[alcook]

If you can get a £20k car or a £5k pa cash package deal, what would be the best bet in today's climate?

I'm pretty crap at all this tax stuff, but it seems a BMW business deal for a £20k car, let's say a nicely specced 09 118 or 120D with service options sounds like a good bet.

Sure the £5k package will allow you to stretch to a loan for £400pm, but to equal the £20k, you'd need ~£620 pm for three years.....

Unless I'm missing something?

[Hotcoupe]

Originally Posted by alcook

Unless I'm missing something?

You could be yes.

I'm assuming you mean a £5k allowance in lieu of a company car?

If so you are missing the business mileage allowance, which at it's most generous is 0.40p per mile for the first 10,000 miles and 0.25p per mile for anything over 10k miles.

So if you do 20K business miles PA, that's worth an extra £6,500.

[AlanQS]

You're also missing all that lovely extra tax you will be paying with a company car. Let's say it's reasonably clean - say 21% and you pay 40% tax on part of your salary. Assume the car costs £20k and you will have an extra tax bill in the region of £140 per month.

It's always been the case, - if you don't have a car and would be starting from scratch, then it is cheaper to have a company car - lots.

If you already own a car and/or are used to having your own car, then take the money.

What kind of car is being offered as the company car? I find that can influence decision a bit. Do you currently own a car? How old it it? Is it paid for?

[alcook]

Cheers.

Cars would be IRO Passat Highline TDI or the Accord GT 2.2 CDi. These are going for about £20k new at the mo...

I currently run my 335D under my own finance etc for about £300 pm. I actually use the current £5k cash to pay for this but it is mine.

There's no private mileage apart from doing the odd journey to Newcastle, which is business related and I can claim back. Other than that it's a very much Social, Domestic, pleasure and commuting....

I do pay the higher rate...

Looks like the money is a better option then. Use that to pay for a small loan and go for the smaller car (for the missus so she can replace her Pug 1007) and keep the 335....

[RCUK]

Bear in mind that the £5k will be taxed as income as well - so factor that into your monthly figures.

I had a simlar decision to make in jan - i took the cash and then got a personal loan to get the 335d. I do a lot of business miles though but only get 12p a mile, so will be putting a Mileage Allowance Relief claim in the next financial year and any monies coming back will go to paying off the loan on the car so it minimises the interst paid.

To minimise tax paid def review the co2 outputs - on our company list i can get a free prius and the rebate i receive for not using my full allowance would cover the BIK (benefit in Kind - ie taxable value) and give me a bit of extra income.

But id own a Prius.

[Looney Toon]

I'd recommend checking out http://www.comcar.co.ukwhich has a nice Tax calculator "Tax Calculator (cars)" for all models.
A Honda Accord Saloon 2.2i-dtec ES for instance, with metallic paint as an option gives a P11D vlaue of £20,931, and you'll be paying £1,674 per year at 40% = £140 per month
As RCUK says, you'll be taxed (and NI'd) on the £5k. If this is at 40% then overall you'd probably only receive circa £250pm... not £400.

In a nutshell, if you take the money and spend £400 per month, you'll probably be financially level.

BUT, i presume your Company/their lease Company, would have a full maintenance contract on the Honda, so new tyres etc would be paid for.

[thewallboy]

My old man had a co car for ...well forever (i was insured, idiots) and it was great. New car every 3 years.

However, the new car list had stuff like Rover 620 turbos and Imprezas on it. He always went German and always had to go for the lowest spec. Audi 100 1.9, Merc 250TDS.....(The Taxi)

For goodness sake, keep the 335d and take the cash. What with this current climate, you need to keep hold of all the assets you can.

Wall

*Written after boozy lunch with bank manager.......

[dxb335d]

keep The D, Keep The D, Keep The D.....

[foxy-367]

I have a cash allowance in lieu of a company car, work pay for fuel and insurance. The money I would lose in tax I put towards my car allowance meaning I am in a much better position either way that money would go out so I think what the hell get what I want.

The downsides are: Running costs you can account for servicing and the like its the unexpected punctures which cause an effect and depreciation, if you do highish miles the car will lose some of its value. However, look at it this way the company is effectively buying you a car.

I would be in a company Vectra (mmm nice!) but instead opted to buy a nice 1 year old 3 series instead for a small additional outlay!

You pays your money you takes your choice!

[foxy-367]

Originally Posted by Hotcoupe

You could be yes.

I'm assuming you mean a £5k allowance in lieu of a company car?

If so you are missing the business mileage allowance, which at it's most generous is 0.40p per mile for the first 10,000 miles and 0.25p per mile for anything over 10k miles.

So if you do 20K business miles PA, that's worth an extra £6,500.

It wouldn't be the full amount thats your tax free allowance so you would be able to claim back 20 or 40% of that amount less whatever you get from you company as a mileage allowance.

[alcook]

Originally Posted by dxb335d

keep The D, Keep The D, Keep The D.....

Don't worry mate.. I'm not leaving the fold. This car is too good.

I need to sit down with a financial advisor as the permutations are still in a thick fog.

My business miles are likely to be low as the train will be my preferred method to London. So I can't rely upon the .40p getting me some rebate. Even with the cash option, we can get hire cars when needed for those awkward country wide trips...

But the loss of the £5k cash plus £140 pm in tax still seems to be a similar price to taking a loan for the £20k or so...but over 5 years...

Down side is I don't own the car, but the upside is reduced running costs....

The fog is clearing....

[ShereKhan]

I am wondering about cash or car too at the moment.
My car is due for renewal come Sept.

The co scheme seems to have some e90's
E90 320d SE and 325d SE for £40pcm more than I pay now.

I get a pawltry £3.5k per year after tax. Business fuel gets paid for (personal fuel is deducted directly - so no tax liability) Insurance is done directly.

The only problem is that i'm doing ~30k+ miles a year.

[NFS]

There are various 'cash or car' calculators on the internet. This one is pretty decent:

www.lvl.co.uk

The way your employer reimburses you for petrol is quite important and makes a fair difference to the result.

As has been said you can also claim a tax rebate on any difference between the amount you receive tax free as a mileage rate and the amount HMRC allow. Unfortunately, you don't get the actual difference, just 40% of it (assuming you pay higher rate tax).

A 320d will cost around £150 month in tax as a company car. Your £5k will be worth £250 a month after tax.

So .. setting aside the mileage payments (which will be a small factor if mileage is low), you will have £400 per month, to finance, tax, insure and maintain your car.

I think this is going to be a little bit tight for a brand new car, but it will work and maybe give more flexibility if you are prepared to drive an older second hand car where depreciation isn't as big an issue.

[alcook]

As it's an either / or position, the ~£20k car looks like a decent deal, including the £140 tax... as that would be a new car, worry free deal, where as the £5k (before tax) will struggle to get me anything decent.

[AlanQS]

Although it's not the entire story, I always found that there are some decent guidelines:

If you do few or no business miles and you are not heavy in private usage then a cash allowance may often be the better way to go.

If you are going to do 20,000 miles and upwards on business then company car is the way to go unless you buy and run a cheap second hand car for work. If you have a decent car and start this kind of mileage it will be slaughtered every way you look at it, within a couple of years.

If you have a fairly new car when starting a new job it makes no sense to sell it and take a company car - unless you will do 20,000 miles plus on business.

If you join a new company and you have the option and your car has quite a few years left in it and it's paid for, take the cash.

If your choice of car is important to you and you have always bought your own, take the cash so that you can have the choice.

If you are paid off and you had a company car, suddenly you are car-less without the wherewithal to do anything about it.

[alcook]

Thanks Alan. That's the type of simple answer I can relate to.

The 335 isn't paid off, and I wouldn't do anything like 20k.

The only reason to go new would be to get the Mrs something nice as I'd use the 335 for the daily drive.. and swap for the long journeys and business stuff...

She'll be happy with a Mini though and I could easily get one with the cash....

As you say to, both cars would be our assets.

Cash seems to be the way then....

[NFS]

Originally Posted by alcook

Thanks Alan. That's the type of simple answer I can relate to.

The 335 isn't paid off, and I wouldn't do anything like 20k.

The only reason to go new would be to get the Mrs something nice as I'd use the 335 for the daily drive.. and swap for the long journeys and business stuff...

She'll be happy with a Mini though and I could easily get one with the cash....

As you say to, both cars would be our assets.

Cash seems to be the way then....

The cash option gives you the extra flexibility to do stuff like this.

If you want to keep the 335d and your work mileage will be low, then taking the cash and simply treating it as extra income is a sound option.

[Ti Rich]

It's a very complex calculation as while you do pay tax on the allowance you are NOT having to car the company car tax. Remember also that if you are a higher rate tax payer you can claim back some of the tax on business mileage as well.

I drive about 20K a year (about 6k Business) and yes it costs me more but i am not driving that damn Passat like everyone else! Lets be honest - if your serious about cars then it isn't all about the money, it's also about being able to drive what YOU want to drive and not what your employer wants you too.

[ShereKhan]

Originally Posted by NFS

There are various 'cash or car' calculators on the internet. This one is pretty decent:

www.lvl.co.uk

The way your employer reimburses you for petrol is quite important and makes a fair difference to the result.

As has been said you can also claim a tax rebate on any difference between the amount you receive tax free as a mileage rate and the amount HMRC allow. Unfortunately, you don't get the actual difference, just 40% of it (assuming you pay higher rate tax).

A 320d will cost around £150 month in tax as a company car. Your £5k will be worth £250 a month after tax.

So .. setting aside the mileage payments (which will be a small factor if mileage is low), you will have £400 per month, to finance, tax, insure and maintain your car.

I think this is going to be a little bit tight for a brand new car, but it will work and maybe give more flexibility if you are prepared to drive an older second hand car where depreciation isn't as big an issue.

Hmm most of these calculators don't help

I get a fuel card which doesn't operate like a normal one. My private fuel costs are calculated and avoid any taxation issues.

The business and total miles for month are declared. Whatever is left over is private miles. So if I spent £300 and 75% of mileage for month was business £75 gets deducted from salary.

If I opt it the above still applies. The car gets insured. So i'm tempted to get something that costs lots to insure and drinks fuel like its water.

The only costs I would have to bear are maintenance and depreciation.

[Oil Burner]

Originally Posted by Ti Rich

Lets be honest - if your serious about cars then it isn't all about the money, it's also about being able to drive what YOU want to drive and not what your employer wants you too.

or in my case what I wanted over what the wife wanted me to get

[Oil Burner]

oh and just an addtional thought, lease rates seem to be shooting up, with the collapse in residuals. Just did a quick check on our website, and my E93 woould now be over £100 a month more than when I started my lease. All down to the reduced end of lease residual value. So guess it depends if the offer of a company car is a set car, or you have a set lease payment monthly figure; if so you might not be able to get what you would like.

Having said all of that, and having had both company cars, private fully maintained leases, and privately owned cars. The fact if you have maintenance or issues, you can get your fleet compnay to arrange everthing, does make life so much easier

hmm that reminds me need to get some new tyres and its first service booked soon

[NFS]

Originally Posted by ShereKhan

Hmm most of these calculators don't help

I get a fuel card which doesn't operate like a normal one. My private fuel costs are calculated and avoid any taxation issues.

The business and total miles for month are declared. Whatever is left over is private miles. So if I spent £300 and 75% of mileage for month was business £75 gets deducted from salary.

If I opt it the above still applies. The car gets insured. So i'm tempted to get something that costs lots to insure and drinks fuel like its water.

The only costs I would have to bear are maintenance and depreciation.

My situation is very similar except that my private mileage costs are not deducted from salary, they are paid for by my employer and declared as a benefit in kind for tax purposes.

Effectively this means that I only pay 40% of my private fuel costs, which is nice.

There is an option on the lex calculator that describes your exact circumstances.

Even though your business fuel is paid for directly, you can still claim a mileage rebate from HMRC. Unfortunately, you only get back the tax you paid on the difference, not the difference itself, but if you do 20,000 miles a year it could still be worth a couple of thousand.

If you have a car with high fuel consumption, the downside is that it eats into the rebate because the fuel costs received are higher. Worth it though.