Financing a car when only paid mileage at work - Carlq
I have started a new job that will see me claiming 45p per mile whilst travelling to client sites.

The clients are quite far away from home and so I should be earning roughly £1000pm. However after 10k this reduces to 25p per mile.

What strategy have people used for buying a car when not having a car allowance but paid instead per mile?

I have looked at leasing based on 20k miles a year but the problem is, if I lose the income from mileage due to being made to work on clients closer to home then I would not be able to afford the car. My option here is change to a lower mileage allowance e.g. 8k so that the monthly payments are lower and then stash the cash to pay off nay excess mileage charges at the end.

Or should I be looking at buying a used a car which would offer more flexibility to sell it if my mileage requirements significantly changed?

I suppose I could afford to run a decent car whilst the mileage is high but as soon as it drops, I could be up a creek!

How have others handled this situation?

Currently I am coming to an end of a PCP and have £4K deposit to start something new.
Financing a car when only paid mileage at work - RobJP

If your current PCP car is reliable and suitable for the mileage, then I'd seriously consider buying it out - that £4k that would be a deposit for the next PCP would make a big dent in any purchase price, and the rest financed by a cheap bank loan.

Financing a car when only paid mileage at work - SLO76
That's 20k a year plus your own mileage so lets say 25k at least. A PCP or lease would be rather expensive on those terms and personally with this sort of usage I wouldn't be keen on pouring a great deal of money into a car that will collapse in value. I'd buy a cheaper used car that you could sell to realise most of your money should the job mileage requirements change.

We know your annual mileage and you say the clients are mostly a fair distance away so it won't just be local stop start driving but what other requirements do you have regarding size, safety for kids and space for luggage etc? Also what is your current car, it's mileage and what is the PCP final valuation?
Financing a car when only paid mileage at work - Bromptonaut

Does the employer have any requirements about car eg must be conventional saloon/hatch or its age? Do you have to carry equipment to do your job? Are you sure all your business miles will be treated as such. IIRC there are 'gotcha' provisions that might affect you if you start from home.

If you do 20,000 business miles then your allowance will total £7000pa. Ideally you probably want something affordable out of your household income with the allowance as fuel+bonus.

Financing a car when only paid mileage at work - Falkirk Bairn

Friend many years ago was in the same place - mileage allowance wise.

He bought 2nd hand, say 3 year old car with a low mileage & service history. Borrowed money in a Bank loan - Bank loan as flexibility to buy & sell car early or hang on to if going well.

20K 3 year old car - put 20K a year on it & planned to sell as 60K car after owning it for 2 years - a 5 yr old car with 60K was still worth money

Previously he had bought new, on a bank loan, did 100K 5 years & car was not worth very much!

Different story but a chap with 60 service employees country wide with company cars leased over 3 years & most had done 80-100+K - very expensive per month. Changed to buying 6 mth old 8 to 10Kmls ex day rent cars - buying price roughly 40% off list & sold them after 2 yrs & 50k/60K/70K - worked out a lot cheaper for him & still had some warranty selling @ 30mths old

Buying new on PCP would be expensive @ your mileage& if you have to terminate early for any reason - low mileage, change of job etc etc it can be eye wateringly expensive!

Financing a car when only paid mileage at work - Big John

Receiving £1000pm @45p mile is over 26,000 miles per year work miles, don't forget to add on private miles as well!

Probably best to think of the costs per year to take into account the drop from 45p/mile to 25p mile after 10,000 business miles

I don't know what car you currently drive but running costs are key here - if y0u get this wrong you would be effectively paying to do business mileage.

Back of a fag packet calcs not including private mileage!:-

At 26,000 business miles/year:-

Car income

  • 10,000 miles @45p = £4500
  • 16,000 miles @25p = £4000
  • TOTAL - £8500

Outgoings (guestimate lease £300/month 10000miles/year 10p mile over this, 45mpg)

  • PCH 10,000 miles £300/month = £3,600
  • PCH over mileage 16,000 miles @10p = £1,600
  • Fuel 26000 miles @45mpg = £3200
  • Tyres (don't under estimate these) = £1000
  • Servicing etc = £600
  • Total - £10,000 + Insurance

Obviously you still need a car for privte use so paying over the odds might still be worth it (If you had a company car you'd be paying tax on it)

I've being doing high mileages for many years and my strategy is to buy the end of an old model (new or nearly new) suitably reduced (Latest was a 14month old Skoda Superb for about £10k) - I buy cheap and ignore depreciation as with such a high mileage whatever you buy will be worthless by the time you finish with it!

An end of model new/nearly new car still has a full set of newish parts! and usually any issues with that particular car model will be sorted.

Tyre costs important - you don't want to be buying a car where the tyres are over £200 each and only last 12,000 miles! I was burn't badly on this one - ONCE

Financing a car when only paid mileage at work - Engineer Andy

My reply may have come too late, but here goes - given (as Big John's post) you're company mileage is likely to be very high, possibly well in excess of 25k miles, then to add private miles on top, wouldn't it be better to ask your firm to provide you with a leased company car, even if its, say, a 2-3 yo second hand model which is then desposed of after another 2-3 years when its worth very little? At least then you aren't (as John says) subsidising its running costs, as they will pay for all company fuel costs and all servicing/MOT/repairs/insurance/depreciation.

A former colleague of mine does that as he does about 40k miles pa, mostly business. Hopefully if your employer is a reasonable one, they will understand the above situation. If they do allow it, just be sure you get a car that suits your needs, both for work and home - don't be fobbed off with some cheap bit of rubbish (this doesn't men you need a car from a German marque - my colleague had a Mondeo and a Hyundia that he's happy with) that you won't feel comfortable driving (given how much time you'll be spending in it).

Financing a car when only paid mileage at work - brum

The OP seem to have forgotten something very basic. Out of the 45p/25p dispensation the op HAS to self finance all car running costs. Fuel (at least 10-14p/mile) maintainence, repairs, insurance and tax. Go away and redo your calculations based on 26-30p/6-10p (or whatever deduction you think is REALISTIC. And if you have a major breakdown that too has to be paid for by the OP.

You may realise then that the employer/taxman is taking you for a ride. The employer should pay you more even if that means having to pay extra tax/ni otherwise you are paying the company for their business use of your own financed transport.

Edited by brum on 17/04/2017 at 12:26

Financing a car when only paid mileage at work - Engineer Andy

The OP seem to have forgotten something very basic. Out of the 45p/25p dispensation the op HAS to self finance all car running costs. Fuel (at least 10p/mile) maintainence, repairs, insurance and tax. Go away and redo your calculations based on 30p/10p (or whatever deduction you think is REALISTIC.

You may realise then that the employer/taxman is taking you for a ride.

Exactly. It was only many years ago that people using their own car made a tidy sum out of using it for business purposes - only for those people who own a slightly older (less depreictaion to worry about) but very reliable diesel car (how many of those do you see these days?!) get any return on doing above average company mileage.

What some firms do as an option is to give the employee a 'car allowance' and then only refund them the fuel cost for business use, and sometimes this can be less than generous IF you do more than a few thousand business miles and/or their calulation method (as mine was IMO) was poor.

The other fly in the oinment with using your own car for very high business mileage is the high outlay or financing costs in replacing it,which would come far sooner than just using it for commuting/private mileage and a lowish business use (i.e. the total mileage below the annual service interval)

Of course, getting a company car can also pose a problem should you have to sell your own car (if there's no room for both at home or you don't do much non-business mileage and it sitting there makes it deteriorate, costing money on repairs as well as wasting it on VED and insurance) if you decide subsequently to leave the firm. You then need to buy another car pronto, which you may not be able to afford.

I chose (fortunately correctly, as it turned out - I subsequently left my firm) to take the car allowance because I didn't want a company car that tied me in to the firm or having to shell out lots of £££ for a new one/second-hand one I didn't know its history if I left. This sort of situation needs to be factored in by the OP when making their decision - if they felt happy at the firm for a longer term, then a company car would be better. They obviously have to factor in the BIK tax cost p.a. as well, which can be signifcant if the car's list price and type (high CO2 is penalised still I think, unlike VED), as well as the amount of private miles they'd do is small.

Best to do a calc, similar to that done by Big John. I'm sure many motoring/financial websites have all the costs or even calculators online to help if the OP needs assistance.

Financing a car when only paid mileage at work - daveyK_UK

You may realise then that the employer/taxman is taking you for a ride. The employer should pay you more even if that means having to pay extra tax/ni otherwise you are paying the company for their business use of your own financed transport.

Exactly this.

Its increasingly common within the public sector (NHS the exception)

I know of a major top 10 (No. of staff) UK employer who pays only 30p a mile for the first 15,000 miles, 25p there after.

Why people agree to drive on those terms is beyond me.

Financing a car when only paid mileage at work - RT

What's wrong with an employer assuming, rightly, that you'd have a car for personal use anyway and that they should simply pay the marginal cost of the extra miles on business?

During my working career, I never got paid more than the tax-free HMRC lower rate, so marginal cost only, but still made enough profit to fund the next car purchase.

Now retired, I drive an expensive gas-guzzling SUV but could still make a good profit from the current lower HMRC rate of 25p/mile.

The OP has a deal of 45p/mile for the first 10,000 miles and 25p/mile thereafter - I'd have been laughing all the way to the Bahamas on those figures, at modern costs!

Edited by RT on 17/04/2017 at 22:11

Financing a car when only paid mileage at work - brum

Now retired, I drive an expensive gas-guzzling SUV but could still make a good profit from the current lower HMRC rate of 25p/mile.

The OP has a deal of 45p/mile for the first 10,000 miles and 25p/mile thereafter - I'd have been laughing all the way to the Bahamas on those figures, at modern costs!

Bangernomics doesn't count when you need to do 25000 miles per year reliably and in a presentable car.

Edited by Avant on 18/04/2017 at 00:44

Financing a car when only paid mileage at work - RT

Now retired, I drive an expensive gas-guzzling SUV but could still make a good profit from the current lower HMRC rate of 25p/mile.

The OP has a deal of 45p/mile for the first 10,000 miles and 25p/mile thereafter - I'd have been laughing all the way to the Bahamas on those figures, at modern costs!

Bangernomics doesn't count when you need to do 25000 miles per year reliably and in a presentable car.

We may differ on opinions - but I don't think my factory-order SUV at over £50,000 counts as "bangernomics".

Financing a car when only paid mileage at work - brum

And I doubt your £50k suv costs less than 25p per mile to finance, fuel, maintain, repair, tax and insure (business use 25k / year)

Financing a car when only paid mileage at work - RT

And I doubt your £50k suv costs less than 25p per mile to finance, fuel, maintain, repair, tax and insure (business use 25k / year)

Going back to the '80s I used to receive the then lower HMRC rate - after 4 years doing 25,000 on business at that rate but saving the difference between income and actual costs, I used the savings to pay cash for a brand new Audi 100.

The BIK tax basis for company cars is quite different these days but the concepts behind the HMRC lower rate aren't - it's always been to cover the marginal costs of running an average car and easy to find cars that cost less than that rate to run.

Financing a car when only paid mileage at work - brum

But you said you would make fortune if paid 25p/mile TODAY.

So how much is £50,000 divided by say 200,000 miles? (Answer, 25p)

Good luck with that.

Financing a car when only paid mileage at work - RT

But you said you would make fortune if paid 25p/mile TODAY.

So how much is £50,000 divided by say 200,000 miles? (Answer, 25p)

Good luck with that.

The lower HMRC rate should/does cover the marginal cost/mile of additional mileage - the extra in the higher HMRC rate should/does cover any additional fixed costs.

The individual should also be contributing the higher HMRC rate towards their own beneficial use of the vehicle.

On the above basis, making a profit is easy.

Financing a car when only paid mileage at work - brum

The individual should also be contributing the higher HMRC rate towards their own beneficial use of the vehicle.

I cannot understand this sentence.

Are you saying that HMRC pays you for private mileage?

Or that the individual should somehow be subsidising business mileage?

Financing a car when only paid mileage at work - RT

The individual should also be contributing the higher HMRC rate towards their own beneficial use of the vehicle.

I cannot understand this sentence.

Are you saying that HMRC pays you for private mileage?

Or that the individual should somehow be subsidising business mileage?

I'm suggesting the employers' mileage rate pays for business mileage, the individual pays for business mileage - and both pay their share of fixed costs, the employer through the difference between higher and lower rates paid for the first 10,000 miles.

Financing a car when only paid mileage at work - Engineer Andy

What's wrong with an employer assuming, rightly, that you'd have a car for personal use anyway and that they should simply pay the marginal cost of the extra miles on business?

During my working career, I never got paid more than the tax-free HMRC lower rate, so marginal cost only, but still made enough profit to fund the next car purchase.

Now retired, I drive an expensive gas-guzzling SUV but could still make a good profit from the current lower HMRC rate of 25p/mile.

The OP has a deal of 45p/mile for the first 10,000 miles and 25p/mile thereafter - I'd have been laughing all the way to the Bahamas on those figures, at modern costs!

Given I barely made any money out of using my mid-range Mazda3 1.6 petrol for company business (5000 extra miles over private use) at 45p per mile over 10 years ago (when it was new) - and worked it out at the time over a 10 year period, including factoring in replacement of parts and the replacement cost of a new one, I just can't see how you could make any money on the 25p rate, let alone the 45p one, especially given you've stated you run a £50k 'gas guzzler'.

I just ran a quick calculation base on just the replacement cost (not factoring in inflation) at the same price (unlikely) in 10 years' time (also very unlikely - probably half that) and fuel at £1.15 per litre for a fuel efficiency of 50mpg (unlikely for your car by your own admission), and found that the 45p & 25p rates for a 25,000 mile pa company use basically wiped out nearly all the money coming in, leaving almost none left for the extra insurance, servicing and replacement parts (including tyres, which might have to be changed annually), and breakdown cover (I left off VED as you'd have to pay for this anyway).

Running your own car for company use isn't just about the extra fuel cost - there are LOTS of extra costs, and especially the cost of financing its replacement over the period, which for those doing significant mileages can be quite short indeed. Others' point about companies requiring staff who run their own cars for business use to have them under 4-5 years old also makes a huge difference too - not everyone can finance (without losing money over the long term) a brand new car (likely cost £15k - £25k) every 4-5 years, given how high the depreciation over the period will be compared to keeping it for 10 years, which would almost certainly not be possible.

Financing a car when only paid mileage at work - Falkirk Bairn

>>who pays only 30p a mile for the first 15,000 miles, 25p there after.

You can claim the tax back on the difference between HMRC rate & employe rate

in the above figures HMRC Rate - 10K @ 45p = £4500

Employer Rate10K @ 30P = £3000

Basic rate taxpayer £1500 x 20% = £300

Higher Rate taxpayer£1500 @ 40%= £600

Not to sniffed at & you can do it all online!!

Financing a car when only paid mileage at work - brum

If they really do pay 30p/mile up to 15000 miles (doubt it) then extra tax and ni is due for 5000 of those miles, at 5p*5000=£250 * 32% for basic tax tax payers. More for higher rate payers. Employer Ni is also due on the £250 and a P11d needs to be submitted annually before July.

Edited by brum on 18/04/2017 at 00:47

Financing a car when only paid mileage at work - daveyK_UK
Brum , I stand corrected.
It's 30p for the first 10,000 miles.
Financing a car when only paid mileage at work - Big John

www.gov.uk/expenses-and-benefits-business-travel-m...x

Financing a car when only paid mileage at work - expat

If you are using the car for business use then you would have to declare that to your insurance company. I bet they charge more to insure vehicles for business use.

Financing a car when only paid mileage at work - Engineer Andy

If you are using the car for business use then you would have to declare that to your insurance company. I bet they charge more to insure vehicles for business use.

They do, but the extra amount really depends on the type of use and the business mileage in comparison to private mileage (including commuting). If you do a lowish amount of business miles, say around 5000, then for most reasonably safe drivers over 25 (or perhaps 30) this will probably add about 5 - 10% to the annual cost. It did for me.

What I suspect makes far more of a difference is those people doing really high business mileages and especially those using the vehicle for 'selling' purposes, i.e. travelling sales staff or those lugging around expensive goods in the boot, such as demo equipment and tools, which obviously are a target for theives, especially when left unguarded in unsecure car parks whilst on the road.

 

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