Company Car Ownership Scheme Versus Private Purchase

[fredsmith]

Hi All

First post. Great forum.

I started a job recently that makes me eligible to join the car ownership scheme. It's doing my head in, trying to work out whether to take the money or the car. I wondered if anyone had bene through a similar choice themeselves, or if there were any comments that might help me make a decision.

I need a new car, however I get it, and after test driving a few, including a BMW 320d and a Saab 93, I've decided to go with the Lexus 220d.

I've just sold my previous car, and have £7K in the bank from that sale.

If I stay out of the scheme, I will get paid £400 a month (before tax) which I can put towards payment of a Lexus 220d. The advantage here is that I can go for a used car with the cost benefit. I could use my £7K as a deposit and use the monthly £400 (pre-tax) to pay it off on HP. I claim 14p per mile for business mileage + presumably the annual top up through my tax return. All other costs are borne by me.

Alternatively, I could use the company car scheme which means the company 'loans' me £5K deposit and I pay £233 a month towards paying off the car over 4 years. At the end of the 4 years I can hand the car back, get another, and that's that. Or I can pay for the rest of the car and resell if I want. It's not a taxable benefit as I theoretically own the car. Under this scheme, I don't get the monthly cash allowance BUT I do get all my business mileage paid via a fuel card. I also get paid the car insurance, all servicing costs, road tax etc. I can only go for a new car under this scheme, so would have to pay the full value of the Lexus. On the other hand, I still have my £7K cash in the bank.

I alternate between thinking choice A is a no brainer, then choice B is a no-brainer. I can't make up my mind.

Any thoughts?

Thanks in advance.

fred.

[Tango]

Hmm...difficult one that, but if it was me I'd either go for the first option except I'd buy a low mileage V6 petrol SE-L with MM. or second option but with a new BMW 320D.

[fredsmith]

Hmm...difficult one that, but if it was me I'd either go for the first option except I'd buy a low mileage V6 petrol SE-L with MM. or second option but with a new BMW 320D.

Thanks for the reply Tango. I have to ask why you would change to a BMW under the company purchase scheme?

[Tango]

Hmm...difficult one that, but if it was me I'd either go for the first option except I'd buy a low mileage V6 petrol SE-L with MM. or second option but with a new BMW 320D.

Thanks for the reply Tango. I have to ask why you would change to a BMW under the company purchase scheme?

Sorry, I assumed when you mentioned the 220D that perhaps the company purchase scheme would limit you to a diesel and with the car allowance you had the freedom to make the right choice of Lexus. Hence if you really have to have an oil burner go for the best one, the Beemer.

Edit...The 220D/320D choice is of course only my opinion, so you may want to research some of the posts here and make up your own mind.

[Scarlet Pimpernell]

Your option 2 sounds like a no brainer

[Vyker]

with option 2 though, the P11D price of the lexus would be far greater then his company allowance, which would mean he would have to "top up" his monthly allowance to be able to pay the monthly charge of the lexus

quick maths shows.... 4yrs * 12months * £233/month = £11kish.... + £5k deposit = £16k...

Rough estimate off the top of my head, the IS220D would have a company car tax P11D value of... say.. £30k? maybe £28k?

which means 28k - 16k= 12k extra ontop,

SOOO... 12k/ 48months = £250... to pay a month extra from your own salary... i think they might also minus the car value after 4yrs, which should being that monthly bill down a little.

like i said, just a rough calculation, but its something you will need to consider, as the tax man doesn't like company cars!

[corsavandal]

a car allowance is the way forward! the would always be yours that way although paid for by the companys allowance!

[ColinBarber]

worth checking the company policy for having an allowance. It may state your vehicle needs to be under a certain age. If you purchase second hand and the policy states your vehicle has to be under 3 or 4 years old then you will be changing it often, with all the expenses that entails.

[fredsmith]

with option 2 though, the P11D price of the lexus would be far greater then his company allowance, which would mean he would have to "top up" his monthly allowance to be able to pay the monthly charge of the lexus

quick maths shows.... 4yrs * 12months * £233/month = £11kish.... + £5k deposit = £16k...

Rough estimate off the top of my head, the IS220D would have a company car tax P11D value of... say.. £30k? maybe £28k?

which means 28k - 16k= 12k extra ontop,

SOOO... 12k/ 48months = £250... to pay a month extra from your own salary... i think they might also minus the car value after 4yrs, which should being that monthly bill down a little.

like i said, just a rough calculation, but its something you will need to consider, as the tax man doesn't like company cars!

I'm not sure if your maths are correct, Vyker. The £233 a month is the top-up.

The P11D value is £18,200 according to the figures I've been given, which I presume is the list priced less the £5K. This is the calculation they've given me:

Car: LEXUS IS DIESEL SALOON 220d 4dr (LX929)

P11D Value (A): £18,200.00

Monthly Instalment (Incl maintenance, & VAT): £474.88

Low CO2 Emission payment: No

Interest Free Loan Amount: £5,000.00

2. Employee Contribution --

Employee Car Contribution Rate (B): 25%

Marginal Tax Rate ©: 40%

Mthly Employee Car Contribution (D): ( A x B x C ) / 12 £151.67

3. Deductions

Car Trade Up or Trade Down Payment (E): £81.50

Total Monthly Salary Deduction: (D + E) £233.17

I'll probably have to go back for clarification of a couple of things. I feel this must be an instinctive no-brainer but can't work out in which direction!

Thanks for the contribution.

fred.

[fredsmith]

worth checking the company policy for having an allowance. It may state your vehicle needs to be under a certain age. If you purchase second hand and the policy states your vehicle has to be under 3 or 4 years old then you will be changing it often, with all the expenses that entails.

It just says something rather vague, along the lines of "a car commensurate with your position"

[Scarlet Pimpernell]

Reason why I thought Option 2 was a no brainer was that you stated that there was no Tax liability for you. If there is, the you really need to do the sums.

My scheme meant that over 4 years, a 320d SE with Prof Nav, Bluetooth, Met Paint, 6CD, Leather and Auto would cost me £31200 (Incl. allowances, Personal user charges, and Tax)....and then like a mug I'd hand it back. Sure I wouldn't have any running costs, but that car would still be worth £10-13000 worst case...and it wouldn't have cost me anywhere near that to run it...

My scheme doesn't do Lexus's, so I bought my own! This way, they do allow me to use pool cars/hire cars, and I can keep the car for 6 years (or as long as I want), which makes it even cheaper!!

PS - Fred - your calculation should be:

Your contribution = £233 + your £400pm allowance minus tax = 233+240=£473 (assumes you are a high rate tax payer). So each year it costs you £5676. Over 4 years, it'll cost you £22704, before you pay the £5k loan back to your employer and the balance of the car's value if there is one...

I would strongly suggest that you consider a PCP unless your mileage is very very high...!! You could also go to a dealer, and haggle the price down of the car you want, maybe even go for an ExDemo or something, and get cheapo finance from your bank. You'll be surprised how cheap you can still get finance...