Company more company cars: Do I buy or lease

Fubar_3

Any help would be great.

I currently have a company car. The company I work for will be offering an allowance instead. The trouble is working out how much they would need to offer me before tax, for me to be able to afford to buy or personal contract lease, a similar car. I would like to know this in readiness for ‘negotiations’.

I have looked on the web to see if there is some kind of calculation (similar to a company car tax calculator) but I couldn’t find one. Does anyone know of one, or can offer advice on how to work this out. Obviously, if my company no longer offer cars and I have to get my own there is the purchase & interest or lease costs plus tax, servicing, insurance etc.,

The car I have now has a list price of £18575. It’s on a 3yr lease hire including maintenance.
Mileage is about 22,000 miles per year (60 mile daily commute)
Business mileage is only about 4,000 miles per year
I pay for fuel, getting £0.14 per mile fuel on business use.
I am in the 40% tax bracket


If I bought I would have to pay servicing, tax, insurance, maintenance but would own something once it has paid off.

If I did a personal contract hire with maintenance it would be a good comparison but after 3 years I would have to give it back and own nothing.

Would my company argue that because I didn't have a car I would be better of tax wise so would offer me less?

Help??!!??

AdrianHi

I have crunched the numbers on this myself before for my situation, which is close to yours. It's not an easy calculation so this is a chance I've made a mistake, but I'll share my findings.
I own a Ltd company so have the option of leasing a car through my business where I can then claim half of the VAT back on lease charges, pay 18% BIK as a 40% PAYE payer, and then HMRC approved 12p per mile for fuel on my approx. 5000 business miles a year (14,000 miles a year total).
I compared this with leasing the car personally paying the full VAT, no BIK and then claiming HMRC approved 40p per mile (first 10,000 miles) for the 4000 a year business miles.
I did these sums on a 27965 list price car with as said 18% BIK band.
My conclusion is that the chancellor is way ahead of us on calculations like this and I am better off leasing the car privately and claiming 40p per mile as my calculation said I was better off by £34.90 a month over a 36 month leasing doing this.
The other advantage is you have more choices about what car you use, you could go for an older car or lease a Vauxhall which are rubbish as a private buy , even with the 0% finance deals on offer (depreciation) but great as a lease as the leasing companies seem to pass on the volume discounts they get on Vauxhalls to the end customer.
If my calculations are right, your employer needs to pay you as an allowance the ex-vat lease cost of your current car plus 8.75% (half the VAT) and then pay 40p per mile for business miles to put you in this position of being ahead by around 25 a month for your 18K car and 4K business miles.
I'm going to check over my spreadsheet on this over lunch today and then post it up here. I would be interested in someone else checking over it to see if anything is missed and you can try and use it for your circumstances too. Back soon....

AdrianHi

Fubar wrote: »

If I bought I would have to pay servicing, tax, insurance, maintenance but would own something once it has paid off.

If I did a personal contract hire with maintenance it would be a good comparison but after 3 years I would have to give it back and own nothing.

A note on this point about "owning" a car.
A car does not last for ever, eventually it is on the scrap heap and you have to get a replacement. During the period you have the use of it you can break down the costs of it as an average monthly expense while you had the use of the car.
Personally I focus on getting this monthly figure to be affordable inside my income, good value for the car I currently have the use of and making sure any cash flow challenges like, paying cash for a car (if that happens to work out best) or paying a lease is manageable too. I've stopped caring about the concept of "owning" something, because I don't think you ever really own a car because it doesn't last forever.
The Vauxhall is a good example, substantially cheaper on a monthly basis as a new car lease and while I've not checked the figures it I would expect buying the Vauxhall at 36 months old works out only a little cheaper on a monthly basis than leasing it again new - taking all costs into consideration.