Company Car or allowance?

Tazium

I'm trying to work this out for my brother in law. Allowance of 595 per month pre-tax. He's single and pays tax at the higher rate. BIK would hit at the maximum 30% (?) due to low expected mileage of about 12K Kms pa. Monthly cost of plan plus services on this is 775 pm so he'd have to make up the difference of 180 before BIK right? Car works out at 36,320. At 30% the BIK liability is just under 11K, and he'd pay 42% on that or roughly 4,580 pa (381 pm). So he can expect to pay approx 561 per month. Does this seem approximately correct? He's got a good range to choose from but the above costs are on a 3 series. The company cover the insurance, tax, car services and tyres, so he'd save on these. Does BIK take into consideration depreciation over the life of the car or is it based solely on the purchase price?

blackbox

BIK is based solely on the purchase price.

There can be reductions for high work related mileage but this would not apply here.

R.O.R

blackbox wrote: »

BIK is based solely on the purchase price.

There can be reductions for high work related mileage but this would not apply here.

It's not that good unfortunately, BIK is based on the retail price rather than the purchase price.

Tazium wrote: »

I'm trying to work this out for my brother in law. Allowance of 595 per month pre-tax. He's single and pays tax at the higher rate. BIK would hit at the maximum 30% (?) due to low expected mileage of about 12K Kms pa. Monthly cost of plan plus services on this is 775 pm so he'd have to make up the difference of 180 before BIK right? Car works out at 36,320. At 30% the BIK liability is just under 11K, and he'd pay 42% on that or roughly 4,580 pa (381 pm). So he can expect to pay approx 561 per month. Does this seem approximately correct? He's got a good range to choose from but the above costs are on a 3 series. The company cover the insurance, tax, car services and tyres, so he'd save on these. Does BIK take into consideration depreciation over the life of the car or is it based solely on the purchase price?

A max 10% discount can be applied to the retail price of the car before declaring to the Revenue comission, and we'd always recommend declaring the full 10% - never had any comeback on that.

That gives a BIK value of €32,688 on an €36,320 car.
At 30% BIK, the annual BIK liability is €9,806.40, or €817.20 per month.

If your Brother in Law has to contribute towards the monthly cost of the car, this is offset agains the BIK (an important point to make to payroll).

If he's paying €180 a month to make up the difference between the allowance and the lease cost, then that comes off the €817.20 per month, leaving a figure of €637.20 to pay tax on.

The amount of tax he actually pays depends on his personal circumstances, but as a rough guide it's about half (€318.60). Some will be at the lower rate of tax, most at the higher rate of tax and then there is PRSI etc as well (or at least that's my understanding - don't really understand how the tax system works that well).

If he took the allowance, he'd end up with roughly half the €595 allowance after tax - €297.50. Sounds like a big difference - either an extra €297.50 in your take home pay when you take the allowance, or missing €318.60 when you go for the company car, but this is where he needs to sit down and work out the running costs.

Net difference between allowance and BIK is €616.10 - can he afford to run the car he wants on that amount each month? He wouldn't buy a new 3 Series on finance, over 5 years for that monthly amount, but a PCP may suit.

If he works out the annual running costs (loan, tax, insurance, tyres, servicing, hire car while in for service etc.) and compares that to what he'd pay in BIK, that will give the answer as to which is better to go for.

If it's even close though, go for the company car. The additional peace of mind is worth the extra money. With your own car, if something goes wrong, then there's lots of calls and additional time spent chasing up getting it fixed. If it's a company car, it's usually one call to the lease company, someone picks up the broken car and drops a replacement car until the company car is fixed or replaced.

HTH

Tazium

Thanks for that, it's actually more savings given that any extras added that increase the cost over the allowance can lower the BIK. Your post is really helpful, thanks very much.