Company Car or take the cash?

PotentialLondoner

I have been offered a deal with a new job of a car allowance of £400 per month cash (gross) or a company car worth £450 per month. I'm unsure what to do.

This may be my only chance to get a decent car (I do like cars!), but I'm not sure if I should use the allowance to, for example, get a loan to buy a car. The car is not really required for my work although with a family we do require one.

Any advice or experiences gratefully received!

Bean_Counter

Hi,

I do know from many previous calculations on this, that I have always found it cheaper (for the employer and employee) to take the company car rather than pay an amount to run an equivalent standard of car.

The best thing is to do the calculations based on the car you have at the moment, how juch it costs to run, whether you would chnage it yourself anyway and the costs incurred in that, amount of business mileage done, how much can you claim back for business mileage done if in your own car, whether private fuel is provided etc etc.

My opinion would be to take the company car. You get a new car on a regular basis and no hassles to run. If it breaks down, just leave it by the side of the road and get someone to sort it.

Also look at the low emission cars to keep the tax cost down (for the employer as well.) You can now get BWM 1 series, Audi A3, VW Golfs and many more under the 120g/km.

PasturesNew

I would take the company car. The benefits of a company car are:
- not being overly precious about it, you can park it in areas you wouldn't park your own car
- not feeling guilty if your car needs repairs and is in the garage and you can't get into work
- no being annoyed if your car is off the road due to a mishap that occurs when driving for work

The £400 cash would be taxed too. I presume at 20%, so you lose £80 of that before you start.

Here is a calculator that might be usable though:
Excel - http://www.pjwaccounting.co.uk/company%20car.htm

hewhoisnotintheknow

it depends how much you will spend on fuel and who pays for it

If work are paying for all your fuel used when working i would take the cash

Thats nearly 5k before tax.

Also if you get sacked or loose you job or whatever you will find yourself having to splash out an a new car when thats the last thing you want to be doing

PasturesNew

hewhoisnotintheknow wrote: »

Also if you get sacked or loose you job or whatever you will find yourself having to splash out an a new car when thats the last thing you want to be doing

Not sure about now, but there used to be a ruling that after 2 years of having a company car the company had to let you keep it for a fixed period to enable you time to make alternative arrangements.

I had a company car in a job once. There were 4 of us covering sales in North, South, East and West. They called a meeting at Head Office, 100 miles away, at which point we had to hand over the car keys and get the train home!

The company had over-stretched itself and couldn't afford a field-based sales team any more. I'd only been with them 2-3 months.

That was tough. I had a big box of stuff with me and no way to get from the station home (10 miles).

I shouldn't have been a !!!!! though. I should have pretended I was clearing the car out, then sodded off and told them to collect the car from my house.

Alfrescodave

You also need to find out what rate per mile your company will pay. Many of us company car owners, particularly diesel drivers, are now finding out that we are in fact subsidising our companies because the rate is so low and updates to the rate take a long time. Considering the tax that you will pay, my choice would be to take the cash.

Bean_Counter

Alfrescodave wrote: »

You also need to find out what rate per mile your company will pay. Many of us company car owners, particularly diesel drivers, are now finding out that we are in fact subsidising our companies because the rate is so low and updates to the rate take a long time. Considering the tax that you will pay, my choice would be to take the cash.

Fuel is definitely an issue, but the OP said "The car is not really required for my work", so I would guess that any business miles would be negligible.

PotentialLondoner

Thanks for all the above. I will not get any petrol allowance - don't know how that changes things.

Also, does anyone have an easy explanantion of how tax on company cars works? I have worked out that I would pay a monthly tax on eg Ford Mondeo 2L diesel of about £300. So overall it would 'cost' about £500 month to take the car option (compared with the approx £200 a month I would get for the cash option).

Cheers!

Bean_Counter

PotentialLondoner wrote: »

I have worked out that I would pay a monthly tax on eg Ford Mondeo 2L diesel of about £300.

What is the list price of the car, CO2 emissions, petrol or diesel and your marginal rate of income tax?

Bean_Counter

PotentialLondoner wrote: »

So overall it would 'cost' about £500 month to take the car option (compared with the approx £200 a month I would get for the cash option).

Would not also need to factor in the actual costs of running your own car?

You need to look at the cost of running your own car, being the actual costs (ncluding depreciation) less the net car allowance received and compare that to the tax bill for a company car.

Night-owl_6

I would take the cash, you can buy a desent car and have change