Car question

benjamin_4

Hi

I'm finding it difficult to make a decision on this so thought I would see what MSEers have to say on the topic.

I'm in a fair amount of debt though with good money saving Im reducing this quickly. I now hate the thought of taking on more debt which is why this is a hard decision.

I need a car for work, and ideally a fairly modern one as I will be doing 35k miles a year or more. I don't currently drive so now have two options:

1) A car allowance of around £300 a month. This will have to cover insurance (expensive as I've just learnt to drive), maintenence etc. The car would have to be bought on finance with a low deposit as I need a car within weeks not months to be able to carry out my job. I estimate finance would need to be around £4.5k. Borrowing the money on 0% cards is not an option - so would be looking at 6% or so best case.

2) A car through the company lease scheme up to around £400 per month. This option means that I would have a brand new car (which is nice, but not something I'm amazingly bothered about), no maintenence and drastically reduced insurance.

The important thing for me as an MSE-er is that as it is a lease scheme I would have the option of terminating with 1 months notice if I lose my job, or after 2 years with no commitment even if I remain in my job. However, as the lease payments just cover depreciation, I would have no return on the £400 a month paid, whereas if I take it as a car allowance and buy my own, I would have a car worth a few thousand pounds at least.

This lease option however is less like debt as it's just a tool for my job which I could give back whenever I wish. However, it feels like a worse financial decision if I look at the cold hard figures.

What should I do?!!

Rikki

It is a difficult one depending on what you want for the future.

A friend of mine has always had a lease car and this has worked well for him and he has been with the company over 25 years. He covers alot of miles a year and the wear and tear on the vehicle are great. If it was his own car it would of been expensive for him to maintain the car. It works for him.

The best advice I can give is listen to what people say on here as it may raise points you haven't considered.

Good Luck

bobbywomble

if you want advice
i think you should take the money £400 a month is a nice bit of dosh
and you would have to be v unlucky to spend £400 a month on a car
in repairs wear and tear

i used to drive a long way every day in a car and it was costing a fortune
so i bought myself a escort van with a diesel engine
it was brill 55 miles to the gallon not that flash but will do the job and i could carry all my stuff and still have room for the dog :eek: :rotfl:

my advice is grab the dosh with both hands (after all you go to work for money not for a flash car) beggars cant be choosers and paying off debts is more important than what car you drive use the extra to pay off the debts and buy yourself a diesel escort you can geta good one for next to nothing you will also save on insurance, fuel and probably keep your licence clean in a slightly slower vehicle :A

good luck matey
rob

Bargain_Rzl

Have you considered the tax implications?

I think if you choose to take a company car (don't know the ins and outs of your lease scheme) it counts as a taxable benefit even though your cash income has not increased, so you have the car but get additional tax deducted from your wages.

If you take the money, your allowance will be taxed at source by PAYE so you can use the net figure to get a (cheaper) car and you won't be out of pocket in any direct sense.

MarkyMarkD

bobbywomble wrote:

if you want advice
i think you should take the money £400 a month is a nice bit of dosh
and you would have to be v unlucky to spend £400 a month on a car
in repairs wear and tear

The OP stated £300 in car allowance, or a £400 lease payment.

On that basis, and given your lack of driving experience, I would think that the car allowance is a poor option unless you do hardly any driving.

My company pay about £100 more in car allowance than the basic lease charge - because they don't have to insure or maintain the vehicle. If the car allowance you are being offered is £100 LESS than the lease charge, AND you would have to pay a lot to insure, AND you are doing any amount of private mileage, the lease car option may well be good value.

It also depends if you can choose the car - you can get a lot of car for a £400 lease payment, and that lot of car could be relatively cheap in tax terms or relatively expensive. Look at CO2 emissions of the cars you can choose from, if it reaches that stage.

benjamin_4

Thanks for the replies.

The lease is a private lease sheme specifically to avoid any tax implications. They have negotiated very good deals to add the early redemption insurance + low prices. I can therefore get a much, much nicer car than I would be able to afford. Nowdays that isn't all that important to me, but when the decision is so finely balanced it might just tip it for me.

Thanks for the suggestions. I shall stop by to see if anyone else has something that I have not realised!

Ben

skintchick

No idea which choice to go for, but if you want a good diesel car can I recommend Peugeot? I had a Peugeot 405 which was great, although a tad too big. But it was very reliable and cheap to maintain even though it was my dad's old cast-off. Also not too expensive to insure,although I realise your circumstances are different to mine.

eek

On a low mileage (say less than 10,000 miles a year) buying a car may be the sensible choice. Based on the mileage you will be doing (35,000+) you are going to destroy whatever value the car has within 3 years.

Remember Depreciation values for cars are based on 12,000 miles a year (i.e. the second hand trade price of a 3 year old car / a car with 36,000 miles on it is say 40% of its full retail price). You are going to be doing that mileage every year so after 3 years or 100,000 miles you will be luck to get 20% of the original price back.

Of course this depends on the terms of the lease. Make sure its based on 35,000 miles a year otherwise you'll be equally stuffed and either you or your company will have a hefty mileage surcharge to pay.