Company Car (A4) or take the money and run...

craigomills

craigomills

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My A4 Avant Quattro is a company car and has approx 18 months left to run until I am eligible for a new car.

I pay approx £5k per year in company car tax (!) at 40% which is a ridiculous amount of money.

I am considering my options for a new car, be it taking the cash and buying my own car, or doing some kind of lease with probably 20k miles per year.

If I took the cash I would get £490 per month but then obv be taxed on it.

I'm so confused and the problem is I like a new car so not sure what to do.
 
Pretty much down to personal circumstances and how much running your own car will cost you.

Mine is up in October, and will be in same quandary. It’s almost getting to point where it’s a moot point of owning a co. car vs. private.

Some things to consider.

- The govt have not committed to what they are doing with WLTP. They have kicked the can down the road for 2 years and fleet drivers are showing concern and opted out. However - rumours have it that a draft reform will get published on July 14.

- Depending on when you got your car, you have to pay the tax on the car, or cash equivalent- whichever is highest. This is the biggest killer to the company car fleet. As there is less incentive to go green.

- If you take a fuel card, do the maths on it. You might find depending on fuel consumption it does not work out to have it still. Break even on more efficient cars is now over 25k miles pa.

- use Comcar calculators to work our benefit of opting out, and search around on running costs of getting your own car. For me, if I went to something like a Ford Focus, leased at 25kpa, I would save ~£200pa vs. Staying in company car scene.

- if you want to evade tax on cash equivalent, look at cars <75g/km CO2. These do are exempt from cash amount and could save more. A PHEV is an thought I am processing for my co. Car replacement (fleet, not private).

Overall, it’s a tricky time, government are shafting this in more ways than one. Hence why car sales are down so much. And would you believe that used car values are up as a result!

Get the maths straight, as these are tricky to nail down. Hope you work something out!
 
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I'm in a similar position - paying not far shy of £5K / year in BIK tax. The A4 is my 3rd company car (ending a run of 2 3 series BMWs). Ultimately what swings it for me is that I cover around 40k miles / year, including quite a lot of personal mileage around the UK and trips to the continent.

I would probably take the cash if I were closer to the 20k mile mark.
 
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I guess the £5k must be the Diesel penalty. My 2.0 TFSI almost loaded (just shy of £38k) is £4,100 pa.

Agree that with mileage it becomes better value. I average around 31k pa - also do more travelling in the UK to take advantage. At the moment hoping that the new VW Passat makes it onto my Co. Car list as it has everything I added to the A4 as standard (bar towbar). If that spec is the same for the incoming Passat PHEV that's going to be very tempting with a 16% BIK.

Other options are the 330e PHEV, Kia Niro PHEV, or possibly A3 Sportback.
 
I was in the same situation, I am in the fortunate situation where I have my work cover my Insurance, being 28 with a brand new 4-week old 35TDI S-Line A4 it was the better option, especially when I do 35k+ PA milage. When I consider the company cover the initial rental etc. it worked out the better option VS a car allowance
 
What rates will your work pay for fuel if you take an allowance and get a car? That will dictate what mpg any car you can get will need to hit.

In terms of money for car if you take the allowance - you’ll have the allowance, minus whatever you are taxed, but will also be saving the BIK you currently pay. So that ought to give you a fair chunk of cash to play with to get a good deal on a car you’d like...
 
tickedon said:
What rates will your work pay for fuel if you take an allowance and get a car? That will dictate what mpg any car you can get will need to hit.

In terms of money for car if you take the allowance - you’ll have the allowance, minus whatever you are taxed, but will also be saving the BIK you currently pay. So that ought to give you a fair chunk of cash to play with to get a good deal on a car you’d like...
Click to expand...

My companies current fuel rates per mile if i take the allowance...

Petrol
<1400 cc - 21p
1400-2000 cc - 24p
>2000 cc - 31p

Diesel
<1400 cc - 19p
1400-2000 cc - 21p
>2000 cc - 23p
 
And then you claim the shortfall to 45p per mile via self assessment.
 
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craigomills said:
My companies current fuel rates per mile if i take the allowance...

Petrol
<1400 cc - 21p
1400-2000 cc - 24p
>2000 cc - 31p

Diesel
<1400 cc - 19p
1400-2000 cc - 21p
>2000 cc - 23p
Click to expand...
Those seem pretty generous!

On diesel, at 130.9p per litre (which is more than I pay, but apparently the current UK average), you'd only need the car to deliver...
<1400 cc - 19p = 32mpg
1400-2000 cc - 21p = 29mpg
>2000 cc - 23p = 26mpg

To cover your fuel costs. That opens up a whole range of 'thirsty' cars, or, the potential to make a small profit from every mile you drive (assuming all your other car costs are covered by the car allowance & BIK savings).

The car allowance, after tax, would net you somewhere around £3410 per year. Assuming that you're paying 40% of the £5k BIK (and not £5K!), that's a saving of £2000pa as you'd no longer be paying BIK with a car allowance. Giving you £5410pa, or £450pm, to run a car.

My 150 2.0 TDI costs me 11.4p per mile, I know your 190PS Quattro TDI will probably cost slightly more - based on Honest John's real MPG figures, I think it would cost about 13p per mile. So that's potentially another 8p x 20k miles (assuming all were business miles) = £1600 per year, or another £133 per month to go towards your car costs. As Paul mentioned, you can also claim the tax relief on the difference from HMRC (against 45p per mile / 25p after 10k miles), which will add up to a fair bit too each year (£960 of tax relief on the first 10k miles, assuming 40% on 21p paid for a 1400-2000cc car).

£580pm (excluding any tax relief you can claim) would seem more than enough to run a car similar to your current A4, or indeed probably to make a small profit on the side if you get a good deal.

Note: none of this is financial advice and you should speak to your own accountant / financial adviser about what the right thing to do is in your own circumstances.
 
Last edited:
tickedon said:
Those seem pretty generous!

On diesel, at 130.9p per litre (which is more than I pay, but apparently the current UK average), you'd only need the car to deliver...
<1400 cc - 19p = 32mpg
1400-2000 cc - 21p = 29mpg
>2000 cc - 23p = 26mpg

To cover your fuel costs. That opens up a whole range of 'thirsty' cars, or, the potential to make a small profit from every mile you drive (assuming all your other car costs are covered by the car allowance & BIK savings).

The car allowance, after tax, would net you somewhere around £3410 per year. Assuming that you're paying 40% of the £5k BIK (and not £5K!), that's a saving of £2000pa as you'd no longer be paying BIK with a car allowance. Giving you £5410pa, or £450pm, to run a car.

My 150 2.0 TDI costs me 11.4p per mile, I know your 190PS Quattro TDI will probably cost slightly more - based on Honest John's real MPG figures, I think it would cost about 13p per mile. So that's potentially another 8p x 20k miles (assuming all were business miles) = £1600 per year, or another £133 per month to go towards your car costs. As Paul mentioned, you can also claim the tax relief on the difference from HMRC (against 45p per mile / 25p after 10k miles), which will add up to a fair bit too each year (£960 of tax relief on the first 10k miles, assuming 40% on 21p paid for a 1400-2000cc car).

£580pm (excluding any tax relief you can claim) would seem more than enough to run a car similar to your current A4, or indeed probably to make a small profit on the side if you get a good deal.

Note: none of this is financial advice and you should speak to your own accountant / financial adviser about what the right thing to do is in your own circumstances.
Click to expand...

That is really useful mate, I appreciate the time you took to write that !

I would like something a bit bigger than the A4 Avant next so maybe an A6 may creep into that cost bracket at some point...
 
One factor to consider in the company car vs car allowance debate is that it moves the underlying financial liabilities away from the employer and firmly to the responsibility of the employee.

If you have the misfortune to lose your job that of course also sees the end of your company car, but at least the balance of any remaining finance remains with the employer.

If you lose your job, or even change jobs with different travel requirements, when there is still two years to pay on any PCH or PCP finance then you are left with the liabilities and terms which may no longer be appropriate for your change of circumstances.

Obviously depends on your security of employment and expectations for any changes over the financing period.
 
I made this decision two years ago when I took a new job. When you do the maths they more than stack up, but you have to go into car allowance with your eyes open.

I decided to buy a B8.5 A4 Avant with 40k on the clock. Plan was to run it until 150k which I estimated would be about 4 years. I decided to take a bank loan of £14k to finance it so I owned the “asset” so to speak - for me this de-risks it to a degree, so long as the value of the car is not less than outstanding loan.

I was paying £5-6k/annum on a Merc C300h beforehand. When I considered that I’d get that £5-6k back, plus £5k car allowance (albeit taxed). I just had to make sure the running costs worked out.

Fortunately where I work I get 45p/mile for first 10,000 miles. I do around 25-30k miles per year. I do feel any more than 30k and the savings are potentially more questionable.

So far, so good. I’ve paid the car off early. So I have an asset currently worth £6k with 100k on the clock. Servicing and insurance costs are more than covered by the mileage, although you do have to be disciplined and setup a car account with whoever you bank with to keep a cash float. I’ve had one “unexpected” cost so far, which was rear shocks that were only £300.

Probably my final bit of advice would be to not buy brand new. Buy something 12-18 months old.

Sorry a bit of a waffle.
 
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