Looks like I may be given the option, in simple terms whats the benefits/drawback ?

Depends on what you get offered as a car.
I had a Focus 1.6 zetec, it cost me £45 a month in tax. Can you honestly buy, run and insure one for that much?

not that i would buy one but make a great company car...........skoda octavia

If you get a car allowance for not taking the company car, it can be worth it, if you get a car allowance and good milage rate it can really be worth it i.e. currently you are allowed 40p per mile for the first 10000 miles = £4000 tax free! (25p per mile for every mile thereafter)
But if neither of those apply and you fancy a new car, take the car option
The cost of having a company car varies depending on the emissions level and the list price of the car (or has it changed again?) but will allways cost you less than if you bought the car yourself.

Hope that helps

Cheers

Alex

quote:

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The cost of having a company car varies depending on the emissions level and the list price of the car (or has it changed again?) but will allways cost you less than if you bought the car yourself.

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Here's all the info needed on car tax calculations:

Clicky

Bear in mind that the tax is calculated on the the book price of the car, not the deal you've managed to get.

I got the salesman on a good day and he knocked 5k off the cost of the car, but mines still calculated on the list price.

quote:

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Originally posted by ecosse
If you get a car allowance for not taking the company car, it can be worth it, if you get a car allowance and good milage rate it can really be worth it i.e. currently you are allowed 40p per mile for the first 10000 miles = £4000 tax free! (25p per mile for every mile thereafter)
But if neither of those apply and you fancy a new car, take the car option
The cost of having a company car varies depending on the emissions level and the list price of the car (or has it changed again?) but will allways cost you less than if you bought the car yourself.

Hope that helps

Cheers

Alex

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quote:

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Originally posted by Humbug

I get a car allowance instead of a company car, and if I need to do business mileage my company only pays me 20p a mile... However, I found that you can get the difference between the Revenue-approve amount (40p) and what you actually get paid deducted from your overall taxable income. I don't do many business miles but it will be worth a couple of hundred quid, anyway.

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I'd thoroughly recommend an Octavia for a personal buy as well as a company car

All depends on the balance of private and business mileage.

I've just had to buy a car as I'm moving jobs and have had a fully expenses car for the last 16 years.

I do alot of private miles commuting so the depreciation is a huge cost, probably £3-4K a year on a decent car. Fuel also is a whopping £3K a year and that's after 40% tax and 11% NIC Add in running costs, insurance and repairs and it really adds up. I've had to go for a group 6 deisel doing around 55 mpg to get the best out of the deal.

If you can rack up 10K business miles I think it will even out but there is still the peace of mind knowing if you hear a funny noise etc. it's not your problem.

I'd go company car every time.

Unless you are doing high business, low private miles you won't get it to stack up on all but the most generous car schemes.

The only way to be sure is do the maths.

HTH

[Edited on 6/1/07 by pajsh]

Hi,
The company I work for recently gave employees the choice between a company car and a car allowance. Many of my colleagues did the sums and decided that a car allowance was better. I have a car allowance myself and I think it works very nicely.

What many people forget to take into account with a car allowance is that you have an asset at the end of the 3 years compared to the company car where you have to hand it back. Take a typical £18k car, unless you choose one which depreciates badly, it will be worth between 45 and 55% of the value after three years during which time it will probably be covered by a manufacturers warranty and won't need any MOT's. The main costs excluding fuel are (in approx order of significance):

1. Depreciation (9k)
2. Insurance (say 250 x 3 = 750)
3. Tyres (say 4 tyres = 400)
4. Road Tax (say 160 x 2 = 320)
5. Servicing (say 120 x 2 = 240)

Total is 10710 over 36 months = £297.50 per month
However, you now have a £9k asset which, if you spread that over the 36 months takes 250 per month off the above figure leaving a comparative cost of £47.50 per month. Obviously if you needed finance to buy the car in the first place then you would need to take account of that too.

Note, assumes what I believe to be typical costs. YMMV...

Any use for business purposes is covered by the 40p per mile you can claim back, usually partly from employer and partly from Inland Revenue.

The other option of course is to buy a second hand car but then you need to think about repair costs and it's not really comparing apples with apples when comparing a brand new company car with a 6 year old, 60k mile car.

The key to making it work is to choose a car which does not suffer bad depreciation. Also, buy a pre-reg car to lessen the initial depreciation.

Cheers,
Craig.

ps. Just looking on Parkers.co.uk website and the variation in depreciation is much wider than I thought. My SEAT Leon Cupra R has 60% residual after 3 years, a Ford Mondeo 1.8 Zetec has just 30% It's obviously crucial that you find a car with good residual value. Funny how I can drive a 225BHP petrol turbo and actually save running costs compared to a Mondeo diesel !!

[Edited on 6/1/2007 by craig1410]

[Edited on 6/1/2007 by craig1410]

I've just taken the car allowance in lieu of a company car after 12 years of company car driving. I can't see how you can lose to be honest. I'm driving a 52 Merc C270 CDi in lieu of a Mondeo and making money too. Depending on your company scheme, you can make quite a bit of money over your salary if you don't mind driving a 'not new' car. Some employers insist that you drive a car of a certain age and type however. Mine insists that the car has at least 4 seats and that's it.

Yes my company says that it has to have at least 4 seats and be able to transport goods and equipment relevant to my job. As I am an IT Consultant that usually means me, my laptop and a notebook...

When I first got my car allowance I used it as the excuse to move from an 11 year old Rover 800 Vitesse to a 2 year old SEAT Alhambra. I got fed up repairing the rover...

My car allowance more than covered the finance on a £17.5k loan (car was £14k) and I was paying for all the other running costs beforehand anyway so was no worse off. I have since traded the Alhambra in for a 1 year old SEAT Cupra R to get back under a warranty again.

I ran the Alhambra for 27 months and traded it for £9.5k (£4.5k depr. in 27 months - pretty good I'd say!)

Cheers,
Craig.

As I said before it is all about mileage and the split between private and business.

If you only do 10K a year the depreciation will be vastly different than doing 30K a year. The servicing and tyre costs will also factor but not so great as the finance, fuel and depreciation costs. Even if you do not have to borrow money there is always the loss of interest to take into account.

All PCP schemes look attractive based on 10K per annum but when you tell them to base it on 20K or 30K the figures shoot up.

I bought a Bora for £18K and after 3 years and 70K it was only worth 6K.

It all depends on your personal circumstances. For me doing around 30K of which at least 25K will be private an allowance will never match fully expensed a company car.

quote:

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Originally posted by craig1410

1. Depreciation (9k)
2. Insurance (say 250 x 3 = 750)
3. Tyres (say 4 tyres = 400)
4. Road Tax (say 160 x 2 = 320)
5. Servicing (say 120 x 2 = 240)

Total is 10710 over 36 months = £297.50 per month
However, you now have a £9k asset which, if you spread that over the 36 months takes 250 per month off the above figure leaving a comparative cost of £47.50 per month. Obviously if you needed finance to buy the car in the first place then you would need to take account of that too.

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It's not as good as a free van

quote:

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Originally posted by Peteff
It's not as good as a free van

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I think many of you are missing the point, the question you have to ask is "would you have a car if you were not offered a company car"?

The answer I suspect is yes. Therefore you cannot include road tax or insurance or servicing/repairs into the equation (until you have exceeded your normal annual milage, i.e. 10,000)

The next step, as has been pointed out, is to run a vehicle which has very low depreication i.e second-hand.

Also, identify a vehicle which will give you a good number of miles to the gallon to lower your running costs further.

Yes, accepted you may have a slightly higher thatn average bill for repairs, but, as you are all extremely good kit car builders, doing the repairs yourself should save you a lot of cash compared to a average garage bill of £30-50 per hour.

the result is this... A beaten up 12 year old montego turbo diesel. I get paid 40p/mile and a considerable monthly car allowance to drive this around. Not to mention that it regularly returns in excess of 55mpg, has zero depreciation, and I drive on roads so congested a Ferrari couldn't get you to your destination any quicker, so lack of horsepower (and there is a considerable lack) is not an issue, (although at the weekends I am building a W*******d) and I also have a motorbike.

Also consider that you are not creating a massive carbon footprint by buying a new car, and all that free cash you will have by not having to shell out large sums of money every month on repayments... the list goes on....

Consider yourselves enlightened!
Rescued attachment Monty 01.jpg

quote:

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Originally posted by pajsh
Sorry but this is very misleading and incorrect.
[Edited on 6/1/07 by pajsh]

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This just bears out what I said that you have to do the maths for yourself. Whilst the calculations are simple there are many variables.

Using your example:-

1) My co car was a diesel rated at 19% tax so would only cost £2,257 or £63 per month at 22%.

2) You loose NI at 11% on the £500 so the income falls to £335 per month.

Just these two changes reduce your figure from £146.75/month to £55.75/month.

In addition to this your insurance could cost you 3 times what you quote for full business use (depending upon your NCB and driving history and your depreciation could easily be £500/annum more than quoted.

These could easily wipe out £55.75 and doesn't consider peace of mind or changes to variable interest rates.

Regarding mileage depending upon your personal use, business use, mpg, CO rate, and tax rate 22% or 40% these could all vary dramatically and affect your income, expenditure and residual values.

You just have to run the figures thorugh based on you own circumstances.

[Edited on 7/1/07 by pajsh]

All I am doing is helping people to understand how to go about comparing the two so they can crank the handle and see what results they get for themselves. I am pleased to see that you didn't find anything fundamentally wrong with my method of calculation.

Taking your points in turn:

1. If you have a reasonable amount of business miles then you will recoup some or all of this in "profit" from the 40p per mile you claim back since a diesel will have better MPG than I get (30).

2. Yes I missed the NI contributions but then again £500 per month is by no means the maximum allowance. For my company they call this "Standard" allowance. There are at least two grades above this.

3. Insurance costs could also be considerably less. My car is a group 17A and is insured for business use with Admiral for just over £300 even though I have two fault claims in two years (both my wife parking) and one SP30 conviction.

4. Depreciation can also be less as with my own car (60% residual after 4 years). I did say choosing a car with slow depreciation was key to making this work...

5. Not sure why I would have less "peace of mind" with my own car covered by a 3 year warranty compared to a company car. More than made up for by the fact I don't have to let other company personnel drive the car and I have more choice when buying the car. Also, a personal loan doesn't have a variable interest rate normally. Once you accept the loan the repayments are fixed for the term.

I agree that you need to work this out for yourself using your own criteria but I would stick my neck out and say that many, perhaps even most, people will find that a car allowance is better than an equivalent company car. This was certainly the case for my colleagues.

Cheers,
Craig.

Quite right you need to run it though based on your own figures which is the point I have been making all along.

I would not feel confident saying one way is likely to be better than the other though as a general rule. It will vary for each individual depending upon their circumstances, the car, the mileage, taxation, CO rating, income tax rate, driver history, car allowance etc. and of course personal preference.

A fully expensed car was cartainly better for me than a car allowance but as stated that is due to my high private miles.

I would go company car everytime even if it cost me more as I value the hassle free issues of not having to buy, tax, service and insure the car and knowing if it got a minor dent in the supermarket or SWIBO kerbed the wheels it was not my problem.

ATB

I still don't agree that a company car is less hassle than a private car. In our offices there are always hassles with the leasing company complaining about scratches and dents in cars getting handed back, speeding/parking tickets coming in to our finance director who then needs to chase up the car owner, problems with the wrong spec car being delivered, problems with servicing not getting done properly etc.

I think car dealers treat company cars with less respect that private cars because they can usually get away with it.

Anyway, I think we've probably bored everyone on the forum to death by now so I'm going to quit while I'm ahead... (only winding you up)

ATB,
Craig.

No probs I'm just pi55ed off cos I've just moved jobs and whilst previously I had a fully expensed brand new car every 3 years, with a £500 monthly allowance I reckon unless I do more than 10K business miles I'll be out of pocket with a 2 year old car and still cop for all the risks.

Hopefully worth it in the long run though.

ATB

[Edited on 10/1/07 by pajsh]

As noted earlier in this thread it depends upon what mileage you do.

If you do alot of business miles and few private you may do better with an allowance although you still have all the hassle of buying the car, loans, insurance, servicing, cost of fuel going up, MOT, Tax, damage and not to mention breakdown.

For me, I do high private, to & from work, so it's a no brainer. No way could I get an alowance to come close and even if I could the peace of mind alone is worth it.

You do need to go into it in great detail though and it can vary depending on lots of variables.

[Edited on 19/12/07 by pajsh]