Hi all. Need to post a poser for my 1st post. Hope someone can help me.
I currently have a Merc C Class Automatic Coupe that is petrol for my company car. I have asked for a diesel but have been told I need to run this for at least another year. I get my mileage back when on company business but obviously, not personal and its expensive as I have to drive approx 60 miles per day when not out on customer visits.
There is an option to "opt out" and I will get £6k per year before tax. I have worked out that with the money I will save not paying tax (£110 per month) on the car will almost negate the tax on the £6k (£500 per month) so there should be approx £350 to £400 PM to buy a car with the rest going to tax, insurance etc so I can go ahead a get a diesel.
Does anyone have any input into.....
A:- should I opt out or not
B:- what is probably the best option I need to be looking at
C:- anything else I may not have covered above
The main considerations have to be financial rather than drive quality. I need something thats economical and the petrol auto just isnt around town. I'm lucky to get 30mpg and thats driving it under 3500 revs.
Cheers count but to be honest, the main considerations have to be financial rather than drive quality. I need something thats economical and the petrol auto just isnt around town. I'm lucky to get 30mpg and thats driving it under 3500 revs. I just need some advice of company car vs car allowance. Which is better and does anyone have any input into it.
Thanks in advance and I hope someone out there can help me.
I look forward to some replies
|
There's a website somewhere that calculates the advantages/disadvantages. Don't forget you can gain some benefit from the Revenue men if the pence per mile paid by your employer for fuel is below a certain amount, although that seems to be a grey area. Is the cash allowance subject to NI? I did the sums a few years back but I can't recall if the allowance is subject to NI.
There are intangibles, a problem with a company car is someone else's problem, a problem with your car is your problem. At 6k a year you should be quids in (assuming your employer pays you per mile for the petrol) if you buy a 2 or 3 year old car, the leasing thing doesn't seem to make much sense, pay money and hand the car back.
|
Yup - how much is the "hastle free" factor worth for you.. (servicing, insurance, breakdowns etc etc)
------------------------------
TourVanMan TM < Ex RF >
|
Micky - I get 15p per mile at present and can back another 35p per mile from the tax man up to 10'000 miles. After than, its 10p per mile over 10'000 miles. The car alowance IS subject to tax but as noted, the tax I am paying at present will aprox negate the tax on the ^k per year. Already looked at poss leasing but I need some input as to actually buying against leasing aswell if anyone can help
TVM - I am not fussed about the "hassle" side of things. Once I have a correct insurance sorted (temp car etc), its just running costs. Tyres and servicing every for 1000 miles.
Cheers guys for this start aswell.
|
most leasing firms have calculators on their web sites to cover this.
Are you fussed about car size/style/age ? Some companies insist that certain conditions are met for cars used for business (even personal cars) ie 4 door, no coupes, under 4 years old etc
|
|
Not really fussed though as I average approx 20 to 25'000 miles per year, I am concious that an old car may not be suitable. I have kids but also another 4 door family car so the company option is not really guided by the family size.
|
|
|
Some companiesinsist that certain conditions are met for cars used for business (even personal cars) ie 4 door, no coupes, under 4 years old etc
I think this is only fair, as if you work for a customer facing organisation like me you dont want someone taking a customer on a journey in a 10 year old scrapper just because he or she is pocketing the allowance and driving around in a heap of junk. My company doesn't have this policy and there are a number of people who drive a 2k car and suffer breakdowns and blowm engines etc, when the company is paying them well to run a reliable and serviceable motor.
|
|
|
|
Isn't it the difference between 15p and 40p? It's a while since I did the sums. And the cash-in-your-pocket benefit is at your marginal rate, so it's 40% of the difference IIRC. NI on the allowance?
Buying is OK if the car is reliable, buy a dog and it's your problem. I calculated that I could run two classics on an allowance similar to yours, so if one breaks down then the other is available. No depreciation but (potentially) lots of problems, didn't happen though, left the world of salaryman to earn more, now back in the world of PAYE but I can't see it lasting, you have to listen to idiots :-(
|
I get 15p per mile from the company. After that, I can also claim an extra 25p (not 35 as above, my typo) taking me to 40p per mile up to 10'000 miles. After 10'000miles, its only 10p over the 15p (25p per mile) I already get that I can claim back on tax.
Thanks for the input.
Does anyone run a company car and poss have a similar issue to me?
|
|
But I don't think you get 25p from the Revenue men, your tax allowance should increase by 25p x miles covered, so at 40% it's 10p per mile in your wallet. I think that's right.
|
|
|
|
|
|
Delotte and touch have the best car tax calculator that I have used.
I have run company cars and had my own car run on company business and in my opinion even with the savage taxation currently charged by gordon it still makes sense to run a company car if you cover over 15,000 miles a year.
The reality is that a car allowance will not cover all the bills you have to pay and when you come to trade in the car just watch the trade walk away from a high mile-age car. I speak from bitter experiance i could not wait to get back into a company car scheme as next month my 80,000 mile focus gets repalced by a vectra and apart from the slightly different tax I get a new car that some-one else picks up the bills for.
When I ran my own car you cover service bills, insurance tyres ect ect and if you wrap it round a tree and you have an important meeting the next day the onus is on you to get a set of wheels and get there, company car no problem the hire car is on its way
hope my experiance helps
|
|
The art is to buy a 2 year old car 80k and run till 160k, still quite shiny but rough to drive. The peace of mind thing is important, but I'll won't forget the lease company who told me that the Pirellis on the back of a Cav were OK because they had tread, even though they had no grip. My life in the hands of idiots with no mechanical knowledge.
|
|
|
MrNikko. That is exactly the sort of thing I was after, someone who has run with both options. Whilst I have still a long way to make my mind up, your input is noted.
If anyone else can agree / disagree then any and all input would be really good to weigh up
Thanks again all
|
Hope the info here, helps, Mutz - said that we're a clever bunch of Broomers!!
VB
|
|
|
Mutz - thats the hastle factor I mentioned.
For example, I wrapped my company car round a bus - wrote it off. (the bus and the car)
I had a hire car the next day, and an accident managment team to tidy up my mess.
The other week I wake up to find a flat with a screw in it. My car has no spare but a can of goo. I dont like using can of goo so I phone up my leasing co, and a mobile tyre man is round within two hours and I have a new tyre.
Ok I pay for it in my tax bill, but thats why a company car works for me..
------------------------------
TourVanMan TM < Ex RF >
|
See www.cashorcar.co.uk/
It is only the tax you get back on the claim to The Revenue, so as you already get 15p, then claiming 25p/mile gets you 10p back, and over 10K miles, 10p gets you 4p back (assuming you pay tax at 40%). So you're really getting 25p & 19p per mile.
Opting out works best if you do a lot of business miles and few private miles (assuming your employer currently pays for your private fuel). It's also true as others have pointed out that if you do high mileage then you might not want to do that in a car that you're responsible for. Apart from unforeseen repairs, if you're out on the road, then you may have to park in places where you really wouldn't want to leave your own car, or leave it in dodgy hotel car parks at night. I reckon the 'peace of mind' benefit of having a company car is worth at least £100/mth.
|
|
Cheers Bill and yeah, I was aware its tax relief, apologise for the misleading info. A few good points you noted and will certainly take them on board.
|
|
I've just switched back to a company car after several years of runnng my own. If you don't account for depreciation of your own car, IMO you'l be about even or slightly better off and you have the freedom of choice you might not have otherwise. The trouble is if in 3 years time you want to change for whatever reason you're going to have to find a big lump of cash or borrow it. I ran my own Fabia vRS which was depreciating at £250 a month. My allowance was £9,000 a year and after the fuel allowance from the tax man I reckon I was about £50 to £100 a month clear. In my case 30,000 miles a year clobbered the resale value of the car and yI got through servicing, tyres, brakes and other consumables at quite a rate - it was my car I looked after it. So when you factor in "every" cost element I think you're no better off and you have the hassle and worry associated with your own car. The real answer is of course to buy something like an 8 year old Xantia or Mondeo for a grand, run it on a shoestring, one service a yera and a couple of National oil and filter changes and pocket the cash but that wasn't appropriate for my situation. The only thing that concerns me now is what Gordon Brown's successor is going to do to company cars.
|
|
|
|
|
|
"I have worked out that with the money I will save not paying tax ((£110 per month)"
If you currently have a MB C Class Coupe Automatic (you don't say which size engine) but I'll assume C180 (2.0l engine) then the SMMT website has this down as having CO2 emissions at 227g/km. Therefore in 2007/2008 tax year the BIK rate is 32% of car value... If we assume a value of £19500 for arguments sake then for:
- 40% tax payer, the tax per month is £208
- 22% tax payer, the tax per month is £114.40
So I am assuming you are a lower rate tax payer. The reason for raising this, the money you get back from the taxman for business mileage as you know is the tax on the difference the company pays and what HMRC would allow. Therefore you will only be getting back at the rate of 22% on the difference. If you do high mileage and figure the tax you get back in your calculations, you might be getting less than you expect.
I know someone who does around 30k business miles most years and probably gets over £2k back per year but if you do low business mileage and are a 22% tax payer then you'd be getting less.
Personally I've had enough issues when the car has been a company one (theft, crash, breakdowns) that I'd have to be saving a lot per month to give up the peace of mind and the fixed monthly payments for having the car.
Also don't forget you will pay national insurance on the allowance too so that reduces what you get each month.
If the scheme is like ours though, you can only opt out when the contract period of the car is up. And if you've opted out you can only change back to a company vehicle on the anniversary of the last change, i.e. every 12 months you could switch but then you'll stuck with the car for 80,000 miles or 4 years whichever comes soonest. Makes sense not to allow people to opt out at any point as the company would have a vehicle they did not need any more.
|
There's a surprising number of variables in the company or opt-out calculation which is why everybody needs to do their own calculations, and then factor in the intangibles, like peace of mind benefit. Some of my colleagues thought opting out was good because they'd still have a car if they left, others thought this was bad as the car could be a mill-stone around their neck.
In my last company, senior managers, who previously *had* to have 5 Series BMW's, where given £750/mth to opt out. They generally all jumped at it, and then went out and bought 2nd hand Astras etc. The company went mad, but there was nothing they could do - the only rule was 4/5dr and less than 5yrs old.
Opting out is most likely to make sense if you're driving a high CO2 rated company car (and want to stick with something similar) your mileage is fairly heavily biased towards business use, and you're a 40% tax payer.
On the other hand, if you're driving a £10K car with a 15% CO2 rating, you don't get private fuel and you pay tax at 22%, then having a company car costs £27.50/mth in tax, which is probably more than many people would pay just for the insurance.
|
I had this dilemma some time ago (1995) with my ex. She was offered 6 grand a year or a company car and it was very much in her interests to have the car not the extra salary...(one major consideration in our case was the insurance as she was fairly young then)
I know the tax rules have changed substantially since then but bear this in mind:
-income tax on 6 grand of your extra salary (currently 22%, will be 20%....depending on your salary could be 40%)
- insurance for the year
- maybe 2 services,depending on your mileage
- set of tyres
-car tax
- any kind of problem on car e.g. clutch, gearbox
and then there's variables such as:
- you come back to your car and find a lorry has hit it (happened to me 3 years ago), with 5 grands worth of damage and a month of the road
- you/ SWMBO have an accident (in either car) and your premium is loaded
- you get a couple of speeding fines (easy enough nowadays) and your premium is loaded
i know what i'd do........swallow the Merc's fuel bill...and sit back and relax
|
|
The biggest issue in car allowance terms is that it changes the dynamics of the employer / employee relationship, not an issue for a 9-5 pen pusher though a salesman etc needs to go where the business takes him and not be influenced by the fact that HIS car needs a major service which he would rather have done on next month's CC bill and thus will put off the trip to the Manchester area for a couple of weeks.
|
All depends on the milage you do.
Low private and low business (e.g 10k/yr total) - opt out.
Low private high business - opt out may work depending on miles
High private and low or high business (e.g. 30k/yr) company car!
I do 30k a year and around 25k is private (60 mile/day commute) and you have to factor in how many services, how many tyres and how much insurance will be (I have never got a quote for 30k a year but would not expect it to be cheap with two minor bumps in the last four years), and depreciation over those miles is enourmous, and that is before anything breaks on the car.
The honda has 96k on it and is just three years old, in 12 months I will give it back. If I was to opt out I would need to find (and make the time to find) a good one year old (or so) car EVERY year, plan for about 6-8k in depreciation each year, and hope that is will run for 30k miles in that year and not leave me at the side of an autoroute in the middle of France.
Also I did not have to worry when I overshot the 30k by 7k in one year - what would a insurer have done to the premium for that!
|
|
Out of curiosity just got a quote and Tesco quote 25% higher for up to 25k pa compared to up to 10k per year - their web-site only goes up to 25k pa!.
|
|
|
|
