I've been offered a job with the option of a company car or a car allowance. I'll probably take the allowance as it appears the better deal. My question is:
Should I just take the allowance as an addition to my salary and continue to run my present car?
It's a 1990 Alfa 75 with 128,000 miles, is in good condition, goes like a train and I service it regularly. As is the way with all cars, I've just had to spend a fair bit for a new clutch, discs and pads, fuel tank and exhaust. It's value to me is far greater than what I could sell it for.
The alternative is to spend about ££8k on an Alfa 156, probably using hire purchase or personal contract plan. Can you do PCP on second-hand cars?
Any advice or thoughts would be welcome.
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As ever, www.smartermotoring.com seems to be your best option for the finance - £167.84 a month over three years with a balloon payment of £3200 would get you £8k.
Certainly places like the Great Trade Centre will do you a PCP on a used car but my limited experience suggests a highish APR and a low guaranteed future value to the extent that an ordinary bank loan is probably less hassle.
Don't forget to take into account the cost of repairs and income tax when deciding which is the better option for you, though IIRC the first 10,000 business miles are tax free if paid for by your company. (That amounts to £4k, which, if you use them all, could be a nice little earner!)
If you were to keep the 75 as a second car, would it be possible to run it on a cheap, limited mileage classic car insurance policy now?
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Do you mean you want to take the allowance, but not lease a car and continue to run your 75? If so, and your company are happy, then this seems the best option.
You get a car that you know and are happy with, along with the bonus of an increased pay packet at the end of the month, assuming your company is the same as mine and just pays it along with your salary.
If your 75 gives up the ghost in the future, that's the time to think about buying a car on PCP, or a lease plan.
Although if it were my choice, I'd run the 75, and buy something mad like a Westfield for the weekends with the allowance!
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Would you have to use the car as a tool for the job, or is the vehicle essentially a perk of the position and used to commute plus occasional business trips?
If the car's a tool of the job I seriously wonder just how well a 13 year-old car with 128k on the lock will stand up to the daily rigours. I'm sure it's been a good and faithul servant, but has the kind of use you've put it to recently got anything in common with what you'd use it for in the new post? You don't want to start a new career by ringing in to say you're standing next to a broken down old Alfa all the time...
I'd go down the old PCP route and get something newer, more reliable, and more fuel efficient.
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A friend of mine used to run a 75 3 litre veloce as an everyday car and did 500 miles a week in it and that was on a car which already had over 120k on the clock. It was mostly motorway mileage though. He did all his own maintenance also but he did service it pretty frequently and it got through brakes and various electrical items at a rate of knots. He took it to about 180k in a couple of years before deciding it was just too mean to wear a car like that out in such a way!
What sort of 75 is yours? What sort of driving would you be doing?
I would also check out morethan and their scheme which gives you a fully maintained and insured vehicle for a fixed monthly cost as an alternative to buying on PCP. Would your company pick up the maintenance costs in addition to the allowance or is that all included?
teabelly
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Thanks for the replies so far. A couple of points to add. Unfortunately, keeping the 75 as a second car is not an option as SWMBO drives a Celica which she loves and won?t give up.
The 75?s a 2 litre Twin-spark and it?s likely there?ll be business mileage of about 10,000 a year.
The car allowance is about £5,000. My understanding is that it?s all taxable except that you can claim 10,000 business miles at 40 pence and 25 pence a mile above that. So that if I travel 14,000 miles a year it?s all tax-free. However if I only travel 10,000 miles, I pay tax on £1,000. Is this the case?
My gut-feeling is to do as Diesel Boy suggests and keep the Alfa till it wears out (minus the Westfield though!). I?ll also look at teabelly?s idea about morethan?s scheme, but the allowance is fixed I?m afraid.
Please keep the ideas coming. Excellent feedback so far.
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I've had a similar size car allowance for a few years now. My initial instinct was to get something new and shiny. But then I decided to go for higher spec cars at three years old, keep them for a year or two then swap for something else - variety being the spice of life.
However, I can't imagine a car better than the one I'm currently driving ('98 Omega MV6) so have decided to keep it for as long as is practicable, thus pocketing the allowance (towards what will undoubtedly be high maintenance costs in years to come). The car is actually paid off too.
The only fly in my ointment is the car allowance has a number of pre-reqisites - 4 door saloon, less than 5 years old etc. So it's about to break the age rule - but there are plenty of people in the company running much older cars on allowance so hopefully that won't become an issue.
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Firstly try a site like tiscali.cashorcar.co.uk that will help you make your mind up.
Secondly you are correct about the tax implications, and you can even have the mileage deduction added to your tax code, it helps with the cash flow. However NIC will also be due so you need to take that into account as well.
Thirdly check that a 'business mileage rate' is also paid. This is common, and adds significantly to the income.
Fourthly the definition of 'business mileage' for IR purposes is wider than what you might expect. So check on their website.
Generally you will usually only be better off if you are happy to keep to lower value cars than your employer offers under their car scheme, or not have new ones.
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