Car or allowance - what would you take?

[Havana_UK]

Company car every time for me. You get a brand new car and don't have to worry about ANYTHING - tax, insurance, tyres, servicing etc. From my perspective purely the fact that I have no worries is worth a lot.

New tax disc arrives on my desk each year, ditto for insurance. When tyres need replacing I just take it down the garage and get them to put new tyres on, when it needs a service I ring the garage and ask them to book it, then I just turn up on the appointed day. No bother with anything.

If you pick the car carefully the company car tax can also work out very cheap. Take the 320d as an example. Let's assume you pick the Luxury Auto model (the most expensive) and stick £2K of extras in (all counts for company car tax). This works out to costing you:
- @ 20% tax ~£1300 / year, or just over £100 / month
- @ 40% tax ~£2600 / year, or just over £200 / month

That's it. Nothing else except any private fuel you use. Motoring doesn't get cheaper!

 

[Del Lardo]

Company car every time for me. You get a brand new car and don't have to worry about ANYTHING - tax, insurance, tyres, servicing etc. From my perspective purely the fact that I have no worries is worth a lot.

New tax disc arrives on my desk each year, ditto for insurance. When tyres need replacing I just take it down the garage and get them to put new tyres on, when it needs a service I ring the garage and ask them to book it, then I just turn up on the appointed day. No bother with anything.

If you pick the car carefully the company car tax can also work out very cheap. Take the 320d as an example. Let's assume you pick the Luxury Auto model (the most expensive) and stick £2K of extras in (all counts for company car tax). This works out to costing you:
- @ 20% tax ~£1300 / year, or just over £100 / month
- @ 40% tax ~£2600 / year, or just over £200 / month

That's it. Nothing else except any private fuel you use. Motoring doesn't get cheaper!

You're only taking into account the cost of the tax and ignoring the post tax income that you'd receive if you took the car allowance instead. To have that car would actually cost me £483/month or £5796/year.

 

[Jez]

Company car every time for me. You get a brand new car and don't have to worry about ANYTHING - tax, insurance, tyres, servicing etc. From my perspective purely the fact that I have no worries is worth a lot.

New tax disc arrives on my desk each year, ditto for insurance. When tyres need replacing I just take it down the garage and get them to put new tyres on, when it needs a service I ring the garage and ask them to book it, then I just turn up on the appointed day. No bother with anything.

If you pick the car carefully the company car tax can also work out very cheap. Take the 320d as an example. Let's assume you pick the Luxury Auto model (the most expensive) and stick £2K of extras in (all counts for company car tax). This works out to costing you:
- @ 20% tax ~£1300 / year, or just over £100 / month
- @ 40% tax ~£2600 / year, or just over £200 / month

That's it. Nothing else except any private fuel you use. Motoring doesn't get cheaper!

I dont understand this post? You quote the examples of costings directly below an almost identical breakdown of the costs, you forget to add the cash allowance to the above.

The long and short of it is that the example you have quoted will cost the OP a net £530-550 per month. That is a fair whack to effectively rent a car. Plus this is if he picks a car carefully.

Motoring certainly does get cheaper!

 

[Havana_UK]

Simply stating my preference and the reasons behind it, as the OP requested.

Yes, the net cost is somewhat higher if you're prepared to buy a 2nd hand, but out of the extra you gain from the car allowance you have to pay for (and worry about) everything else.

Not for me, sorry!

I get a brand new car every three years and I don't have to worry about a thing.

 

[Del Lardo]

Simply stating my preference and the reasons behind it, as the OP requested.

Yes, the net cost is somewhat higher if you're prepared to buy a 2nd hand, but out of the extra you gain from the car allowance you have to pay for (and worry about) everything else.

Not for me, sorry!

I get a brand new car every three years and I don't have to worry about a thing.

If you're happy to spend £5-6k/year on a company car and the lack of hassle that comes with it then fine but to claim that it only costs you ~£2500 rather than ~£5500 totally misrepresents the reality.

 

[Havana_UK]

If you're happy to spend £5-6k/year on a company car and the lack of hassle that comes with it then fine but to claim that it only costs you ~£2500 rather than ~£5500 totally misrepresents the reality.

It COSTS me around £2600 / year, not £5500.

 

[Del Lardo]

It COSTS me around £2600 / year, not £5500.

So do you not have the choice of taking the allowance instead?

 

[[TW]Fox]

It COSTS me around £2600 / year, not £5500.

It doesn't, you must Add the cost of the allowance to your figures as well to give you the difference in financial position.

 

[Jez]

It COSTS me around £2600 / year, not £5500.

The only way that this is true is if your employer does not offer any alternative but to simply have nothing at all, for the reasons we have cited many times over in the thread. If this is your situation (which is highly unusual) then of course you would take the car, as it is effectively a pay rise hence it being taxed directly at your tax rate as a taxable benefit

To be honest i suspect that rather than having really understood the situation, you are actually the "typical" company car driver whom i made reference to in my initial post in this thread - ie, one who has not actually worked any figures and just dashes for the "new car woo" without thinking. (Please note that this is not a citisism as such, as it is very common. I would really struggle to tell you how many times i have heard the same as what you have said above from company car drivers IRL, my colleagues included.)

Company cars are hassle free, but they are usually nothing more than a fairly expensive way to simply rent a new (and often not very good) car.

 

[Tenzo]

This thread is interesting.

It'll cost c.£2600 pa for a company car

It'll cost insert no. to run your own vehicle

So while OP might pay c.£2600 for a company car and another c.£3000 in "lost" income, no one appears to be factoring in the running costs for his current vehicle?

OP has already stated it's unreliable and has a bill of c.£1000 to pay, plus services and consumables, insurance, tax etc.

So yes, if going the company car route you pay "more" but not as much as people are implying here. Additionally, some might view the "automation" of owning a company car as a complete godsend. Hassle free motoring as such..

Lastly, some confusion may arise from people not considering that the allowance could be used by some to purchase and run a new car. Not applicable to the OP at the moment, but this is perhaps why some people do not view the "lost" income as a cost, just an alternative means to fund a vehicle.

edit: Jez basically said it above ^^ I'd be one of the rare ones, with only an old 172 to run at the moment. I'd have to take the allowance to buy a new vehicle or go for a company car.

 

[rodenal]

Is fuel benefit included in that £2600 actual cost (before taking into account the "lost" allowance at circa £300 per month?) as it seems high for car only benefit - In saying that I haven't had to look into this properly for about 3 years now.

I reckon the car currently costs the OP in the region of £4200 (real) per year excluding fuel (but allowing £500 repairs, £500 insurance, 160 for a set of tyres every 3 years, £120 tax, £250 mot+service).

The allowance comes relatively close to covering this, again excluding fuel.

 

[Hagar]

I priced a 'modest' company car tax at 40% marginal rate for a 20,000 Honda Civic diesel and came to about £110pm car only tax paid. Together with my allowance of £300pm after tax and NI gave me a budget of £4920 per annum. This easily covers business insurance, tax, two full services, four tyres, MOT and a contingency.

You do need a car as well though to start with. So a company car driver starting off with an allowance would need to fund a purchase as well.

One advantage of switching is if you lost your income, you do still have a vehicle.

 

[Beta]

Some interesting thought provoking ideas here.

The way I see it, there are four scenarios

1) Keep the current Civic
Cost over 3 years is (18 months x £375) + (18 months x £160) = £8670 + £1,000 for new clutch/DMF ~ £10k
Optimistically, by the end of three years it would be worth £2.5k - 3k

Therefore, cost £7 - £7.5K

2) Sell Civic, buy equivalent price replacement but petrol
End result would probably be pretty similar to scenario 1

3) Sell Civic, buy newer, more expensive car in the region of £12k
Cost over 3 years roughly guessed at £500 a month (£300 a month finance payments, £200 Maintenance)
Total over 3 years £18,000
Optimistically, replacement would be worth £6 - 8K

Therefore, cost £10k - £12k

4) Take a company car, losing approx £330 net in allowance and £220 in tax, total £550 per month.

Total over 3 years, £18,000

Does this seem to be about right?

Any suggestions for scenario 2 & 3?

 

[[TW]Fox]

£2.5k is a very pessemistic value.

 

[Havana_UK]

I just double checked and I'm definitely not missing £3000!

My car as an example is a 2011 320d Tourer with a few extras, total list price about 35k.

BIK is ~£6600, which at 40% tax means roughly £2700 actual cost to me per year. That's all, the car costs me oohing else except private fuel, which is approx. £60-£80/month.

I do around 30-35k miles per year, and the tyres generally need changing between 25 & 30k, so let's assume one set of tyres per year, assume £700-£800 for a set of run flats. Servicing is approx 1.5 times per year, no idea of cost at BMW main dealer, perhaps someone can add this (£500 ish)? Road tax is basically £100/year.

I get average 48mpg from this car, and based on 30k miles and £1.35 / litre fuel would cost £3800 / year.

Insurance for personal + business use For 30k miles I would estimate at ~£700, maybe more, not to mention the cost involved if you actually stack it.

That tots up to £6150 / year.

Now you've got to buy the car itself. Depending how you choose to finance it has a big impact here, but let's assume you go for the highly popular PCP, which will probably work out at around £550 / month, plus you'll need a deposit, say £3k at least, and then will end up after 3 years with a car worth about £10k, against which you probably owe £9k.

So £6150. (running costs) + £6600 (car cost) + £1000 (deposit amortised over 3 years) leaves you with a total annual cost of almost £14k.

So, you get your £450 / month allowance, less tax and NI leaves you around £250 / month plus £9k which you can claim back against business fuel equals £12k per year, or a net loss of approx. £2k / year.

Now, if you're prepared to drive something else cheaper, or run a second hand motor then MAYBE you can make this work out in a profit, but for all the hassle....no thanks.

 

[[TW]Fox]

That is some VERY creative accounting.

Why are you including fuel cost in any of the calculations? You have to fuel both cars irrespective, and you'll get a higher rate per mile back if you don't have a lease car.

Secondly your 'maintenance costs' on the company car are grossly exaggerated, most 2011 320d's have a service pack anyway, nothing like 500 quid a year.

 

[Havana_UK]

There's nothing creative about it.

Fuel is included because you've got to pay for it. With my company car I have a fuel card and I simply have the private element deducted each month (as I said, between £60 & £80). Running a private car you claim the business mileage back from a combination of your employer and the tax man.

As for service pack, fine, drop it from the list, makes only a small difference.

Please put some figures to the claim that running your own car wih a car allowance makes you profit, or a least doesn't cost this imagined £3k per year that I'm apparently paying out!

 

[[TW]Fox]

Fuel is included because you've got to pay for it. With my company car I have a fuel card and I simply have the private element deducted each month (as I said, between £60 & £80). Running a private car you claim the business mileage back from a combination of your employer and the tax man.

Using only 60-80 quid of private fuel a month you are worse off with a fuel card than you would be if you claimed for business miles. So, your fuel expenditure with your company car is more than it otherwise would be as you don't get the benefit of receiving that mileage rate, which is typically higher than the cost of the fuel.

The main advantage of opting out is that you are freed from the shackles of the company car list and can choose your own car, meaning you are not stuck with dreary base model diesels. Jez for example runs a Mercedes SL with his. Because you run a company car you stuck with a 320 - with the flexibility of a car allowance you could be running a better specified, nicer model.

 

[Del Lardo]

or a least doesn't cost this imagined £3k per year that I'm apparently paying out!

You're not paying it out, you never receive it in the first place.

To try and make this really clear...... By taking the company car you do not receive the car allowance each month, now if I've read correctly you have the choice of either £550 Company car or £450 money in your bank. By taking the car you are not receiving ~£3100 money in your bank and this coupled with the £2700 tax bill means that you are actually have £5800 less in your bank account each year by taking the company car.

 

[Havana_UK]

...and how much can I claim per mile for fuel on a company car?

Answer: 15p / mile

Actual cost is about 12.5p / mile, but this is a recent change. Until this time last year you ould claim only 11p / mile.

So that's a 2.5p / mile, or £750 / year, but then I'd have to shell out for the fuel out of my pocket and claim it back. That over £310/month coming out of my account that I need to claim back.