Company Car Confusion

DrivingForce

Hello,

I am a young male who has just started working with a company. They have detailed to me a company car scheme that they say is attractive. I have my license a few months but never actually bought a car.

Basically we can order brand new cars, keep them for 6 months then order another and that cycle goes on. The lease cost is 1% of the value of the car pm and then some BIK on top of that. There is no contracts, deposits or anything like that either. Firstly, is that good?

Included is all servicing, taxes, insurance(!) and things like that. Also a fuel card so that can be taken against tax or something but not free fuel.

You see, for me to actually be insured on a car would cost the price of the car lease. (Any quotes I have seen are ~1500+) Would this be a good option for me? I like the idea of a new car biannually but if it doesn't make sense then thats different.

MagicMarker

If something sounds too good to be true, then it usually is.

You need to ask your company for more specific details.

DrivingForce

Like what exactly? I have most of the details I think, there is nothing fishy or anything about it I will add.

R.O.R

That sounds incredibly strange, unless you are working in the motor industry, then a 6 month replacement cycle would be unusual for Ireland, but not unheard of in the rest of Europe.

Drummerboy08

I've never heard of a company in Ireland on a 6 month cycle outside of motor trade.

MagicMarker

DrivingForce wrote: »

Like what exactly? I have most of the details I think, there is nothing fishy or anything about it I will add.

Well have you worked out the costs then? 1% per month on a 20k car is 200 per month, BIK could run into the hundreds also? What if you have an accident, what costs are you liable for?

It all comes down to money at the end of the day, what will it cost and is it worth it?

Nody

Liability is the big one (esp. for incidents caused by you), what about excessive wear & tear? What about mileage and travel outside of Ireland (i.e. could you go around the world if you felt like it?), who'll approve new cars (i.e. can you get the latest Jaguar if you felt like it?) and do you need to hit targets for it (i.e. sales) or risk to have to cover part of the cost yourself in a month?

As other have noted it's very unusual for a company to intentionally take a big loss (initial depreciation) every 6 months...

Also I think you might have gotten your BIK wrong; run the numbers in this calculator and see what you end up with (as indiciator).

DrivingForce

Sorry, logged intobfriends ac above. Yeah it's a car company. Well it's 1% then a small amount of BIK (Due to calculations given) so let's say it's 1% and a bit for BIK. So a 20k car would cost me 240 ish a month to lease I think.

In comparison to other lease schemes, would it be better? I just don't really know these things and was cynical when they said it was attractive

Buona Fortuna

DrivingForce wrote: »

Sorry, logged intobfriends ac above. Yeah it's a car company. Well it's 1% then a small amount of BIK (Due to calculations given) so let's say it's 1% and a bit for BIK. So a 20k car would cost me 240 ish a month to lease I think.

In comparison to other lease schemes, would it be better? I just don't really know these things and was cynical when they said it was attractive

If its yours for the 6 months to do as you wish its a good deal

- fair use clause?
- private mileage?
- taking car abroad?
- accidents and damage, do you have any liability if so ....
- if you forget to lock it and its stolen, who is liable
- if you have a small car now and circumstances change can you change it for a bigger car - who decides?

DrivingForce

Buona Fortuna wrote: »

If its yours for the 6 months to do as you wish its a good deal

- fair use clause?
- private mileage?
- taking car abroad?
- accidents and damage, do you have any liability if so ....
- if you forget to lock it and its stolen, who is liable
- if you have a small car now and circumstances change can you change it for a bigger car - who decides?

We were told we are not liable for damage. Company takes the hit but if we take the p*ss they can revoke your privilege to lease. Travel is allowed too just have to fill a form. No targets no as it won't be used for business. Just order a new one ever 6 months, then a few months lead depending on model and options. Basically you order and own a new car for 6 months cycle. So can go from a 1l focus to a 2l mondeo if you like.

The one thing I'm worried about is, apparently insurance companies don't see lease car experience as real driving experience? Just so if I got my own car

Kenny Logins

I think you've underestimated the BIK by a good bit..

DrivingForce

No, I don't think so. The BIK is less because the lease fee and fuel card balance is taken from the BIK so it is not so high, if you get me.

Drummerboy08

There are lower BIK rates for motor trade employees anyway

Buona Fortuna

DrivingForce wrote: »

The one thing I'm worried about is, apparently insurance companies don't see lease car experience as real driving experience? Just so if I got my own car

When you have an inkling this is likely to change, buy an old banger and insure as cheap as you can, just keep it to rack up a year or 2 NCB.

MagicMarker

DrivingForce wrote: »

No, I don't think so. The BIK is less because the lease fee and fuel card balance is taken from the BIK so it is not so high, if you get me.

In the OP you said the lease fee was 1% of the value of the car, plus BIK on top of that?

DrivingForce

MagicMarker wrote: »

In the OP you said the lease fee was 1% of the value of the car, plus BIK on top of that?

Yes, but the 1% is taken away from the value so BIK is lower. Basically, BIK works out to be the much lesser of the two.

commited

BIK is on the OMSP of the car, not the lease that you will pay.

On a €20,000 car, assuming less than 24000 business km, you will pay tax on 30% of the OMSP, so €6000. Assuming you're in the low tax bracket, but subject to USC&PRSI, that means effective tax is 31% of that figure so €1860 or €155/month.

The above works out at a total of €355/month for the car - €4260 out of your post tax salary + fuel. Only you can work out if it's worth that. Is there a car allowance alternative available?

If you're insured on a company car scheme, insurance companies may grant you a partial NCB based on your time insured.

R.O.R

commited wrote: »

BIK is on the OMSP of the car, not the lease that you will pay.

On a €20,000 car, assuming less than 24000 business km, you will pay tax on 30% of the OMSP, so €6000. Assuming you're in the low tax bracket, but subject to USC&PRSI, that means effective tax is 31% of that figure so €1860 or €155/month.

The above works out at a total of €355/month for the car - €4260 out of your post tax salary + fuel. Only you can work out if it's worth that. Is there a car allowance alternative available?

If you're insured on a company car scheme, insurance companies may grant you a partial NCB based on your time insured.

If you pay towards the upkeep of the car, and paying some of the "lease" cost and business fuel counts towards this, that amount comes off the BIK liability.

Mr.David

Working for JLR?

commited

R.O.R wrote: »

If you pay towards the upkeep of the car, and paying some of the "lease" cost and business fuel counts towards this, that amount comes off the BIK liability.

Apologies, you're right. BIK will be 31% of €3600 (as already admitted no business use) so 1116 or €93/month.