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Company car - buying

Discussion in 'A3/S3/Sportback (8P Chassis)' started by Castro, Dec 4, 2006.

  1. Castro
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    Castro New Member

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    [Dec 4, 2006]
    I'm new to company cars so any advice is appreciated.

    I'm just about to take out a lease on an Audi A3 TDI (170) S Tronic. There is a 36 and 48 month term avail, I've gone for the latter as the monthly payments are approx £25 less and I'm pretty sure that I'll be out of this company by mid-2008.

    The question I have is what kind of buy back offer could I expect from the lease company (Lombard) assuming the following:

    Car is 2 years old with 40k miles on the clock. I've tried to ask them but they will not commit to a price so I just want a ball park figure. The car as it stands has a BIK value of £22,392.. and if the buy back price is favourable I might spec out the car to keep e.g. better stereo, light pack etc..

    Cheers
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  3. Amchlolor
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    Amchlolor Active Member

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    [Dec 4, 2006]
    In our experience,leasing companies always want more than you can get for the same car on the open market.
    We've offered to buy several cars over the years,but we've yet to actually go through with it.
    For example,we offered to buy my '02 A4 1.9tdi (130) sport at the end of it's three years,as one of our clients wanted to buy it from us.
    The leasing company wanted £13k,which was daft.
    There were better spec ones on the open market for less.

    Our experiences aren't just restricted to one company either.
    They all seem to have over-inflated ideas of what their cars are worth after three years.

    I have no idea why this is.
    My personal opinion is that they either try and take advantage of the fact you evidently want the car,or they assume you're too daft/lazy to check the open market.
    #2
  4. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Dec 4, 2006]
    I'd also have a look at the tax you'll be paying as everyone I know is getting out of company car schemes as you will be forking out between £200-£300 a month in additional tax (depending on tax bracket and fuel card), that's £320-£400 grossed up. That's a lot of money just to have the use of a new car, worth checking so you know what to expect, car allowance is the way forward, then you can actually make money on the vehicle rather than p1ss it down the drain.
    #3
  5. Castro
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    Castro New Member

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    [Dec 4, 2006]
    After tax my cash allowance will be £285. I've thought about taking out a loan and then using the money to service it. I've also looked into buying an A3 on finance, but I'll need a hefty amount upfront for the deposit.

    Wheras if I go down the company car route I will be paying an additional £120 in tax a month (my company doesn't offer a fuel card) and everything else (insurance, service, tax etc..) is included. Considering it costs me £80 a month to insure my 2001 Audi A3 TDi Sport, it seems quite attractive to drive a new car with no worries.
    #4
  6. Amchlolor
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    Amchlolor Active Member

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    [Dec 4, 2006]
    Company cars are still a helluva cheap car.

    My car,with all fuel paid for by the company,costs me approx £132.52 a month in tax.

    That's a £24400 car x 18% tax = £4392 x 22 % / 12 = £ 80.52 a month + approx £52 a month fuel benefit tax.

    If I were a 40% tax payer,the same car would cost me £ 198.40 a month.

    Either way,cheap car.
    God knows where people get this £200-£300 a month in tax from.
    You'd need a helluva expensive,or very high CO2 rating,car to pay that.
    #5
  7. marriedblonde
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    marriedblonde Moderator

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    [Dec 4, 2006]
    Isn't the £200-300 a month pre emmision taxation days?

    Not sure!

    I've always opted out but not because I wanted to make money but to give me a greater freedom of choice and not to be restricted to when I can change etc.

    I think I am normally a few quid better off each year after I have paid all the running costs etc, claimed by buss miles back from the tax man.

    J.
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  8. Amchlolor
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    Amchlolor Active Member

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    [Dec 4, 2006]
    It's certainly possible to be paying £200-£300 a month,for a 40% tax payer.
    But you would have to be driving either an expensive car,or a very inefficient car.
    The likes of a 3.2 A3 driver would have horrendous tax.
    They'd be paying a lot more than I would,simple because their hefty CO2 rating puts them right up into the 'daft' bracket.
    They'd be paying tax on something like 30% of the value of the car,as opposed to 18% for me.

    I always go for as efficient a car as I can,simply so I can pay the least tax possible for the best spec of car.
    #7
  9. MattW
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    MattW Reverse

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    [Dec 4, 2006]
    Don't forget to add the allowance you are giving up also.
    #8
  10. Amchlolor
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    Amchlolor Active Member

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    [Dec 4, 2006]
    But that would only be of benefit if I didn't have a car,or was willing to run a cheap one.
    #9
  11. Booster
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    [Dec 4, 2006]
    Mine is a company car and I'm a 40% tax payer. It costs me £260 a month in tax as i don't have a fuel card. The way I look at it is even if I was paid say £600 a month car allowance after I had paid tax on that I would have £360 left. That wouldn't even cover the finance payment (even though I work for a finance company and get a mega cheap staff rate) let alone taxing it, insuring it, service costs and tyres. Factor in depreciation and with me doing around 18k per year its a no brainer.

    Yes, it is a pain in the ass paying the fecking tax man even more money but it is still cheaper than running it myself.
    #10
  12. Amchlolor
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    Amchlolor Active Member

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    [Dec 4, 2006]
    You could minimise the tax hit though,by running a more efficient car.
    I can't wait to see what sorts of engines are around when I renew (Jan 2008),as it is entirely conceivable that I could actually get a better car,but pay less tax than I am just now.
    My car's Co2 rating (around 156-159) used to be quite good,but they're getting better all the time.
    The government is aiming for a certain percentage of cars to have a CO2 rating of less than 140 within a definite timeframe,even if I can't remember what that timeframe is !
    I have no problem being environmentally friendly if it helps my pocket !
    #11
  13. marriedblonde
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    marriedblonde Moderator

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    [Dec 4, 2006]
    On top of the £360 you would then have £260 that you where no longer paying tax on, add to that the company miles you may do. Or are you saying you couldn't afford to run your car for less than £620 a month?

    J.
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  14. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Dec 4, 2006]
    you're all missing the point.
    Yes it's a no brainer if you insist on running the same brand new car that you would get through the company car scheme. The whole point of opting out is that you don't go and buy a brand new £23k car with your allowance. You buy a 3 year old £10k car which will still be worth £3k after another 2-3 years. You make money on the fuel as well, so if you do a lot of business miles (25k p.a.) you can expect to make £200-£300 per month on fuel alone.
    So £7k over 3 years = £200 per month (so basically the same as the tax on an average company car)
    Insurance/tax/tyres = £120 per month (easily covered by business mileage profit)
    So the £300 per month net allowance is looking pretty damn good to me to cover servicing & private mileage.
    I've been running my own car for 7 years now and it's made me over £7k profit net, that's £12k gross, compared to a company car that would have cost me at least £18k in tax. Over 7 years that's a saving of £30k.
    People look at opting out in completely the wrong way. They compare the tax they're paying on a company car, to the allowance they would get to run the same car. Wrong!
    Booster you said you'd only get £360 per month net. No, you'd get £360 net + £260 saving from co. car tax + around £200 per month profit on fuel (if you stuck with a diesel). That's £820 per month net (£1200 per month gross). More than enough to run a half decent 3 year old 130Tdi and make a profit.
    Personally I don't care what anyone does, but at least do the maths correctly.
    Company cars only really make sense if you do one helluva lot of personal mileage and you have a fuel card
    #13
  15. Castro
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    Castro New Member

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    [Dec 4, 2006]
    Hmm.. I'm starting to have doubts now too :uhm:

    My situation is that I drive 500 miles a week, all commuting miles so not claimable as expense.

    I'm a 40% tax payer and my car allowance is £475. A 2.0 A3 TDI (170) Stronic would cost £390 a month operating cost and the tax would be £150. The operating cost is taken from my gross (£475) allowance and the tax comes from the net of the difference (£475 - £390) + my net salary. So all in all I'm looking to pay around £120 out of my own pocket for the car after the car allowance has been taking into consideration.

    The way I see it is that I pay £80 a month to insure my current 5 yo A3 TDI, not mention servicing, road tax, maintenance etc.. so in effect the company car is cash neutral compared to owning a car.

    Am I missing something major here?
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  16. Amchlolor
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    Amchlolor Active Member

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    [Dec 4, 2006]
    Firstly,I'm not missing the point,ta very mooch.
    I've always said it only really makes financial sense to opt out if you go for a cheaper car.
    That's what I'm going to mull over come Dec2007/Jan2008.
    Do I really want the hassle of a used car,or the (hopefully) hassle-free new car ?

    I get annoyed enough when a car goes wrong,I'd be livid if I kept having to pay !

    Secondly,the scenario you describe is exactly how it is for me.
    I do zero business mileage,but I have a fuel card.

    One can also be quite....erm....'creative' with a fuel card...
    #15
  17. Booster
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    [Dec 4, 2006]
    Ah, yes I was having a Monday afternoon moment!
    Yes, I could get my tax bill down by having a soot chucker but I don't want one. I can see how opting out would benefit some but I like having a new car every three years or so and no headache if they go wrong. Horses for courses and all that!
    #16
  18. Amchlolor
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    Amchlolor Active Member

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    [Dec 4, 2006]
    The only thing I really hate about company cars is the fact you're tied in for so long.
    Even if a car behaves itself perfectly,I get so bored so quickly.
    #17
  19. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Dec 4, 2006]
    Bowfer "I do zero business mileage,but I have a fuel card."
    Don't really justify having a company car at all then?
    It's ironic that the tax laws surrounding company cars/fuel card were originally designed to penalise that exact scenario. i.e. where it's totally just a perk.
    When now it's actually only worth having a company car if you don't actually need it for your job.
    And cheaper car often means better car, the exact car you want not a compromise based on monthly rate and emissions.
    Makes sense to me, if no one else "gets it" then your loss.
    #18
  20. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Dec 4, 2006]
    "Do I really want the hassle of a used car,or the (hopefully) hassle-free new car ?"
    I think you'll find that the most "hassle" from a car is in the first year, so by buying 2-3 year old cars you actually have a better hassle free experience (basic reliability "bathtub" graph). And my experience has been the same, and judging from a lot of the posts on here the most faults seem to be with brand new models.
    Also having a company car is so boring. I'm a car enthusiast (presumably most people on here are as well) and the 12 years or so I had a company cars were the most boring car years of my life. The only excitement is choosing and taking delivery of a car which isn't quite what you wanted. Which is very short lived.
    Running your own car is a pain sometimes but massively offset by getting exactly what you want and running it like your own little business. Sounds pretty sad but it is true in my experience.
    I'm probably an extreme case as I've grown out of the whole "new car" thing and I understand the youngsters on here will still get a buzz from that. I also do a lot of business miles and have chosen to stick with the 3 Audi's I've had for probably longer than most. If you're going to chop & change every 6 months then it's not going to save money.
    I've also assumed most people able to get a £20k+ company car are in the 40% tax bracket otherwise your company car would actually be more valuable to the company than you the driver.
    #19
  21. Amchlolor
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    Amchlolor Active Member

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    [Dec 4, 2006]

    Steady...
    40% tax doesn't cut in until about £34000-£35000k a year,not the low £20K's.
    #20
  22. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Dec 4, 2006]
    Blimey that's gone up I still thought it was around £25k. It's actually £33.3k for this year, £32.4k last year. Well you get the point anyway.
    #21
  23. Vertigo1
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    Vertigo1 Well-Known Member

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    [Dec 4, 2006]
    Err, what? Not many people doing 25k p.a. will have the option of a cash alternative to a company car for the very reason you cite. Any companies offering a cash alternative to such people and then paying them a fortune in mileage charges to use their cars for 25k business miles each year are utterly mad.

    It's generally those who have a company car as a perk more than a necessity, and thus do far less business miles, who are given the option of a cash alternative.
    #22
  24. AndyMac
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    AndyMac Moderator Staff Member Moderator

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    [Dec 4, 2006]
    What??? I think you need to read that back to yourself.
    It actually works the other way. The more miles you do the more money the company saves if you opt out. Think about it.
    They pay a fixed amount as a cash alternative regardless of mileage. If you run a company car they get stung on the lease if you do over 60k miles in 3 years. You are also clocking up private miles on their car as well.
    They cover the cost of fuel either way, so that's irrelevant, but they also save on the private mileage.
    The profit on the fuel by opting out comes from our friends at the inland revenue not the employer. You can claim 40% back on the difference between the amount your employer pays you per mile and the allowance the IR provide. For the first 10k miles this is 40p, after that 25p.
    So if you do 25k miles per year and your employer pays you 14p per mile, you will get tax relief on 26p per mile, then 11p per mile i.e. £1,700 per annum. With a diesel then you're also making money on the 14p per mile as well.
    #23
  25. Booster
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    [Dec 5, 2006]
    My firm makes a "profit" on the sale of our company cars. We drive decent brands and make sure we get them well specced. They depreciate faster in our books than they do in real life (I think the accountants use 20% or 25% on the decreasing balance each year). On my last car the profit was almost £3k and on my car before that it was £2.5k.
    #24

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