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Car Allowance

Discussion in 'off topic' started by garyi, Nov 10, 2017.

  1. garyi

    garyi leave blank

    Hi folks

    Could someone tell me the differences/plus/minuses with a car allowance Vs a company provided car?

    I'll do my own research but real life examples is always better.

    I am currently drive a volvo which wipes out my tax fee 10k each year.
     
    Last edited: Nov 11, 2017
    Spike likes this.
  2. thebiglebowski

    thebiglebowski pfm Member

    You've just answered it yourself, company car taxes these days are shite.

    You pay income tax on the allowance but company car is classed as a BIK.

    Also a car allowance is your employer paying your car loan ;)
     
  3. garyi

    garyi leave blank

    Sorry I am confused by your answer.
     
  4. The Far North

    The Far North pfm Member

    I think it still depends on the amount and type of mileage that you are driving. If you're doing 30 or 40k a year with a bootful of gear, you'd need a big allowance to cover that kind of cost and depreciation yourself. If you're doing perhaps 10k a year in town, there mught be attractive PCPs on hybrids or EVs which your allowance might cover.
     
  5. thebiglebowski

    thebiglebowski pfm Member

    short answer is if you do a lot of miles take the company car if not take the allowance
     
  6. garyi

    garyi leave blank

    Ok, fair enough. I think last year is shaping up to be 25k which is less than usual.

    There will be an allowance for the car then they pay a certain amount per mile. So I guess thats a negotiation point.
     
  7. Ponty

    Ponty pfm Member

    On that sort of mileage, I’d have thought some sort of hybrid company car with low BIK would be the best bet. If running yourself you’re going to get shafted unless you are on a very decent allowance and buy a 1 year old Passat or something equally dull. When I was in your shoes, the way I looked at it was if I was stuck in the car for 25K miles a year, it needs to be a nice place to sit.
     
  8. richgilb

    richgilb pfm Member

    I had that option for 12 years. If you are lazy / don't like second hand cars / your employer insists you get a new one and only keep it for 3 years with your allowance / stupid, then get a company car.

    I did 25,000 miles a year. But on a 5 year old car £3-5k with 100k on it I was quids in on a £6k allowance

    My employer did not stipulate how old the car could be...so a banger i got. Mostly they say you need to get rid after 5 years. So you buy a 3 year old one and keep it for 2 years.
     
  9. richgilb

    richgilb pfm Member

    Yes we had a mileage allowance too. Beware the diesel rates, everyone was losing on that one and paying to go to meetings. you need to get a 1401 or 2001cc diesel for it to work.

    LPG was not on our list initially, so i went to a Polish back street hacker in Leeds and got LPG fitted for 650 quid (5 times over 12 years) and claimed the petrol rate. That made me £2k a year. A few years in, the LPG appeared in the company mileage rates, so I put the nozzle hole behind the filler cap on subsequent cars.
     
  10. richgilb

    richgilb pfm Member

  11. The Far North

    The Far North pfm Member

    It's pretty much 45p a mile for the first 10k, then 25p a mile after that, so easy to work out what you'll get with the money. If you like new, remember that pre-reg and demonstrators will save you loads off the list price.
     
  12. garyi

    garyi leave blank

    I guess what I am asking is what should I be asking!

    Things are rosey now, and whilst the car should not be the deciding factor, i feel its important when in previous years I have topped 35k a year. I dont want to have to drive a ford mondeo because its something I can afford.
     
  13. richgilb

    richgilb pfm Member

    I'm referring to the car allowance petrol chart, not the use of own-car allowance.
     
  14. richgilb

    richgilb pfm Member

     
  15. JensenHealey

    JensenHealey pfm Member

    I am on an allowance - but in my case the right to a company car is more about a status car. My business mileage is naff all these days. In my case I asked the FD what the 'allowance' for my grade was. Then I added fuel, insurance and said add it all up and pay it as extra salary. Amazingly they did! - but then Americans do not 'get' company cars - nor do many Europeans - it is a fairly unique UK thing.

    Friends get allowances of the order of £300 a month, or less, and then have to finance a car using that and the lower mileage rate.

    I have worked in companies with a decent mileage allowance and peeps bought 'bangers' to make a profit. But it all seemed a bit stressful on the driver. You got a big rollicking if unreliability caught you out!

    If you do a lot of miles, find a low BIK car that you are prepared to afford and enjoy a new car every 2 - 4 years. There are some very good cars with 'low' BIK around. No one in my company doing proper business mileage (15 - 30K most of 'em) takes an allowance. All the senior manager cars are private with the allowance.
     
  16. cutting42

    cutting42 Heading to Fish Hacker Erg \o/

    I have had a company car for 25 years and my company does not offer an allowance alternative but I am considering asking for one. It is essentially a perk car but I do like having a stress free car and have a decent lease allowance and currently have a BMW X5. The tax is pretty brutal so I need to balance that against getting the value in cash less income tax and what car I could get for that.

    This is the most taxed car I have had ever and I might change my strategy to a cheaper BIK car or try for an allowance.
     
  17. stevec67

    stevec67 pfm Member

    There isn't a one size fits all answer. Sadly you will need to do your own arithmetic. If you pay 40% tax then the same car deal will cost you twice as much as if you only pay 20% top rate. In addition your employer may be prepared to give you a lease car at £300 a month but if you ask for the £300pm to buy your own car he may tell you to Foxtrot Oscar and give you a smaller amount. You may be forced to buy/lease a newer car with heavier costs than you would choose, as your employer may not want you showing up at clients in a 10yo Astra. Worse, your employer may have a ban on you showing up at clients in a Porsche 911, should you choose to buy one with the allowance. The mileage rates will vary too, as Rich points out above.

    I've a mate who works for the NHS, he can get something like a BMW X3 hybrid and his tax bill is well under £200 a month. A new car, upmekret model, taxed, insured, ready to go, under £2k a year. Who wouldn't say "Yes please"? Conversely I run my own business, last year I billed clients for 20k business miles in my own car. That's 10k at 45p, 10k at 25p. £7k revenue, tax free, straight through the business and into my pocket. Fuel came in at just under 40 mpg, so about £2500, leaves £4500 to tax, insure, maintain and buy/lease the thing. Easy. I can have a £300 lease if I want or buy outright and I'm still in front. I currently run a ratty Mondeo, I should move up the food chain but can't be bothered. I actually run the Mondeo and the Mazda sports car on the mileage charges. I should get rid of the Mondy and track down a nice respectable workhorse, like a 5 series diesel with a recent-ish plate and a few miles up, that would tick a few boxes.

    As to what you should do, you need to get the rules and then either post them all up here or do some sums yourself.

    Edit - there are a few tasty cars that are low BIK. It used to be diesels, now it's hybrids. It's all a scam to keep new cars churning through the UK car industry, so play the game and get a hybrid. If your employer doesn't offer you a cash alternative then I wouldn't bother asking for one unless you have specific car needs, which you don't.
     
  18. garyi

    garyi leave blank

    I am concerned with this leasing thing, essentially this might be a new job and I dont want to be left holding the baby if it does not work out.

    I think I shall negotiate with them. I also wonder if a lease can be novated, I love the car I am in now, buts its a company one.
     
  19. johnhunt

    johnhunt pfm Member

    Plug in hybrid is they way to go. Even if you don’t actually plug them in. I have a 330e on order via leasing company into my employer. Who have enough rules in place to prevent taking an allowance and sourcing your own vehicle
     
  20. omegatt

    omegatt Member

    Just came out of my company car and took the car allowance. OK mid tax year but my paid tax ( @40%) this month just dropped £600 with the change in tax code. My car allowance of £650, and leasing an Audi A4 Avant @ £220 per month, makes me wonder why I didn't do it sooner !
     

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