In the last couple of years huge swathes of former company car drivers have opted out and now run their own cars. This is in part due to subtle persuasion by the government and also by companies such as my own.
My question for discussion is as follows, is this harming the sale of high-spec luxury cars and indeed new cars in the UK ?
In my own experience, the majority of people that have opted-out drive a far cheaper car and keep it longer than they would if still in the scheme. For example I myself drive a car that is probably £8000 cheaper new (list price) than what I would be able to get as a company car.
Also, when you are running your own car, you tend to do things differently than the 'blank cheque' way company car drivers do, regarding servicing, repairs, new tyres etc !
Hope this stirs some interesting debate.
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From what I can gather the new company car tax structure is flawed.
The idea was to reduce Co2 emmissions by encouraging the use of cleaner vehicles with lower Co2 ratings. These cleaner vehicles would then filter down to the used car market after three years. However, because of the tax burden of the new rules many companies have either opted out of company cars altogether or are offering their employees a cash alternative instead.
This cash is generally being spent on buying older/luxury/sports vehicles that are not as clean as the cars the employees would have got had they remained as company car users.
Also, because of this opting out govt company car tax revenue has also dropped significantly.
It probably does harm the sale of brand new luxo barges but it's a niche market anyway. It's probably been good for the used market in such vehicles. No matter how you look at it the govt has lost out on revenue, and a reduction in emmissions through company car legislation looks unlikely
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The present system seems try and reconcile two contradictory aims, income tax on a benefit in kind and eco tax on use. Not really surprising that it fails on both counts.
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Unfortunately that does not surprise me, an ill thought out Government policy.
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My brother in law,has opted out of his companies car scheme.He had a top end merc.With the money he gets instead,he has bought himself a new Golf GTI and wife new Touran.
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We've been pushed down this route by our company over the last 2-3 yrs. It is amazing that many people who *had* to have BMW's etc as company cars then went out and bought themselves Peugeot 307's or Vauxhall Astra's. Our company complained about this, but if you do the maths, even with our pretty generous allowance, it was very finely balanced between having a company BMW or buying your own BMW, so people took the safe route and downsized.
Doing 30K miles/yr, with business insurance, maintenance etc, gets pretty expensive, and our rules say cars can never be more than 5 yrs old. If you include insurances to cover sickness, redundancy and resignation (which you effectively have when you have a company car) then opting out looks a very uncertain proposition. Plus, few people take into account is the 'peace of mind' value of the company car, which I reckon is worth at least £100/mth.
Personally, I *hate* having my own car ? every time I go on a long run something seems to happen. And I often can?t choose where to park it so I live in fear of something happening to it. I also refuse to stay in certain type of ?lodge? type hotels now, as they have a reputation for thefts from cars, so it?s costing my company a fortune to put me up in ?proper? hotels.
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I remember the convenience of a company car.
Had a smack recently and the paperwork and hassle was horrendous.
Compare that to some bint running in to the back of my British Gas Cavalier SRI. It was drivable just so I drove to work and called the Car Unit. Within two hours someone had taken my keys moved my stuff in to a new identical Cavalier (same coaler) and taken the old one away on a truck that was that.
They repaired the old car, claimed the cost off the other parties insurance who paid up promptly and then sold it I was later told but nothing to do with me I wasn't involved. Bliss.
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We've been pushed down this route by our company over the last 2-3 yrs. It is amazing that many people who *had* to have BMW's etc as company cars then went out and bought themselves Peugeot 307's or Vauxhall Astra's. Our company complained about this, but if you do the maths, even with our pretty generous allowance, it was very finely balanced between having a company BMW or buying your own BMW, so people took the safe route and downsized. Doing 30K miles/yr, with business insurance, maintenance etc, gets pretty expensive, and our rules say cars can never be more than 5 yrs old.
I see what you're saying and it is very difficult to comment without knowing the exact details of your package. I think everyone who opts-out has a different agenda, some people are not interested in cars, so they are happy to not drive a BMW/Audi etc, and its these people who can really benefit. They way I look at opting out is as follows :-
I want to drive a newish quality car which I will keep for just over 3 years. My maths tells me in my situation, that I can buy a £20K car with the saving on tax, the allowance and business mileage tax rebate, it is paid for in about 26 months. So effectively I end up with a free-car probably still worth about £10K that is entirely paid for by my company & the tax man. If I did 30K+ miles per year however, I would consider opting back into the scheme but fortunately I only do half this.
I have to agree, when you go somewhere on business, you tend to worry a lot more about damage to the car, but all the years I had a company car was like burning £10 notes !
There has never been a better selection of keenly priced - nearly new cars to choose from so no excuse there.
The 5 year rule seems slightly draconian, however there are people in my company who abuse the system so much we could do with a rule like this ! After all why should someone being paid £550 month car allowance drive an 8 year old small Renault, which he may have to take customers out in !!
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My tuppence worth.
I last had a company car about 10 years ago, which suited because the pay was low. It came with a petrol card, which at the time only attracted £500 BiK, so £10/month.
When i left that job, the next employer wouldn't give me a car until i was chartered. But as the office was in the centre of Bristol and i lived opposite a train station, i wasn't that bothered. But they said i "had" to have a car. But they couldn't offer me parking. So i got a cheap heap, and got the train or a lift in, which annoyed them no end.
Once i got chartered, they offered me a Peugeot 406, but i had to buy my own fuel and charge 8ppm for business mileage. Which didn't work, you had to achieve 45mpg for it to work. And I still had to find somewhere to park it every day. I had moved by then and was catching the Park and Ride daily, so the thought of a £16,000 car that would cost me BiK of circa £3,000 per annum, sit in a car park 4 miles from work and to add insult to injury cost me 2ppm on business mileage didn't make sense to me. Plus i didn't rally want a Peugeot 406 anyway. So i took the car allowance, kept claiming private car expenses (never understood that one, you get paid twice), and bought a year old Micra.
I'm now in the position that i need to recruit chartered staff myself. I drive myself around in an old heap because it suits, and my partner has a 54 reg Tourag that we use for meetings if we need to make the right impression, but i acknowledge that some people like a nice fresh car every three years.
I am less comfortable with buying or leasing a vehicle that may well be thrashed, require servicing at main dealer and so on. so i'm looking at the car allowance / higher salary option for potential employee. Plus of course if they move on, you're stuck with the car. Frankly i don't really care what he or she drives as long as they can get to site and do their job.
I don't know the ins and outs and i need to go through it with my accountant, but i don't really understand why you don't just get a higher salary e.g 45k salary rather than 40k salary and 5k car allowance. I imagine it's something to do with NI, but you're above the NI threshold in any case, and i would have thought that it would be advantageous to have the higher salary for mortgage and pension reasons. Maybe the job market expects a car allowance and can't see the advantage of a higher salary?
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For the private motorist it's probably a good thing.
I recall reading in one of the car mags some years ago that car manufacturers, and many dealers, were more interested in providing company cars, and this resulted in cars at the upper end of the market being overpriced. Those companies that bought in bulk got huge discounts, and the private motorist had to grin and bear the high prices.
I think this also depressed the second hand car market. There was also an article about the Nat West Bank that used to change its managers' Fords every six months, at the behest of Ford. I guess this also was the policy of other big companies with the result that not so old vehicles flooded the market.
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I recall reading in one of the car mags some years ago that car manufacturers, and many dealers, were more interested in providing company cars, and this resulted in cars at the upper end of the market being overpriced. Those companies that bought in bulk got huge discounts, and the private motorist had to grin and bear the high prices.
I think it's the Mondeo's of this world that are really struggling. That kind of car is a pain as a company car because you have to pay tax based on its list price but you know full well it really cost thousands less. People that have a choice therefore go for BMW's or Audi's so at least they feel like they're getting some value for their tax, and they're not much dearer to lease.
Many people who opt out and buy privately tend to down size a little, to a 307/Astra/Focus or whatever, or they buy smething completely different.
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Frankly i don't really care whathe or she drives as long as they can get to site and do their job.
This is an area that's ripe for trouble, and it was definitely a motivating factor a few yrs ago for my (medium sized) company - they thought they could absolve themselves of all responsibility for cars by shifting ownership to the employee.
However things have moved on, and, as an employer, you have a duty of care responsibility towards your employees and that extends to ensuring that their own car, if used for business, is suitable for purpose, insured, serviced etc etc. So you need to care what they drive.
If someone is involved in an injury traffic accident now, then the Police should record if the car was being used for business purposes. They could then involve the Health and Safety executive, although it's currently not seen as a priority by them.
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Bill payer. Thanks for that, good food for thought
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Part of the 'package' with opting out of company cars is surely the additional expense of insurance with business use included. However, the extra cost for me is minimal, but then my average premium is well over £800pa so I probably don't notice the extra bit!.
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Espada III - well if you have a family and need a Lamborghini, what else do you drive?
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"why you don't just get a higher salary e.g 45k salary rather than 40k salary and 5k car allowance"
The car allowance is usually detailed seperately from basic pay so it can be non-pensionable, not subject to annual pay rises and excluded in any termination payment. Its treated the same as salary for NI (either 11% or 1% for employee and 12.8% for employer)
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I opted out of our company leasing contract from a company leased 5 series (old but beautiful shape) into a new self owned new 5 series. SWMBO (an expert in this area her background being a tax accountant more latterly a forensic accountant) told me I would be slightly better off with my own part funded car, piling the miles on and part exing it. I have now done this (but still awaiting my new car) and look forward to reaping the tax advantage next year. She's hung onto her own self funded MINI with a wido's grip - she might be looking at a new 3 series next year though.
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"why you don't just get a higher salary e.g 45k salary rather than 40k salary and 5k car allowance" The car allowance is usually detailed seperately from basic pay so it can be non-pensionable, not subject to annual pay rises and excluded in any termination payment. Its treated the same as salary for NI (either 11% or 1% for employee and 12.8% for employer)
So from an employEE's poitn of view, more salary has got to be better hasn't it? You get more pension and pay rises don't necessarily have to be percentage based.
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Agreed, but the EmployER will not do it as it pushes up pension, NI costs etc.
My employer has spent three yerars trying to persuade people to opt out and is just realising that it does not work.
Those that opt out now tend to travel by rail (claiming fare) rather than putting the miles on their own car upping the actual cost to the company.
On top of that they have just realised the obligation they have to check insurance and suitability of car as stated above. They are moving back to "if we think you need a car you have one - if you don't want to pay tax use it for business only"
As a 30k/yr driver (80% private) I did not opt out as gain was marginal and risk greater.
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Duty of care (as previously raised by Bill Payer) is starting to attract a lot of attention.
Fleet magazines have been highlighting this for some time and I suspect that we'll have some defining legislation shortly.
If companies pay a car allowance instead of providing a car, then they have to ensure that the car is taxed, Mot'd, serviced in accordance with the manufacturers schedule, etc, etc.
It would appear that onus for responsibility still rests on the company if they pay a car allowance, from the companies perspective they've got all the administration and precious little control.
Easier to farm out to a leasing company who will provide a fully maintained company car.
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Fleet magazines have been highlighting this for some time and I suspect that we'll have some defining legislation shortly.
To be fair, the Fleet business does have something of a vested interest. I see FleetNewsNet online, and some of the comments in there, week in week out, from the industry are practically hysterical.
'Somebody I know' is a accident investigator for the Police, and he told me this is an area they are aware of, and they look at things like unreasonable amounts of time behind the wheel etc. They'll also make sure insurance cover is correct for business etc. It's reckoned that a third of business drivers don't have the correct level of insurance.
The Gary Hart case was supposed to be test of corporate laws in this area, but as he was a one man band it didn't really pan out like that. If he'd been acting under someone else's direction then it may well have been a different story.
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So from an employEE's poitn of view, more salary has got to be better hasn't it? You get more pension and pay rises don't necessarily have to be percentage based.
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This is theoretically true, but in my business and job-type you will not find a job with higher salary and no car/car allowance.
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Having the car allowance incorporated into the salary is fine with me but, as Ian pointed out this costs the company more in NI and pension costs.
Having a separate car allowance saves the company money (short-term) by not attracting additional NI and pension, it may be that if legislation is introduced the higher salary option may become more attractive financially.
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This is theoretically true, but in my business and job-type you will not find a job with higher salary and no car/car
allowance.
Thanks Roly (and apologies for slightly hijacking your thread).
That indeed is a consideration. Contractor Quantity Surveyors with 8+ years experience (for that is the beast i am after) will be expecting a car or an allowance, and may not appreciate that the salary is higher in lieu.
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