Hello all
The BIL is thinking of opting out of his company car scheme. He's actually classed as an essential user so the car is not part of his package - albeit that he has to pay about £200 per month for a decent motor. If he opted out he would get 44p mile for first 10k miles and 25p thereafter from his company - business miles only of course. He is currently considering a brand new Mk IV golf estate TDi 130 (£13k at local dealers in Cirencester - which seems pretty good)
Does anyone out there have any experience of this type of opt out - all the web based calculators I can find are for opt outs if you take the cash equivalent but in this case it doesn't apply.
Forgot to mention that he gets taxed for BIK to the tune of £3.5k per year as well and he does 30k business miles per year. his job is on direct sales to the public so turning up in a banger is not really an option.
Appreciate the help
Cheers
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The current Inland Revenue tax free mileage allowances are 40p for the first 10k miles, and 25p thereafter so be aware that he will pay tax on the excess.
If he does 30k business miles a year, his employer will pay him £9k tax free. Add this to the tax he is saving by foregoing a company car (£3.5k) and he needs to be able to finance, run and depreciate a private vehicle for £12.5k a year.
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"....he needs to be able to finance, run and depreciate a private vehicle for £12.5k a year."
Dead easy. No need to buy new. A decent newish Mondeo estate will be ideal. May be more reliable and cheaper to fix than a VW. Nicer car than the Golf as well, IMHO.
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so
He gets taxed 40% (assuming he is a higher rate taxpayer?) on £3,500 a year (I assume this is after the £200 pounds a month contribution?)
= £1,400 year, plus his £200 month (£2,400) means his car is costing him £3,800 a year.
10k miles times 0.44 = £4,400 annum
20k miles times 0.25 = £5,000 annum
30,000 miles at 40mpg = 750 galls/2,800 litres £2800 at £1 litre
so 30,000 miles = £6,600 spare for tax, insurance, depreciation, servicing etc.
Add to this the £3,800 pounds a year he is currently paying for his car the total is £10,400 a year to buy and run the car and be no worse off. I see a fat profit here even if you fully depreciate the car over three years!
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TourVanMan TM < Ex RF >
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www.cashorcar.co.uk should be able to cope with this.
When you get to the page that says ?Enter the gross cash amount per annum your employer is offering you instead of your company car? put £0, then select ?A fixed rate? on the business mileage page, and enter the average mileage payment (31.3p) on the next page.
I recently opted out after many years with a company car. Few things to think about:
1) It?s one thing doing 30,000 miles/year in a company car ? quite a different thing in your own car. You may have to take it to, and leave it in places, where you really wouldn?t want to leave your own car.
2) All the financial risk becomes yours ? car park dents, headlight smashed, insurance jumping because you make a claim or pick up some points. If you leave, get made redundant etc then you may be stuck in deal that you can?t get out of. You can insure against all this but it adds up. I reckon the ?peace of mind? benefit is worth at least £100/mth.
3) If the cars doing 30K biz miles, plus some private miles, then after 3 yrs it?ll be close to worthless. Get a quote for Personal Contract Hire 9based on 30K plus his private mileage), with full maint, and full sickness/redundancy/resignation insurance, and you?ll get a good idea of the real costs.
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If the cars doing 30K biz miles, plus some private miles, then after 3 yrs it?ll be close to worthless
Important from a managing-the-finances point of view of it's going be traded in for a new one. But if there's any truth in what some backroomers say about a car which has clocked up motorway miles, a 3yo 100k mile car should still have a lot of life left in it.
So it could still be used for another 2 or 3 years for business purposes, or make an excellent second car for another five years, both at very low capital cost.
You may still be right about the merits of PCH for managing the risks.
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A well serviced Mondeo will do 200K easily, possibly more. Treat the car as a disposable asset, accept at the end of the day it's worthless and then start again.
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Interesting site but like most assumes you run a brand new car so therefore depreciation becomes a major factor. Over 23 months of running the Alfa 156 JTD as a co. car it cost me including resale at 32PPM, brought at 2 1/2 years old & sold just after 4. And that includes some major bills.
Currently run the 944 on my car allowance which is £6,700PA & 13PPM. I suppose I now do 27,000 based on 10,000 private the rest Co.
Jim
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Thanks for the info so far - BIL called his insurance broker who says because he has had 6 claims (5 of which were non fault claims) in the last 4 years and they won't insure him !! I guess he's going to have to have a look at the boys in the back of top gear magazine in the high risk zone. The opt out genuinely sounds worth doing though and he would give the 100k car to his SWMBO at the end of its 3 years and buy another.
At least the car would be his own if he moved to another company etc. and as some of you know and say a 100k well serviced motor is less of a risk than a few years ago.
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Thanks for the info so far - BIL called his insurance broker who says because he has had 6 claims (5 of which were non fault claims) in the last 4 years and they won't insure him !!
Some of our resident insurance experts may be able to advise, but it seems to me (as a non-expert) that this might be a reason to reconsider the whole idea, at least until he has a few years claim-free. He may be able to get insurance now, albeit at a price, but a few more claims and he might be in real trouble if it's his own insurance.
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Oh dear!
remember the section where you have to say "have you ever been refused insurance" He now has to say Yes! This is going to put his premium in the £1,000s from specialist high risk brokers.
He needs to get a quote and an estimate before he even considers this idea. Consider that another claim in his new car could well make him completely uninsurable the next year. I would stick with the company scheme (despite it being pants form the sound of it) till he gets his claims history sorted
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TourVanMan TM < Ex RF >
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Thanks for the info so far - BIL called his insurance broker who says because he has had 6 claims (5 of which were non fault claims) in the last 4 years and they won't insure him !!
There?s always more to these things than first presented! Does seem a bit harsh if 5 out of 6 were non-fault. Again, bear in mind that sorting these things out for your own car is much more painful. One condition of my old company?s opt out scheme is that we?ll hire the same standard if the car is off the road ? ie they don?t want us doing thousands of miles a month in courtesy Ford Ka.
Your BIL might benefit from a defensive driving course. I know they're mainly non-fault, but sounds like he's been in the wrong place at the wrong time too often!
The opt out genuinely sounds worth doing though and he would give the 100k car to his SWMBO at the end of its 3 years and buy another.
If he picks a car that suits her then that would be a good arrangement.
At least the car would be his own if he moved to another company etc. and as some of you know and say a 100k well serviced motor is less of a risk than a few years ago.
I?ve routinely done 30K/yr for 3 yrs in company cars for many years now, and I?d say that at the end of it, they?re pretty wacked. I kept one for 120,000 miles once and for the last year one thing after another went wrong with it ? one day it was booked into the garage again, and they rang up to say the leasing company wouldn?t authorise the work. I rang the leasing company and they were ending the lease and to return the car ? it was obviously costing them too much. I generally had Fords or Peugeot but colleagues who drove Audi or BMW were just the same. Don?t forget that with variable servicing, a 90K mile Golf might have only had 3 services.
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BP and all - thanks for the help.
I think your advice is sound - he could definitely benefit from a defensive driving course. Maybe I'll suggest we both do a course at the same time.
Incidentally three out of the five non fault accidents he was not actually in the vehicle at the time. The other two were suicidal wild animals! it turns out that 5 of the 6 accidents will not need to be declared (greater than 4 years) by June, in which case his broker has assured him he will be OK at this point. I guess it's all about risk and that if this was his own vehicle he would have to pay for the damage himself - worth remembering when you have to park up in all sorts of weird places to visit people's homes! Still as I know we become mildly obsessive where we park when it's your own vehicle. My SWMBO has stopped moaning now when I park a long way from Tesco's entrance!
His option is therefore to get a pool car (he works for a large utility company so there are plenty) until June and then opt out after that. I'm trying to persuade him to get a six months - one year old car to lessen the depreciation pain.
His SWMBO only does about 2k miles per year so that would probably work on receiving his old car.
I'll post in a few months and let you know how he gets on - once again thanks for the help.
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