either lease or loan payments.

neilmcl

Grumpy_chap said:

The OP is driven to achieve the lowest monthly cost.
That will mean keeping the C Class, which is paid for, thus avoiding either lease or loan payments.

I got the impression that he's still paying the loan for it hence looking to see if the monthly cost for lease will be less than the loan itself. The OP needs to go and look at the potential cost of a PCH for a car of his choice and for that kind of mileage before doing anything.

AdrianC

If it's been bought with a loan, then he'll have substantial equity in it.
Sell the Merc, buy something cheaper and owe nothing - maybe even free some of the equity.

But it does depend on the terms of the car allowance.

Jwiltshire85

Thanks for the responses. Neilmcl is right, I am paying off the loan over 5 years at approx £400 per month so that's what I am comparing the monthly costs to. I do own the car, but the cost is paying back the loan. I could sell the car, pay off the loan to wipe the slate clean. Ideally I would look to have a similar car which may or may not be cheaper by leasing. The car allowance policy is that the car has to be no more than 18 months old from date of purchase, and no more than 4 years old to keep the car allowance. As you say, I think it is a case of looking for a comparable car on PCH etc. and weighing up the monthly costs

ontheroad1970

It's up to you, but it might be more expensive in the short term to pay the loan, but a leased mercedes C class might not be a huge saving in any case and it will not be yours after the equivalent of the reminder of the loan term.  Also, short of a crystal ball, who is to say that your mileage doesn't stay low isn a year or two, and you end up with a huge excess mileage bill.  

AdrianC

Jwiltshire85 said:

Thanks for the responses. Neilmcl is right, I am paying off the loan over 5 years at approx £400 per month so that's what I am comparing the monthly costs to. I do own the car, but the cost is paying back the loan. I could sell the car, pay off the loan to wipe the slate clean. Ideally I would look to have a similar car which may or may not be cheaper by leasing. The car allowance policy is that the car has to be no more than 18 months old from date of purchase, and no more than 4 years old to keep the car allowance. As you say, I think it is a case of looking for a comparable car on PCH etc. and weighing up the monthly costs

Yes, you're paying £400/mo... but you keep the car at the end, and are paying off the purchase price over that time. With PCH/lease/PCP, you're only paying off the depreciation - so are far less likely to have equity. You simply give the keys back and walk away, rather than having an asset worth £000s.

Either way, you've taken on a 5yr loan on a car that you can only run on your allowance until it's 4yo. So you're going to have to get out of the finance before the end. The question is whether you have any equity in it at that time or not.

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Now you have provided more information.

With a £400 repayment a month, plus you have to replace it at 4 years old, cheapest monthly cost would be to sell it if it covers the settlement on the loan, then I'd get a 12,000 miles P.A. PCP on something much cheaper than the car allowance.

If you go back to 24k P,A., pay the balloon  at the end and sell it, unless the excess miles are cheap.

You are going to have to hand it back anyway after the 3 years and pcp another to keep the allowance.

If you loose your job, you will either VT it, or settle the pcp with the redundancy.

If you go for PCH, you are in deep doo-doo if circumstances change because VT or settlement are not options.