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What are the pro and cons of company cars. You're essentially renting the car thus have nothing to show for at the end of the term aren't you?
Maybe I'm missing something.
Do the maths.
For me it was £500 in lost allowance and tax a month. I can easily finance and run much nicer used car for less than half that thanks!
You don't rent the car. The company give you use of a car (which they might rent from a leasing company).
You are then liable for the tax (as a taxable benefit). This will usually adjust your tax code to take this into account. If you are in the 40% tax bracket, it is much more than if you are below it.
If you are offered free fuel too, this is another taxable benefit (which I refused - as I don't do enough private miles to justify what I'm paying in tax). I pay my company 15p for every private mile instead.
Although it all sounds expensive, it is usually cheaper than running your own car. They deal with tyres, insurance, breakdowns and you usually get a new car every 3 / 4 years.
really? I just had a quick look at my details and its costing me 140 a month, even if i'm looking at the higher tax band - which i'm not in yet! Am i working it out wrong? £500 a month seems bonkers to me?
He's including an allowance. Some companies give you the option.
£140 a month in what?
there were 3 costs to having a company car for me. Forefit allowance 5.1K a year, pay additional tax, and pay personal user charge if the car was over a certain rental limit.
One of these elements could be £140, but you probably aren't looking at the full cost.
Not necessarily. He may not have an option of an allowance and not need to go over the rental limit. In this case, the cost is the BIK tax.
Also, you get taxed on the allowance as if it's income, so you are not including all costs either.
ah right, the £140 is just the tax bit based on co2.
I think we've the option of an allowance but its poor to say the least. I'm doing 35-40k miles a year too, so maintenance costs is a big bonus for me.
You'd be taxed on that 5.1k though right, so you swap that for the car and pay the tax on that instead. You should end up better off if you want to run a new car.
Company cars are great IMO; taxed at source so you never really have the money to miss, road tax, tyres, servicing, insurance, fuel are all paid for and you get a new car every three or four years. What's not to love?
The big bonus for me is hassle-free motoring. Servicing, tyres, all covered. I worked out once that if I were paying myself, I'd be paying 10p/mile in rubber alone. If the engine falls out of the car tomorrow, someone will come and scrape it up, at no cost to me. A couple of years ago, someone [url=
a stolen car into mine[/url] (parked). Total cost of replacement to me - nothing.
The peace of mind alone makes it worth it.
We have some cars with buyout options (10k car will cost us 2k) but the rest don't. My company car I just bought outright as when I did the maths, we would be better off after about 30 months of a 48 month lease. Typical leasing values here seem to be 500-700 euros a month depending on the make/model.
Hassle free life = priceless esp when you live in London. I just got a tyre replaced as it had a nail in it - would have been £350 (low profile run flat)
When we did the maths at work(bunch of geeky accountants) we worked out the sweet spot was £12k - ie if you are changing your car every four years and spend less than £12k on a second hand one you are quids. If you are spending more the depreciation starts to hit you and you are better off with a company car.
This was a 3 years old 3 series vs a brand new 320d ED with probably higher insurance costs than you will pay (london).
I am paying a decent chunk a month and don't regret a thing! Not worrying about anything is worth so much to me and I got a lovely new BMW
But, against that tax on the allowance, if you do business mileage you can claim tax back. Essentially the calculation is trying to achieve the same as if you got 45p / mile (inc fuel) as an expense and taxed on the rest. So if fuel is 15p / mile and you do 10,000 business miles, (45p-15p=30p) x 10,000 = £3,000 is not taxed and the rest is.
I still went for the Co car as I do 30k p.a.
There are a lot of variables - it will be different for each individual...
I switched back to company car at the end of last year - running my own was getting too expensive. Had previously opted out of a company car circa 2003. In general, I think the balance has now switched back to company car being cheaper.
When credit was cheap and available, running your own was a good option - esp with car allowance and mileage payments.
But in the current economy:
Credit is not cheap or available
Most folks don't want to be burdened with a car loan
Companies are trying to be greener - ie more journeys by public transport or avoided using video conference = less miles to claim private mileage for
Depreciation on own car seems to have increased - ie 2nd hand values fallen
Insurance seems to be the only part of the economy* where costs can go up year on year without any competitive market restraints
Fuel costs are increasing and new company car gives access to latest higher mpg engines
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ETA * and energy companies