Car or allowance - what would you take?

[[TW]Fox]

Company 320d: £2660 pa tax.

Cost of not taking car allowance: £6600 before tax, £3800 after tax.

NET COST OF COMPANY CAR: £6460. Thats how much it costs you to have a company car. You are paying £538 a month. This is where you go wrong - you fail to account for the lost car allowance as a cost.

You are shelling out 538 quid of your own money for:

a) a tool for your employer
b) A car which, privately, you barely use if you only spend 60 quid on private fuel.

And you think thats a stonking deal?

 

[Havana_UK]

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

Precisely my point. Company car COSTS £2.7k / year.

 

[[TW]Fox]

...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.

Your own car, if you had that instead, isn't a company car though. Those rates are presumably for people with a company car but without a fuel card.

 

[[TW]Fox]

Precisely my point. Company car COSTS £2.7k / year.

No it doesn't!

It costs £2.7k + the lost car allowance.

If you didnt have the company car you'd receive an additional salary - therefore it cannot be ignored, it is a COST of chosing the company car above and beyond the tax you pay.

 

[Kenai]

Precisely my point. Company car COSTS £2.7k / year.

Pretending you're not losing out on the rest of it though just because it's money you're not being given rather than money you are spending is silly though, it's just deluding yourself.

You can't ignore it if you want to truly appraise the two financial positions.

 

[[TW]Fox]

Its like me saying 'If you don't buy that McDonalds for £5, I'll give you £10' and then you claiming the McDonalds you subsequently bought only cost you a fiver. It didnt, it cost you 15 quid. ie, your net position if you didnt buy the McDonalds would be +£15 not just the cost of the McDonalds.

Seriously, it's a pretty simple concept and I don't really understand why so many company car users don't grasp it.

 

[Havana_UK]

Said "lost" car allowance is to run a car though, its only extra money in our pocket if you don't spend it, so pray tell how you can have a free car, thus being allowed to keep this extra money every month.

Also, for what it's worth under the company car scheme we run I can choose any car I like, and just pay any extra over my monthly budget myself.

 

[Kenai]

Seriously, it's a pretty simple concept and I don't really understand why so many company car users don't grasp it.

I suspect many simply don't want to in all honesty, as it makes the choice of a company car seem much less sensible.

 

[Tinders]

Surely, if you take the money and run then you have to source and run a car. Any decent car that is used for work is going to cost money, tyres,servicing and lets not forget the cost of buying a nice car. And also if you do reasonable mileages the car after 3 years is going to be worth a lot less.

Imo, I can see both sides of the arguments, but neither of you are painting an accurate picture

 

[Havana_UK]

I'm painting as accurate a picture as I can from the side of being a company car driver. The assumed costs for running the same car privately are necessarily guess work and hence a little vague, but no-one else seems to be willing or able to put any real numbers on the running of a similar private car as a company car.

If someone can show me how I can run the car I have today as a privately owned car used for business, and be better off than I am now I'll gladly listen.

 

[Del Lardo]

Precisely my point. Company car COSTS £2.7k / year.

I'm painting as accurate a picture as I can from the side of being a company car driver. The assumed costs for running the same car privately are necessarily guess work and hence a little vague, but no-one else seems to be willing or able to put any real numbers on the running of a similar private car as a company car.

If someone can show me how I can run the car I have today as a privately owned car used for business, and be better off than I am now I'll gladly listen.

The cost of running a similar private car are totally irrelevant to working out what the company car is costing you. I'm even happy to accept that at 30k/year mileage a company car could work out to be the better bet financially or close enough that the saved money vs. risk isn't worth it. However this doesn't mean that taking the company car doesn't cost you Company Car Tax + Loss of (post tax) car allowance income, in your case ~£5800/year

 

[[TW]Fox]

If someone can show me how I can run the car I have today as a privately owned car used for business, and be better off than I am now I'll gladly listen.

A 9 month old 320d M Sport Touring (ie, the same car you've got now - exactly the same unless you collected it 1 day ago becuase yours probably has at least 5k miles on it) costs about £22k.

Lets keep it for 3 years.

They've all got service packs so servicing costs will only be about £250 for the duration of the 3 year ownership once it expires. You'd also renew the warranty and assistance so you get no hassle, no faff and the same service you get if there was a problem with your new one. So £500.

You've told us you spend £800 on tyres a year. Lets keep that.

So, cost of maintaining a 320d for 3 years: £3150
30k a year of fuel @ £1.35 @ 48mpg: £11491
3 years insurance: £1500 (Rubbish would it cost £700)
3 years tax: £300

About £16k.

Lets finance it.

£1k deposit. It'll trade for £9500 after 3 years.

So you are going to borrow £21k with a £9.5k baloon at say 9% APR.

So, thats interest of £3040 over 36 months.

About 400 quid a month if we end up in a situation where you can walk away in Month 36. For simplicity sake we'll divide your deposit over the 36 months too just to give us a monthly cost. So £427 a month on financing it.

So, running costs = £450 a month
Finance = £430 a month

Cost per month = £980

WHOA you say. More expensive than my company car.

Not so.

Now its time for your monthly expenses claim. We'll say 25k miles are business miles. Using HMRC guidance lets assume that, as its NOT a company car its your car, you'd get 40p a mile for the first 10k and 25p a mile for the rest.

You'd be claiming back £7750 tax free per year. £645 a month.

After that, your monthly cost drops to...

£335 a month.

Your company car is costing you a fortune.

 

[wassap]

I cant opt out, but if i could I wouldnt, as the fuel benefit and high private miles mean that a company car is better for me.

I have an Accord, and thats the level of car i'd want privately.

So lets look at the costs ive experienced.

2 year old model 2.2 ESGT Accord - circa £15k to buy.

Over a year you will need :

2 services - £500?
1 set of tyres - £500
2 tanks of fuel a month - £180

Apart from that, I havent experienced any extra costs, so the only other thing to factor in is depreciation, as it stands, my 3 year old car with 75k is worth a paltry £9kish and it would be a paint to shift at that mileage.

I personally think if can and are willing to drive an oldish motor and can run it into the ground, then opting out is the best way, and will result in you making money, but if you want a newish car, then im not so sure.

 

[Havana_UK]

After that, your monthly cost drops to...

£335 a month.

Your company car is costing you a fortune.

...of the £335 / month the car allowance (say £450 less tax/NI) would leave me £80 to make up out of my own pocket...for a second hand car.

I want a brand new car with 0 miles n it, just like I get now.

 

[[TW]Fox]

...of the £335 / month the car allowance (say £450 less tax/NI) would leave me £80 to make up out of my own pocket...for a second hand car.

The car allowance in the OP is £550. These are the maths I worked to. But whatever, it's still costing you MILES LESS MONEY than your company car.

Remember, your company car is costing you £540 a month! For a car that isn't yours!

The reason why you don't get it is because you keep refusing to consider the refused car allowance as a COST you incur when you take the company car.

If you chose car not cash you are effectively taking a pay cut *AND* paying company car tax when compared with taking the allowance.

I want a brand new car with 0 miles n it, just like I get now.

You don't have a brand new car with 0 miles on it parked on your drive. You have a 2011 320d. My figures are for a 61 plate 320d with 4k miles on. Therefore its newer and lower mileage than your current car.

 

[Kenai]

Using HMRC guidance lets assume that, as its NOT a company car its your car, you'd get 40p a mile for the first 10k and 25p a mile for the rest.

45p

 

[[TW]Fox]

45p

It's even cheaper then, I forgot they'd done that. My maths are based on just 40p a mile.

 

[rodenal]

Be careful with the 45/25p comparisons, I've never hada car allowance where I could collect those rates - usually in the region of 16p like the co car drivers but can claim the difference in tax at year end

 

[Havana_UK]

I've had it for a year now, and in two more years I give it back and get a brand new <insert chosen car here> built precisely to the spec I want.

In the meantime I pay about £220 per month in company car tax and have not a care in the world about my car.

 

[[TW]Fox]

Yea, but it's still part of the total overall cost as you can claim tax releif on the difference.