Company car or car allowance

Rylan

Looking at both options. Starting with a new company in January and have option of either. Company car is a Toyota avensis diesel new. Company allowance is 8000 per annum. I would be doing approx 60klms per year at a rate of 27cent per kilometre tax free if I was to take car allowance. Fuel card provides for company car if I was to choose that option. The car allowance would be taxable at high rate. Thinking of getting a better car 2014/2015 for circa €30k and going with car and mileage allowance. Am I mad? Should I just take company car? Would need to take out loan for 30k. Any opinions or advice apprecaited.

Joeseph Balls

Not sure I'm understanding it right but anyway, if you use your own car, you're clocking up miles and wear and tear when it comes to selling or trading in. I would take the company car, and have my own for weekends etc and low mileage when it comes to getting a new one. It's a buyer's market atm and condition is everything.

bmwguy

Rylan wrote: »

Looking at both options. Starting with a new company in January and have option of either. Company car is a Toyota avensis diesel new. Company allowance is 8000 per annum. I would be doing approx 60klms per year at a rate of 27cent per kilometre tax free if I was to take car allowance. Fuel card provides for company car if I was to choose that option. The car allowance would be taxable at high rate. Thinking of getting a better car 2014/2015 for circa €30k and going with car and mileage allowance. Am I mad? Should I just take company car? Would need to take out loan for 30k. Any opinions or advice apprecaited.

60000kms a year will depreciate your car to zero in 4 or 5 years. And it will need 3 services a year. And a set of tyres at least every year maybe twice.

Interest on a 30k loan is significant.

Diesel costs are about 10c per km too.

Insurance on your own car.

Sit down and do your sums but I can't see using your own car for this being viable.

Clareman

It's a no brainer to me, get a company car and any time you have to get anything done with your car you can do it on company car without any hassle, use your own car and you've to get stuff done on your time. You'll also get a new car every few years with no hassle

pm.

100% company car, hassle free driving and no worries about maintaining the car or tax insurance and nct....

bazz26

Just factor in BIK if you take the company car, however if your business miles are 60k km per year it should help reduce your BIK tax burden. Another thing to remember is that your NCB on your own private insurance policy will expire if you leave your policy laps for longer than 2 years.

exaisle

This is possibly more appropriate for the Taxation forum...

You COULD receive Civil Service mileage rates tax free for this (as opposed to a flat 27cent/km):

6347km @ 59.07cent = €3,749
53,653km @ 28.46cent = €15,269
Total Mileage paid tax-free = €19,019.

However, BIK on a New Avensis Diesel:
Cost/OMV (say) = €30,000
Business Mileage = 60,000
Personal Mileage = 10,000

Cash Equivalent is €30,000 x 6%(business mileage >48,000) = €1800
Income Tax, PRSI & USC (say 50%) = €900 per annum.

So, it would cost OP €900 to have a company car...sounds like a better deal to me.
If €8000 is the maximum the company will spend on running the car, any amount the OP has to contribute reduces the cash equivalent..

Mods: Maybe post this in the Taxation forum where those more familiar with BIK will confirm details (or politely tell me that I've made a balls of the calculation...) :-)

Rylan

Thanks for all the replies

My thinking is @27 cent per klm gives me 16200 tax free per year. Car allowance @8000 give me approx 4K after tak per year. Paying no BIK gives me back an additional 1k approx. This totals €21,200 per year

I have worked out fuel costs of approx €6000 per year, a generous €1500 for insurance and €2000 maintenance costs per year. This totals €9500 per annum outgoings leaving a net additional incoming if €11,700.

I could use this to pay off the loan and after 3 years would own car outright whereas with company car I would not own.

Is my logic flawed?

nice_guy80

Company car

But keep a cheap car with insurance anyway

exaisle

Rylan wrote: »

Thanks for all the replies

My thinking is @27 cent per klm gives me 16200 tax free per year. Car allowance @8000 give me approx 4K after tak per year. Paying no BIK gives me back an additional 1k approx. This totals €21,200 per year

I have worked out fuel costs of approx €6000 per year, a generous €1500 for insurance and €2000 maintenance costs per year. This totals €9500 per annum outgoings leaving a net additional incoming if €11,700.

I could use this to pay off the loan and after 3 years would own car outright whereas with company car I would not own.

Is my logic flawed?

Yes. The company can legitimately give you €19k tax free as per civil service mileage rates (2800 more than 16200). Then take €5200(2800 less than 8000) car allowance and you pay €2600 tax. Net total €21600.
This is the amount that you have to finance and run what would be your own car.
Deduct running costs of €9500 which leaves €12100. This would pay finance on a new Avensis diesel (I think).
After three years it's going to be worth something.....so finance costs on a new one would be less...(Don't under any circumstances finance with a PCP. That is a toxic method of finance).
You shouldn't take the tax you save on not paying BIK into account as we're just calculating the cost of running the car on its own merits. You'd only include that in the calculation to find the cost of driving a company car.

To my mind, the problem is that if anything goes wrong with the car, it's your problem, not the company's. Think about what happens if the engine blows up....

I'd still be inclined to take the company car. You pay €900 per annum and have the use of a relatively new car. €900 is the most it can cost...

R.O.R

Rylan wrote: »

Thanks for all the replies

My thinking is @27 cent per klm gives me 16200 tax free per year. Car allowance @8000 give me approx 4K after tak per year. Paying no BIK gives me back an additional 1k approx. This totals €21,200 per year

I have worked out fuel costs of approx €6000 per year, a generous €1500 for insurance and €2000 maintenance costs per year. This totals €9500 per annum outgoings leaving a net additional incoming if €11,700.

I could use this to pay off the loan and after 3 years would own car outright whereas with company car I would not own.

Is my logic flawed?

Using the calculator on the AIB website, a 3 year loan of €30,000 would cost you €11,343.60 per year, so you'd be marginally better off (by €6.85 a week) and will have an asset (and no claims bonus) at the end of the 3 years.

Honestly though, for peace of mind, it's worth taking the company car - the difference between having to all running around yourself, against making 1 simple phone call and having someone else look after everything, in the event of breakdown/accident, should have quite a bit of value.

The only negative of taking the company car, is that the Avensis wouldn't be most people's first choice - take it the company is stuck on the Avensis? Short service intervals of every 15k mean you'll be in to Toyota every 3 months, and the smaller than normal fuel tank mean you'll be off the road more frequently than say a Passat or Superb. These are unquantifiable costs, but definately costs to the business (or you personally) as if you aren't working, you are costing the company money.

You're not by any chance selling very tasty sauces and have a lot of colleagues driving Black Avensi are you?

mickdw

For me, with the figures quoted, I would have my own car every time.
Firstly cause an avensis is just a deal breaker to begin and secondly because buying yourself opens up a whole range of far superior used cars.
That is speaking as a person interested in cars.
If one had no interest at all in cars, I'd suggest a 3 year old with low miles and actually make a good saving.

I'd normally suggest going for the car allowance but with your figures it makes more sense to take the car. Avensis isnt a bad car either despite some of the comments running it down.

iwillhtfu

Been there and done both.

Short answer is company car. Nothing better than not having to worry about car issues and if they do arise (which they will in either yours or company) You're still on company time dropping off their car for repair waiting for replacement etc.

On your own yes you get a car but at those kms it will be rough after a few years and you'll need more than standard servicing intervals.

No substitute for a fuel card and company car imo.

Rylan

Rylan wrote: »

..........Company car is a Toyota avensis diesel new. Company allowance is 8000 per annum. I would be doing approx 60klms per year at a rate of 27cent per kilometre tax free if I was to take car allowance. Fuel card provides for company car if I was to choose that option. The car allowance would be taxable at high rate..............

If you go the car allowance rate at those figures you'll get €16200 & €4000 (the car allowance net) per annum.

At 50mpg looking at €4 /4.5 ish in diesel every year.

3 services per annum and tyres you'd have to allow €1500 for that.

€1000/annum at least for tax and insurance.

Looking at spending probably €7k on the above so that leaves €13k/annum.

There's definitely scope there to go the car allowance route and not be out of pocket.

If I was sure I'd like the job and do at least two years I'd consider getting a decent specced almost new 2.0 Passat, Superb or Mondeo or personally I'd go with Mick's suggestion and make a few quid.

Such a car won't take a €26k depreciation hit over two years so there's at least a few thousand in the figures. Low or 0% PCP deal might suit you too if you are willing to buy it at the end of the 3 year term.

For the extra effort you can have a very decent holiday every year or save a few quid.

Rylan

Rylan wrote: »

....
Is my logic flawed?

Nope

mickdw

iwillhtfu wrote: »

No substitute for a fuel card and company car imo.

apart from full cash substitute in this case.

iwillhtfu

mickdw wrote: »

apart from full cash substitute in this case.

It's not really to be honest as I said I've done what op is asking either way and I'm currently in a co car by choice.

mickdw

Boils down to what the interests of the driver are.
For me, cars are my interest and just driving something that I've no input into wouldn't do it at all for me.
To have car expenses that got anywhere near the actual running costs would be a dream for me. To have expenses that appear to be in excess of running costs would be just fantasy stuff for me. Having to take car into dealer the odd time is part of the fun, have a look around the new cars etc.

ford2600

I've done this for 18 years.

3 cars in that time. I have never bought new, 2-3 yr old fresh diesel is optimum.

Your biggest cost is depreciation, so buying a 3 yr old car gets that out of the way.

Current car is a 7 yr old Octavia with 300k. Tyres, oil and filters and very occasionally brake pads.

Only way I know off of writing a tax free 5 figure cheque to myself.

kevohmsford

I am in the same position as the OP. I will be taking the company car.