Well, I agree with you, Artful! And there's certainly no element of jealousy on my part - I could buy any, and I mean any, car that takes my fancy but I choose to run an eight-year-old sports car for 'best' and one that's nearly 15 for knocking about every day.
The business of companies in the UK providing cars has been going on far too long and has resulted in a totally distorted market and steep depreciation. Companies can take that sort of thing, but private buyers are often denied the pleasure of taking delivery of a new car because of it's value going off a cliff as soon as they drive away from the showroom.
And all this so reps and middle managers can be kept on their toes!
Company owned cars are rare in France (where I live) and, consequently, depreciation rates are both lower and and on a much shallower curve.
Incidentally, company-owned cars here, like all other 'commercial' vehicles, have to have their unladen weight and other details painted on them - so their ownership is instantly obvious.
I think all company cars in the UK should have the name of the firm owning them painted in foot-high fluorescent letters down each side - then we'll see who would prefer to put up their own money instead!
Was this a rant? If so, it's over...
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Incidentally, company-owned cars here, like all other 'commercial' vehicles, have to have their unladen weight and other details painted on them - so their ownership is instantly obvious.
We provide leased cars to some of our French employees (in France) and I don't recall seeing anything painted on them. Some pretty expensive Audis and BMWs IIRC...
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I have had a company car in the past ('perk car') and it certainly is a benefit beyond the tax that is paid - there is a freedom from servicing hassle and worrying about where you leave it parked etc. The recent move to emissions-based taxation tends to benefit the lower-mileage 'perk' driver rather than the guy who needs to clock up a lot of miles.
The good thing about the CC is that it provides the private motorist with a steady stream of cheap used cars - probably the cheapest used cars in Europe.
On the negative side it represents a awful lot of capital tied up (probably unnecessarily) in motor vehicles and at the end of the day **someone** has to pick up the tab for deprecitation. It would actually be much better if that money went into investment in productive capacity. I can't be the only person who visits small engineering companies that have £200k's worth of management BMW's and MB's out front, but clapped-out 30-year-old production equipment inside.
One thing to bear in mind is that some companies will offer a car to go with a relatively low-paid job - it can be a 'cheap' way of attracting and retaining employees (who are seduced by the allure of having a new car on the drive). Personally I'd go for more money and stuff the car.....!
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On the negative side it represents a awful lot of capital tied up (probably unnecessarily) in motor vehicles and at the end of the day **someone** has to pick up the tab for deprecitation. It would actually be much better if that money went into investment in productive capacity. I can't be the only person who visits small engineering companies that have £200k's worth of management BMW's and MB's out front, but clapped-out 30-year-old production equipment inside.
That's why so many companies lease their cars now; no huge chunks of cash tied up in 'non-productive' assets, just a monthly bill from the lease company. And if they didn't have this bill, they'd be paying their employees more instead!
Interestingly enough, the ever tightening noose of legislation imposed on business by the Government has led to a slight increase in the number of company cars recently, after a long period of decline driven by the tax system. Because the onus is more and more on the employer to (rightly IMO) ensure the saftey of their employees while at work, some companies are not allowing 'essential users' to opt out of company cars since they have much less control over the type of vehicle used and the condition it is in...
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That's why so many companies lease their cars now; no huge chunks of cash tied up in 'non-productive' assets, just a monthly bill from the lease company. And if they didn't have this bill, they'd be paying their employees more instead!
Well, maybe they could lease some productive machinery instead? Also cars are just about the fastest depreciating asset you could spend money on - that depreciation has to be paid for.
Certianly Germany doesn't have the company car culture that the UK has, and they seem to invest rather more in equipment, hence their higher productivity.
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As someone who has been entitled to a company car for the past 3 years, I have found that where the offer to 'opt out' has been made, the majority of employees take it. Our car park at work (a moderate sized housebuilder) looks like a prestige or sports car dealers - we have everything from Mercedes C/E/S Class, Jaguar X & S Types, Impreza, Alfa GT, New Land Rover Disco, and BMW 3 & 5 series 10-a-penny, whereas with a fully company expensed car being either an Astra, Vectra or Signum. I find the biggest benefit is free fuel (well, apart from the tax, obviously!)
Me - I drive a Hyundai Terracan instead of a company Astra 1.6. I know which one I prefer. I find the car allowance is a requirement of the job - being able to afford something for all the mileage.
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... I have found that where the offer to 'opt out' has been made, the majority of employees take it. Our car park at work (a moderate sized housebuilder) looks like a prestige or sports car dealers ...
Interesting that you have that effect where there is a car park. I suppose that it someone turns up in an old banger it looks as though they've had a poor bonus.
I work in central London and no-one in their right mind chooses to commute by car and there is no car park anyway. We only have a car allowance scheme and not even bothering with a car is a popular option (to fund a mortgage instead). Even fairly senior people run old cheap cars to drive to the station.
Someone above mentioned they could leave a company car and not worry about it being damaged. Whether it's my own car bought using a car allowance or a company car, I wouldn't treat it any differently.
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That's absolutely correct, they could (and in many cases do). However our curent labour market has, in many areas, a shortage of qualified and experienced people (unlike Germany where unemployment is high). If the market demands a certain level of salary and benefits in order to attract staff, then in some way or another the company must pay for it...
Ironically, because the 'prestige' brands depreciate rather less than mass market brands, the difference in lease costs between a vectra and a 318d is not that great, so the blue and white propeller multiplies in company car parks. The question is, how long can volume continue increasing for the brand before depreciation follows a mass market curve?
Agreed, in other European countries the company car is not as widespread (though it still exists), but this could in part be as a result of the historic tax treatment of cars vs salary in the UK - another example of government inteference having unintended consequences perhaps?
Just my thoughts, FWIW...
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That's absolutely correct, they could (and in many cases do). However our curent labour market has, in many areas, a shortage of qualified and experienced people (unlike Germany where unemployment is high).
LOL! Unlike the UK eh? (Where we park about 2 million people on 'incapacity benefit'!). There is a shortage of engineering professionals in Germany, and they are rather better paid than in the UK. Don't believe the propaganda.
If the market demands a certain level of salary and benefits in order to attract staff, then in some way or another the company must pay for it...
I easily earn more in Germany than in the UK, but in Germany the tax system does not encourage the company car. In the UK the CC is a fairly 'cheap' way of attracting/retaining staff.
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The simple sums are: Vectra 1.8 lease costs inc maintenance c£450pcm or £5400pa, car allowance c£6K pa, but no insurance or much risk, so giving a car allowance is a better perk than a company car.
In a previous job there was no allowance available, it was company car, or no car!!
I think in my industry a car is expected, not a perk.
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I easily earn more in Germany than in the UK, but in Germany the tax system does not encourage the company car. In the UK the CC is a fairly 'cheap' way of attracting/retaining staff.
Cost to company tends to be fairly similar nowadays, since now many follow the lease model and there is more attention paid to equality (from a company perspective) between the cash or car option offered to staff. This did not use to be the case though under th eold tax rules, and I believe that many people now see real benefit in the less tangible aspects of a company car - less worry, risk-free, someone else to sort any problems out so that cost to the individual is only one factor in the decision from an employee's perspective.
BTW, I work for a German company (and earn a lot more in the UK than I would in DE ;-)) Not sure that propoganda comes in to it...
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BTW, I work for a German company (and earn a lot more in the UK than I would in DE ;-)) Not sure that propoganda comes in to it...
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peter s:
i agree 100% with you. your posts have summed up the situation perfectly, and you have grasped the incentives/benefits/tax/pay balance very well.
the reason things happen the way they do here or in germany depends very much on how employers can best reward their employees at minimal cost to the employer.
in the uk, there are still some tax-free perks allowed.
see www.hmrc.gov.uk/pensioners/benefits_in_kind1.htm
the tax-free value of the annual-party has remained frozen at £75 per person (so you can double it if you invite spouses/partners) for many years. so much so that it is now not worthwhile for employers to treat employees to an annual tax-free family day outing.
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It always amaizes me how people consider seeing someone go down from a new jag to an old Focus as having hit hard times.
Not a bit of it!
I have two clients who have had to get shot of company cars.
One got completely fed up with his job and took a short career break. It was the best thing he ever did. He now has another job and has another CC.
The other has still got his job but decided to take more cash and pay less tax. He has a perfectly good Merc 220 which is now adequate for the family as his youngest no longer needs to be accompanied by pushhairs etc, and the Voyager was not economic.
Had I had a CC when I lost my job, I would have seen its loss as another indicator of a great weigh off my sholders.
H
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BTW, I work for a German company (and earn a lot more in the UK than I would in DE ;-)) Not sure that propoganda comes in to it...
Good grief, what line of work are you in? German rate for automotive engineers is 50% higher than what could be earnt in the UK (assuming you could get a job at all). All UK engineering employers want is cheapest hourly rate - never mind how good you are at the job - pay as little as possible and expect lots of free overtime. You'd be surprised how many British people have had enough of it and are now working in the German auto industry.
The 'propaganda' I was refering to is the current fashion for UK media to report how 'bad' things are in Germany. There are certainly some bleak areas of unemployment, but overall their economy and jobs market is not half as bad as reported in UK; if you are prepared to move around a bit. Obviously its the former DDR region that is mainly affected.
I must say, I look at the way the UK is going, with congestion, high crime, now water shortages (overpopulation?), astronomical prices for property, high energy costs etc etc and I do think the outlook for Germany is much more favourable, more 'stable' society than Britain has nowadays. UK engineering is on its knees and the whole economy seems to be based around retail parks, 'financial services' and housing. I would sell up and move the family to Germany tomorrow, but wife doesn't want to on account of relatives in UK......
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Good grief, what line of work are you in? German rate for automotive engineers is 50% higher than what could be earnt in the UK (assuming you could get a job at all). All UK engineering employers want is cheapest hourly rate - never mind how good you are at the job - pay as little as possible and expect lots of free overtime.
I understand where you're coming from; its symptomatic of how the UK economy has developed rapidly in the service sector at the expense of manufacturing I think. I myself am in what would be called a 'service' type profession (in that I include lawyers/finance/doctors/marketeers/it/sales etc...), and in the south-east there problem is demand exceeds supply for the right people.
Interesting what you say about the shortage of engineers in Germany though...food for thought. Is that as a result in a fall in the number of apprenticeships etc during the last few years, or students switching to other fields?
Peter
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I understand where you're coming from; its symptomatic of how the UK economy has developed rapidly in the service sector at the expense of manufacturing I think. I myself am in what would be called a 'service' type profession (in that I include lawyers/finance/doctors/marketeers/it/sales etc...), and in the south-east there problem is demand exceeds supply for the right people. Interesting what you say about the shortage of engineers in Germany though...food for thought. Is that as a result in a fall in the number of apprenticeships etc during the last few years, or students switching to other fields? Peter
Germany has always been able to soak up good numbers of engineers. Many companies have actually expanded their design engineering capability in recent years. If you go to the BMW FIZ (Research and Innovation Centre) in Munich is used to employ about 5000 engineers - that's increased to about 7000 now, I think. There are quite a few British there, plus many other nationalities (Brazilian, French, you name it). The German export economy is doing pretty well at the moment - cars, factory automation products, machine tools are all doing well. There has been a certain amout of 'outsourcing' to other countries, but most design and development is still done in Germany.
Interestingly things aren't so strong in other sectors. Germany is 'over doctored' (too many doctors) and there are something like 50000 empty hospital beds because they don#t have enough patients. Medical staff are currently taking strike action for more pay - they are rather less well paid that UK medics. I understand UK doctors are the highest paid in Europe..
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Lets not forget why we have company cars - in the age of wage restraint - a previous Labour government idea that I was too young to enjoy - meant that employers could not give their key staff pay rises that would keep pace with what a competitor coule offer them if they changed jobs.
This gave rise to cars being offered as additional salary which did not count to the goverment permitted annual rise - ironic that Gordon Brown is trying to tax out of existence (hasn't he heard of the golden goose) something which a previous Labour government created.
Personally speaking I have a company car, doing 35k per year I would be marginally worse off if I opted out. If I did opt out I would buy something 6m to a year old of similar size and spec. When I last changed it one of the main factors was cost (bik tax, fuel and lease) along with size. With the Accord Exec being about the same cost as a Mondeo LX which way would you go!
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- ironic that Gordon Brown is trying to tax out of existence (hasn't he heard of the golden goose)
Tax out of existance? Not doing a very good job is he? I think, if you are honest, the tax situation is pretty favourable, especially for lower mileage drivers.
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>> - ironic >> that Gordon Brown is trying to tax out of existence (hasn't >> he heard of the golden goose) Tax out of existance? Not doing a very good job is he? I think, if you are honest, the tax situation is pretty favourable, especially for lower mileage drivers.
In my experience it is the low milage drivers who are opting out and buying their own cars - If you are paying 2k tax and doing 5k a year it is 40p a mile tax, with 30k a year it is only 6p a mile on the same car.
The high milage drivers around here see the greater depreciation, more service bills, more tyres, more potential breakdowns etc. and stay in the car scheme.
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Interesting Aprilia - thanks! I guess the proliferation of new models in sectors BMW previously did not enter (X5, then X3, one series, MINI, the 'secret' MPV, small RR etc), combined with the ever increasing complexity of cars also means that there'll always be a need for more engineers!
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