I?m considering opting out of my company car scheme as the price of year old cars has never made opting out a real option for me.
I do 35-40k a year (25k business) and am considering buying a year old car. Vectra?s seem to be around the £7k -£7.5k mark of you go diesel, £6k for a petrol.
I get £500/month allowance if I opt out (£300net of tax) plus I?ll save another £225/month on company car tax. Net spend on car£525/month to break even.
The obvious expenses are Insurance (£50/month as I have no NCB), Road Tax, Tyres (I?m guessing 6 per year at £100/tyre) and maintenance (no idea on this one as I haven?t paid for years but I?ve budgeted £75/month)
Are there any expenses I?m missing out on?
I?d get a slightly better fuel rate from my company so that?s an upside as well.
Any other considerations I need to make, please advise.
I would run the car for 4 years (cars cannot be over 5 years old to qualify for a car allowance) so it would have circa 180-200k on clock.
Vectra diesel/petrol, any others to consider but don?t really want to pay over £8k for a year old car.
Thanks
Edited by Pugugly on 18/01/2009 at 20:53
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>>The obvious expenses are Insurance (£50/month as I have no NCB),
Depending on where you live and what you buy, then without NCB £600pa might be too low. But you should be able to get a letter of credence from your employer's insurance which will give you some discount with some insurers. It is not a NCB but a discount. This assumes you've had no claims....
.... but then if you have had accidents (fault and no fault) these need to be declared on the insurance anyway if recent. For some companies it is accidents in the last 5 years.
You should also be able to claim back tax on mileage paid - look into it. It's not complicated but typically if you got 15p/mile then for the first 10,000 miles you can claim back the tax on the difference between the 15p and 40p allowed by HMRC (this is the tax) and then the difference between the 15p and 20p for the rest. I am assuming HMRC figures have not changed since I last looked.
Something else to consider is the type of car. You probably need good MPG but beware of some DPF equipped diesels. If possible, if going for a diesel get one without a DPF.
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"Are there any expenses I?m missing out on?"
With a requirement to do 40,000 miles a year my main issue would be what I would do if the car was unavailable due to mechanical failure or accident repair.
Edited by daveyjp on 18/01/2009 at 20:52
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That is a very good point. Colleagues of mine running "older" cars have failed to turn up to meetings (without getting into trouble!) but opting out must mean you need to get to appointment come what may.
Some experiences for me with a company car and getting a replacement without hastle:
- Golf GTI stolen overnight. Replacement hire car arrived within 1 hour (before the police)
- Passat in accident. Get home and ring lease company. Drive to local body shop and walk home (15 minutes) and the hire car was waiting for me at home.
- Mondeo brakes down and recovered home (local). Recovered to garage next day. Late at night (night of breakdown) get a paid for taxi to take me to get a hire car. Lucky for them the airport was open otherwise they had to open the local depot to give me a car late at night - that is the deal.
And for all of these no cost to me. But the peace of mind is worth something too. So factor that in. The hastle for sorting all of the above was not my problem. I was even lucky:
- Waiting for the Golf to be written off I got two Audi A4s (one a Sport) and a Passat Sport (and since these were "hire" cars I got my pay up for the car back and the difference in tax)
- Passat was off the road for 2 months but got an Alfa 156 2.0TS Lusso instead. And I did not have to deal with the repairs
Before opting out think of the downsides.
Edited by rtj70 on 18/01/2009 at 22:24
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45k a year is a lot of mileage and it also sounds like your car is critical for your job.
I used to do 18k a year and I would opt for a company car anyday over allowance. I would only opt for an allowance if i was doing under 10k business miles a year.
Think about it... 45k a year is heavy mileage on a car and at the end of it you will have a high mileage car with little residual value and a lot of wear and tear.
For the mileage you are doing it dosnt make sense to try and DIY it. Just outsource all the hassle depreciation, maintenance etc to your fleet manager and spend your free time the way you would want to spend your free time, rather than trying to sort out the latest repair on your car.
Your biggest cost is going to be depereciation & maintenance
PS i do about 200 business miles a year, if that, so i have taken my allowance and run.
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One other thing to bear in mind is whether you would be out of pocket if made redundant. The figures probably work for a nearly new Vectra over 4 years. However, if you were made redundant after 1 or 2 years you could be out of pocked for the initially very steep depreciation. Could potentially cost you thousands.
I do about 30K per year, and back in 2005, when I went onto the allowance, I bought a 2000 MKII Mondeo with a view to changing it after a year for something similar. It only cost £2500, so helped to mitigate the above risk. It's still going well now, but I'm fairly handy with the spanners and do most of the maintenance myself. I find it more convenient since it's hard to agree a time with the dealer that is OK for both of us.
Unless you can fit things like brake disks etc. yourself, you will have to allow a fair amount in your budget for wear and tear maintenance.
Unfortunately I had to move to the allowance because of the stupid C02 based BIK. Fine if you get to choose the car (and choose one with low C02), but why punish the driver when the company chooses a high C02 car? I'm sure there are a lot of companies where the employee has no say in the car they get.
It is a lot of hassle, and there's no way I could afford to run what I had as a company car. But, alas, it was the only way to escape the crazy BIK taxes. I would have stuck with the company car if I could have, if only to spare the hassle. I know a lot of my colleagues wanted to go for the allowance to get a car that wouldn't have been available on the company (e.g. 2 seater, people carrier, older Jaguar XJ etc) but if you're happy with a rep-mobile its probably worth staying with the company motor.
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With that milage split it is difficult.
I understand you can claim a percentage of maintenance costs related to the business miles and this may make it attractive.
A colleague (since moved to another company) used to do this and swore he saved ££££ doing it although some paperwork was involved.
Check everything you can claim but like others here £600 is a bit light for 30k plus miles - the cheap insurers tend to limit you to 25k or less and won't touch you!
I do around 20-25k private and 5-10k business and it is borderline, SWMBO insists I take the car for peace of mind.
Also bear in mind that "duty of care" will probably force you into franchised dealers for maintenance (our policy does), your MD would not be happy if you maintain the car yourself, get it wrong, and kill someone in the resulting accident as HE might end up in court.
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>>Are there any expenses I?m missing out on?<<
Only the big one - depreciation.
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If the main motivator here is to create a situation where you end up with more cash in your wallet each month then it may well be possible to achieve that by opting out. The downsides come when the unexpected happens as others have mentioned.
A more reliable method might be to ask your employers to provide you with a vehicle which attracts a lower BIK charge than the one you have currently.
Extreme example I know, but a pal of mine had an X5 provided by his employer. When it came to the time to replace it he asked them to get him a top of the range Mondeo diesel estate instead. He's quids in and actually rather likes the car.
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