Rising up the career ladder and opening the door to the company car scheme isn’t just exciting, it also offers big savings in terms of maintenance, repair bills and fuel costs over the car you currently own.
But it doesn’t necessarily make sense for everyone and when presented with a cash alternative, many decide to opt out of the scheme.
So which is best for you? We’ve taken a closer look at the pros and cons of both choices:
Company car scheme
One big perk of choosing a company car is that you no longer have to worry about many costs associated with running it, or dealing with the stress of selling it at the end of the lease. Plus you’re not personally tied into a financial contract: if you leave your current job, the car stays there.
Insurance is also covered and so is breakdown recovery – most companies also cover any costs associated with accidental damage but it’s worth checking your driver’s handbook first.
You do have to pay tax, of course, so if you want to keep costs low, pick a model with low CO2 emissions. That said, having the tax costs of your company car in one monthly payment can help you plan your finances more effectively – no unexpected bills to worry about.
If fuel is also part of your package then you’ll need to pay Car Fuel Benefit each month in addition to your company car tax, but if you’ve a lengthy commute you’ll still save a fair amount of money.
You also get a brand new car every three to four years and with it the latest connectivity technology, driver assistance systems and fuel-efficient engines.
The company car has been considered a perk for many years and although it still is today, there are lots of private leasing deals and PCP offers that include servicing, maintenance and even insurance, so it’s worth taking a closer look and crunching the numbers to see which delivers the biggest savings.
Pros:
- No unexpected bills, just a set fee every month, plus maintenance and insurance are covered
- A new car every three to four years
- Access to the latest kit and fuel-saving technology
Cons:
- Restrictions on choice
- You never own the car
Taking the cash
Not everyone is able to opt for the cold, hard cash option at work, and the sum offered can vary from company to company. Some offer as much as £8,000 per annum subject to tax and split across 12 months.
One of the biggest perks of opting for the cash is that if you already own a car or have a small commute, it can be a big cash injection for your household.
Some decide to spend the extra allowance on a new car which, depending on the financial agreement you enter into, could be yours to sell at the end of the term.
You also get more freedom to choose which car you want, subject to it meeting certain criteria laid down by your employer, whereas the company car scheme is usually limited to certain car manufacturers, CO2 outputs and fuel type. If you’ve had your eye on a sports coupe or convertible, ensure there isn’t a requirement from your firm for a minimum number of doors or seats before you buy it.
Company car drivers have to pay a monthly tax bill as well as a Car Fuel Benefit charge if they don’t pay for their own fuel, so you’ll save here too, but if you choose to buy a car yourself you’ll need to budget for servicing and maintenance costs. If any repair work is required, you’ll have to foot the bill for that, too.
You can charge your employer a mileage fee to cover both fuel and the cost of maintenance, with a rate set by the government at 45p per mile up to 10,000 miles a year.
One thing to bear in mind is that if you take out a financial agreement for a new car, regardless of any change to circumstances, you are obliged to pay until the end of the term.
Pros:
- You have the freedom to buy any car you want
- Cash sum may help ease financial burdens
- You keep the car as an asset
Cons:
- You pay tax on the monthly allowance
- Could be tied in to a financial contract if you decide to use the money for a car
- May have to budget for servicing and maintenance costs
Still unsure which option is right for you? Perhaps the following articles could help:
Top low-tax diesel company cars
Guide to reclaiming business mileage
Your complete guide to BIK tax
