Cheapest way for me to 'own' a car?

slaney

I am joining a big 4 consulting company imminently and part of my package is a pretty reasonable £6k car allowance on top of my salary, or I can choose to take a company car  through a salary sacrifice scheme.  My salary and car allowance will put me above £100k but below £130k.  So the £6k will get taxed at effectively 60% because of my personal allowance being eroded.

Given that I could take an electric vehicle as a company car, so low running costs, what is the cheapest way for me to 'own' a car?  Should I take the car allowance and buy something in cash? Or should I take a company car and incur the BIK?  Should I buy a second hand car with 30k miles on the clock rather than a new one? Should I lease a personal car?

The options are endless and I can't figure out which is the cheapest way to do this.  Even though a lot of work has been moved to working at home because of the pandemic, I still suspect I will be doing a lot of motorway miles.  How do go about figuring out my options?

Thanks

GunJack

A slight aside to your main question, but can you salsac into your pension scheme more than the minimum to take you below the £100k inc the car allowance? If you can, double benefit of more money in the pension

AdrianC

The cheapest way to own a car is to buy a cheap, older used car.

Anything above that is balancing off extra ownership cost against potentially lower maintenance cost against perceived prestige of the car.

Does this car-allowance scheme have any restrictions on age/type of vehicle etc? £6k minus 60% tax means just £2,400/year, £200/mo in your pocket. What is the per mile allowance available on top?

What sort of mileage are you going to be covering?

If EV, how much time are you prepared to put into recharging on top of a long work/motorway day where your destination has no charging available?

jimjames

Is there a requirement set for the car that you need to buy in terms of age etc? My company car scheme has no limit so I was able to run a 18 year old car on the car allowance. An older car is probably the cheapest way but whether it suits your situation is another matter

DrEskimo

Used EV is likely to be cheapest, as you get lower depreciation costs than brand new, and low running costs. Something like a used Hyundai Kona will have lots of remaining warranty so similar peace of mind, minimal servicing costs and plenty of range.

Salary sacrifice can be tax efficient, but the net cost I still found to be expensive and not too different from a good deal on a personal lease.

BOWFER

The rules for the car allowance is a good point.
Mine is that the car must be under 5 years old and 4 doors.

Grumpy_chap

slaney said:

I am joining a big 4 consulting company imminently and part of my package is a pretty reasonable £6k car allowance on top of my salary, or I can choose to take a company car  through a salary sacrifice scheme.  My salary and car allowance will put me above £100k but below £130k.  So the £6k will get taxed at effectively 60% because of my personal allowance being eroded.

Given that I could take an electric vehicle as a company car, so low running costs, what is the cheapest way for me to 'own' a car?  Should I take the car allowance and buy something in cash? Or should I take a company car and incur the BIK?  Should I buy a second hand car with 30k miles on the clock rather than a new one? Should I lease a personal car?

The options are endless and I can't figure out which is the cheapest way to do this.  Even though a lot of work has been moved to working at home because of the pandemic, I still suspect I will be doing a lot of motorway miles.  How do go about figuring out my options?

Thanks

Making a general assumption you'll want a "nice" car and the choice of £6k car allowance taxed at 60% so worth £2.4k per year OR a company EV, then the company EV seems like a no brainer.  BIK is 1% this year and 2% next year so, on a £50k car, £500  this year or £1k next year.

That means £3k or thereabouts is your all-in cost to run a "nice" car per year (plus fuel / energy).  Energy will be cheaper for an EV than ICE.

This will be the "no hassle / no responsibilities" solution.

As others said, you could possibly do this cheaper with bangernomics, though only just if you are going to cover a reasonable mileage.  You are then responsible if the car breaks down but you need to get to the important meeting.  Would the company policies allow this in any case?  They may specify maximum age of vehicle etc.

Plus there is a significant value (to you) of having a comfortable car, with good safety rating and modern creature-comforts and a value (to the employer) of the image from your arriving in a modern vehicle.

The big question, then, is whether an EV can sensibly work with the mileage you do.  You mention a high proportion of motorway mileage.  EV ranges are improving now, actual range achievable is quite significant, so it could work well.

BOWFER

Grumpy_chap said:

slaney said:

I am joining a big 4 consulting company imminently and part of my package is a pretty reasonable £6k car allowance on top of my salary, or I can choose to take a company car  through a salary sacrifice scheme.  My salary and car allowance will put me above £100k but below £130k.  So the £6k will get taxed at effectively 60% because of my personal allowance being eroded.

Given that I could take an electric vehicle as a company car, so low running costs, what is the cheapest way for me to 'own' a car?  Should I take the car allowance and buy something in cash? Or should I take a company car and incur the BIK?  Should I buy a second hand car with 30k miles on the clock rather than a new one? Should I lease a personal car?

The options are endless and I can't figure out which is the cheapest way to do this.  Even though a lot of work has been moved to working at home because of the pandemic, I still suspect I will be doing a lot of motorway miles.  How do go about figuring out my options?

Thanks

Making a general assumption you'll want a "nice" car and the choice of £6k car allowance taxed at 60% so worth £2.4k per year OR a company EV, then the company EV seems like a no brainer.  BIK is 1% this year and 2% next year so, on a £50k car, £500  this year or £1k next year.

That means £3k or thereabouts is your all-in cost to run a "nice" car per year (plus fuel / energy).  Energy will be cheaper for an EV than ICE.

This will be the "no hassle / no responsibilities" solution.

As others said, you could possibly do this cheaper with bangernomics, though only just if you are going to cover a reasonable mileage.  You are then responsible if the car breaks down but you need to get to the important meeting.  Would the company policies allow this in any case?  They may specify maximum age of vehicle etc.

Plus there is a significant value (to you) of having a comfortable car, with good safety rating and modern creature-comforts and a value (to the employer) of the image from your arriving in a modern vehicle.

The big question, then, is whether an EV can sensibly work with the mileage you do.  You mention a high proportion of motorway mileage.  EV ranges are improving now, actual range achievable is quite significant, so it could work well.

£3k a year won't get him an EV with much range at motorway speeds.
It's only £250 a month and that won't get him a 62KW Leaf, which is around 150-160 miles at 70mph.

Grumpy_chap

BOWFER said:

Grumpy_chap said:

slaney said:

I am joining a big 4 consulting company imminently and part of my package is a pretty reasonable £6k car allowance on top of my salary, or I can choose to take a company car  through a salary sacrifice scheme.  My salary and car allowance will put me above £100k but below £130k.  So the £6k will get taxed at effectively 60% because of my personal allowance being eroded.

Given that I could take an electric vehicle as a company car, so low running costs, what is the cheapest way for me to 'own' a car?  Should I take the car allowance and buy something in cash? Or should I take a company car and incur the BIK?  Should I buy a second hand car with 30k miles on the clock rather than a new one? Should I lease a personal car?

The options are endless and I can't figure out which is the cheapest way to do this.  Even though a lot of work has been moved to working at home because of the pandemic, I still suspect I will be doing a lot of motorway miles.  How do go about figuring out my options?

Thanks

Making a general assumption you'll want a "nice" car and the choice of £6k car allowance taxed at 60% so worth £2.4k per year OR a company EV, then the company EV seems like a no brainer.  BIK is 1% this year and 2% next year so, on a £50k car, £500  this year or £1k next year.

That means £3k or thereabouts is your all-in cost to run a "nice" car per year (plus fuel / energy).  Energy will be cheaper for an EV than ICE.

This will be the "no hassle / no responsibilities" solution.

As others said, you could possibly do this cheaper with bangernomics, though only just if you are going to cover a reasonable mileage.  You are then responsible if the car breaks down but you need to get to the important meeting.  Would the company policies allow this in any case?  They may specify maximum age of vehicle etc.

Plus there is a significant value (to you) of having a comfortable car, with good safety rating and modern creature-comforts and a value (to the employer) of the image from your arriving in a modern vehicle.

The big question, then, is whether an EV can sensibly work with the mileage you do.  You mention a high proportion of motorway mileage.  EV ranges are improving now, actual range achievable is quite significant, so it could work well.

£3k a year won't get him an EV with much range at motorway speeds.
It's only £250 a month and that won't get him a 62KW Leaf, which is around 150-160 miles at 70mph.

I think you took that out of context.

I am not saying to lease a car with the £3k.

I am saying to not take the £6k car allowance and take the company EV:

slaney said:

£6k car allowance on top of my salary, or I can choose to take a company car  

Given that I could take an electric vehicle as a company car,

It's going to be hard to get anything "nice" any other way on these figures.

slaney

BOWFER said:

The rules for the car allowance is a good point.
Mine is that the car must be under 5 years old and 4 doors.

I need to find out what the rules are, if any.  I was thinking of getting a 1-2 year old car with low mileage (given nobody went anywhere in the pandemic so they must be out there).

GunJack said:

A slight aside to your main question, but can you salsac into your pension scheme more than the minimum to take you below the £100k inc the car allowance? If you can, double benefit of more money in the pension

I am going to stick as much as I can afford in the pension through salsac because i realise that reduces my tax, and I think it will be advantagous / tax efficient to get it below the 100k for the moment inc car allowance.

AdrianC said:

The cheapest way to own a car is to buy a cheap, older used car.

Anything above that is balancing off extra ownership cost against potentially lower maintenance cost against perceived prestige of the car.

Does this car-allowance scheme have any restrictions on age/type of vehicle etc? £6k minus 60% tax means just £2,400/year, £200/mo in your pocket. What is the per mile allowance available on top?

What sort of mileage are you going to be covering?

If EV, how much time are you prepared to put into recharging on top of a long work/motorway day where your destination has no charging available?

I suspect the mileage allowance will be the 40p per mile for a private car and a fuel card for the company car option, but I don't know yet, plus I have no idea how that works for an EV.  Before the pandemic I would have expected to be doing 20k miles per year+ for this sort of role, but now I am just not sure.  But having a car is a requirement for the car allowance so it does not matter what the mileage is.  My thoughts are at the moment to get a second hand EV and to put up with the charging times, plus charge at home.  I am not a 'car' person and just want a reliable a - b that does the job at the lowest cost, and is a comfortable motorway drive. 

AdrianC

slaney said:

I suspect the mileage allowance will be the 40p per mile for a private car

Not on top of a car allowance, it won't be.

That's the total running costs, including ownership. You're getting that covered by the allowance.