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Thread: Company car vs car allowance

  1. #1
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    Company car vs car allowance

    There may be a change on the horizon and I may be faced with the above question.

    Can anyone help me understand the financial pros & cons for both scenarios please? Currently I have a pretty boring diesel estate company car with cash equivalent value of around £8k and I was wondering if I’d be better off with an allowance for a lease?

    Thanks

  2. #2
    There are various websites that will explain the ins and outs. It will depend on the value of the car allowance, how much they’ll pay you per mile, your tax bracket, how many miles you’ll do.

    Without knowing any of the above, I would guess taking the car allowance and keeping the current car would leave you best off financially.

    When I got a car allowance from work I used it as a way of ‘justifying’ a brand new car on lease.

    Don’t forget if you get a car allowance and get paid for mileage, you should be able to get some tax back at the end of the year.

  3. #3
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    The most important question I think is around your annual mileage. If you do sub 12k miles, unless the car scheme is very attractive you’re probably always better to get a personal lease.

    £8k sounds like a generous allowance. Translates to roughly £5k after tax thats £450 a month day to get something, insure it and maintain it.

    There’s a really useful car leasing thread on here which should help you get a guide on respective costs.

  4. #4
    Quote Originally Posted by thestore View Post
    There are various websites that will explain the ins and outs. It will depend on the value of the car allowance, how much they’ll pay you per mile, your tax bracket, how many miles you’ll do.

    Without knowing any of the above, I would guess taking the car allowance and keeping the current car would leave you best off financially.

    When I got a car allowance from work I used it as a way of ‘justifying’ a brand new car on lease.

    Don’t forget if you get a car allowance and get paid for mileage, you should be able to get some tax back at the end of the year.
    Sorry I misread your post, I thought you owned a car worth £8k

  5. #5
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    Quote Originally Posted by Chinese_Alan View Post
    The most important question I think is around your annual mileage. If you do sub 12k miles, unless the car scheme is very attractive you’re probably always better to get a personal lease.

    £8k sounds like a generous allowance. Translates to roughly £5k after tax thats £450 a month day to get something, insure it and maintain it.

    There’s a really useful car leasing thread on here which should help you get a guide on respective costs.
    I always took my allowance and never removed the tax for calculating what I could spend monthly. Reason being that my BIK on my company cars maxed out my tax free allowance so paid 40% on more income.

    Allows a better choice of car too.


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  6. #6
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    Mileage is good indicator to determine between car or cash, last time i looked at this I believe it was around 16k, to consider depreciation and other costs. As others have commented, there are plenty of online resources and it comes down to personal situations.


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  7. #7
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    Also, make sure you look up optional remuneration arrangements if you have a choice between the cash allowance or a company car.

    https://www.gov.uk/government/public...n-arrangements

    https://www.gov.uk/guidance/optional...f%20cash%20pay

  8. #8
    Grand Master JasonM's Avatar
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    I had a similar choice to make some years ago, I went with the allowance, the tax saving plus full mileage allowance and a 20k + miles pa meant that the allowance plus expenses paid for the car and all costs via a personal loan in 4 years I think it was, I bought a 4 year old car for 13k. The idea was when the car is paid off I do the same again and the old car was either a deposit or sell it. The problem is though, the car is very high mileage at this stage, it still worked out as ‘free’ motoring plus a car at the end of it.
    Cheers..
    Jase

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    Good advice above. I'd expect the car and mileage allowances to be the best option with greatest flexibility but if you're after an electric vehicle and/or stress free ownership then the company car could be preferable.
    Last edited by deepreddave; 24th January 2021 at 14:43.

  10. #10
    Grand Master JasonM's Avatar
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    Just a general tip / advice, I opened a separate expenses bank account and had my work expenses and allowance paid into that, all the car stuff, fuel, insurance, loan tax etc comes out of that account, generally, there are excess funds in there that build up nicely ( especially in the 45p a mile months) and pays for the extras like servicing and tyres periodically.

  11. #11
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    Quote Originally Posted by JasonM View Post
    Just a general tip / advice, I opened a separate expenses bank account and had my work expenses and allowance paid into that, all the car stuff, fuel, insurance, loan tax etc comes out of that account, generally, there are excess funds in there that build up nicely ( especially in the 45p a mile months) and pays for the extras like servicing and tyres periodically.
    Good move, do something similar myself. Or did anyway when I used to claim expenses miles. Wonder if I can claim for wear and tear on my stair carpet as a result of me being at home all the time now.

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    Quote Originally Posted by Chinese_Alan View Post
    Wonder if I can claim for wear and tear on my stair carpet as a result of me being at home all the time now.
    Indeed maybe I'll check with my accountant and see if it's now deductible

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    Quote Originally Posted by cbh View Post
    Indeed maybe I'll check with my accountant and see if it's now deductible
    Not incurred in the performance of your duties unless your job is walking up and down the stairs and difficult separating business and private element!

  14. #14
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    There was a thread about claiming £6pw expenses when required to work from home and HMRC's relaxed approach to claims in 20/21 due to Covid.

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    Quote Originally Posted by Gav View Post
    Not incurred in the performance of your duties unless your job is walking up and down the stairs and difficult separating business and private element!
    It was a joke, but maybe I'll get onto Axminster and see if they need anyone to do home trialing...........

  16. #16
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    Thanks for the comments so far. To be clear, the change would be leaving my current company (and handing back the company car) and then having to make the choice at the new firm.

    Is it typical to expect a choice of company car?

    Edit: mileage (in a non corona year) would be around 6k I reckon.

  17. #17
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    Quote Originally Posted by rico View Post
    Thanks for the comments so far. To be clear, the change would be leaving my current company (and handing back the company car) and then having to make the choice at the new firm.

    Is it typical to expect a choice of company car?

    Edit: mileage (in a non corona year) would be around 6k I reckon.
    It depends on the company, you may have to inherit a car for a bit if the position became vacant mid lease, if that’s not the case, then there should be a limited choice of similar level of cars. Companies car policies are very varied in my experience. Is it a big firm or small? A large firm with a big fleet will usually have a pretty tight policy, I have found that smaller ones are more flexible.
    Cheers..
    Jase

  18. #18
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    Quote Originally Posted by JasonM View Post
    Companies car policies are very varied in my experience. Is it a big firm or small? A large firm with a big fleet will usually have a pretty tight policy, I have found that smaller ones are more flexible.
    I think a lot of companies are ditching company cars using environmental reasons as an excuse. Similarly reducing choice and certainly engine sizes is something I have seen. I'm out of teh loop on the benefit in kind charge on cars but I'm guessing that's now pretty punitive unless you choose an electric vehicle.

  19. #19
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    Quote Originally Posted by JasonM View Post
    It depends on the company, you may have to inherit a car for a bit if the position became vacant mid lease, if that’s not the case, then there should be a limited choice of similar level of cars. Companies car policies are very varied in my experience. Is it a big firm or small? A large firm with a big fleet will usually have a pretty tight policy, I have found that smaller ones are more flexible.
    My current company has about 2k people in the UK (30k globally) and the policy is very tight. One type of car for most and one other type of car for managers.

    The next company is much smaller, probably a few hundred people in the UK only and the role would be created for me (or the successful applicant).

    Any kind of vehicle that needs plugging in to the mains is not an option for me.

  20. #20
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    Some companies are very restrictive, Bain Consulting for example buy a job lot of cars in the same colour & spec for certain levels.

    I’ve had various over the years, from ‘any car up to £ monthly cost’, ‘any car from Ford’ (had a focus RS from that), the rest have been from a provided list, but there are always ways to negotiate more in my experience.

    Most have had a 6 month requirement to use an existing car within the pool if available & get you through probation etc.


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  21. #21
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    Quote Originally Posted by rico View Post
    Thanks for the comments so far. To be clear, the change would be leaving my current company (and handing back the company car) and then having to make the choice at the new firm.

    Is it typical to expect a choice of company car?

    Edit: mileage (in a non corona year) would be around 6k I reckon.
    Based on that mileage, I’d have thought that taking the cash allowance (which seems pretty generous) would be the better option, and even more so if of the higher tax bracket. Write down the numbers on both and see what the figures look like.


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  22. #22
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    Quote Originally Posted by mrsammyp View Post
    Based on that mileage, I’d have thought that taking the cash allowance (which seems pretty generous) would be the better option, and even more so if of the higher tax bracket. Write down the numbers on both and see what the figures look like.


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    I think I would agree with that, it’s a low mileage so buying a year or two year old car ( gets the initial depreciation out of the way )with a decent warrenty and it will hold its value well, paid for over a few years and the company has paid for a car you own. That was my thought process when I did it.
    Cheers..
    Jase

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