Car allowance

[BurnleyFC]

This is all new to me, but I’ve been offered another job with a car allowance included.

The car allowance is £630 per month and I’m expected to be covering upwards of 35,000 miles a year with the job. I’ve been looking at lease vehicles as I’m assume it’s the best compromise of cost versus reliability, especially with the high amount of mileage that would rack up. I can also claim back personal car mileage of 45 pence per mile for the first 10,000 miles and 25 pence per mile thereafter. No company fuel card is provided.

Does this sound about right because from my admittedly limited knowledge of these types of situations I’m seriously doubting whether £630 a month would cover it, especially with how expensive new vehicles are nowadays?

Any help appreciated.

[Burt]

If you get a fuel efficient car I.e. 50mpg plus then you will make over £5k on fuel or £400+ per month

Don't forget the £630 allowance is taxable, dependent upon your tax rate

Should still be enough to fund the car. Leasing may not be best option with that mileage

[claret2018]

Is the £630 before tax?

[Burt]

Something like this, buy outright, pile the miles on it then sell after 3 years

http://www.autotrader.co.uk/car-details/202404058329655

[BurnleyFC]

Is the £630 before tax?

Yes it is, so roughly (I think) £490 after tax.

[tarkys_ears]

https://www.carwow.co.uk/car-chooser?fu ... order_cash

[claret2018]

It will be subject to your highest rate of tax, as well as NI and student loan repayments if applicable.

Broadly if you’re a basic rate payer it will be around £450 and if a higher rate payer £365, if you’ve got student loans then take £57 off those numbers.

Not great amounts to be leasing with given the very high miles- you’ll be much better off buying something.

[BigJay]

£630 is pretty generous for a car allowance especially as you have fuel allowance in with the deal. Most companies seem to be moving away from company cars because it means the company don't have to commit to 3 to 4 year deals and then be stuck with the vehicle if an employee leaves. From a tax point of view you'll be taxed on the amount as benefit in kind, but if you go for a plug in hybrid or an electric, then there are some further tax breaks, particularly for full electric. However, wouldn't recommend full electric if you going to be doing long miles, thats just a personal opinion though based on not wanting to sit in some service station fast charging. Also if getting a hybrid check that it comes with a charge point for hone installation. Also, hybrid cars good for economy combined with petrol if driven efficiently, but you'll only get 20 miles on full electric charge with most hybrids and car manufacturers exaggerate the amount of miles you'll really get. So, in my opinion, take the allowance, get what you want and do your research, its a generous amount even allowing for tax, especially with the mileage allowance on offer.

[Devils_Advocate]

At my company I get about £7k per year but I can use this to lease a car which will come out of my wage before tax or take the cash and use my own car but pay the tax. I have a 10 year old Volkswagen still going strong so taking the cash till I run it into the ground and then opt for the company leased car.

Your milage rates seem pretty good considering they are giving you an allowance to lease a car. Those who dont have a company car and travel at only get about 45p per mile at my place whilst I think I get about 24p.

If you're £630 can be used on the car lease before tax I think thats a pretty decent deal

[Burnleyareback2]

I’ve leased and bought 2nd hand over the years. Challenging now as both second hand cars and new cars (leased) are expensive.
When I have bought I looked for the highest depreciation cars and bought them about 2 years old. Generally after 3 years I’ve sold them at a profit (once I deduct what the company has given me over that time)

Leasing can work quite nicely and there are some ok deals around at the moment. I change again next year and unless prices drop I’m aiming to lease a 2nd hand car- I’m not fussed about it being brand new.

Good luck at least with a car allowance you have the choice!

[BurnleyFC]

At my company I get about £7k per year but I can use this to lease a car which will come out of my wage before tax or take the cash and use my own car but pay the tax. I have a 10 year old Volkswagen still going strong so taking the cash till I run it into the ground and then opt for the company leased car.

Your milage rates seem pretty good considering they are giving you an allowance to lease a car. Those who dont have a company car and travel at only get about 45p per mile at my place whilst I think I get about 24p.

If you're £630 can be used on the car lease before tax I think thats a pretty decent deal

Sorry for the daft question, but how can I use the £630 before tax to lease a car?

[Devils_Advocate]

Sorry for the daft question, but how can I use the £630 before tax to lease a car?

This is done through my work so if I lease a car it is paid for by my company instead of them paying me the cash value that would then get taxed. Sounds like this might work differently at your place if they just give pay you the allowance and then you spend it privately post tax.

Not sure the size of the company but might be worth checking with their finance or HR team if there is something they can do to show it as a deductible expense pre tax.

Im by no means an expert as mine is all taken care of by my company

[BurnleyFC]

This is done through my work so if I lease a car it is paid for by my company instead of them paying me the cash value that would then get taxed. Sounds like this might work differently at your place if they just give pay you the allowance and then you spend it privately post tax.

Not sure the size of the company but might be worth checking with their finance or HR team if there is something they can do to show it as a deductible expense pre tax.

Im by no means an expert as mine is all taken care of by my company

Makes sense and would work better for me, I would imagine.

I’ll certainly enquire. Thanks again.

[Darthlaw]

Sorry for the daft question, but how can I use the £630 before tax to lease a car?

That’s often done through a salary sacrifice scheme operated by some employers. Caveat is that you are then liable for benefit in kind on the vehicle that you lease. One benefit is that they are often deposit free, maintained and insured.

Fwiw, I’m going through the same process currently and deciding what to take when my Tesla goes back at the end of the year.

What’s worth bearing in mind is that the £4500 you get tax free (first 10k miles) probably needs to also cover your insurance, tyres and any maintenance. After that, your 25p per mile should at least cover your fuel.

If you’re not precious about what you drive, the focus mentioned above is a great shout. If you want something more flashy / comfortable for your 35k miles per year you may want to look at something German 2/3 years old.

[Caballo]

I went through this almost 3 years ago when company decided they no longer wanted 'company vehicles'. The 35k is going to be an issue with leasing, you'll either be out of pocket or driving a car not suitable for travelling 35k a year in. My advice would be use the net monthly amount to fund a 3 year loan on a low mileage 2nd hand vehicle. Run the the miles up for 3 years then get rid, all the while using the mileage allowance to fuel and maintain your vehicle. Then it's rinse and repeat.
Don't dismiss a diesel on that mileage either, even though a polar bear will die every time you start the engine , allegedly!

[Iloveyoubrady]

Personally hate electric car but the tax benefits are excellent. If you lease it before you take money as income you would get a much nicer electric car for the same effective cost as they are very low benefit in kind.

Don’t know if it’s an option or would be a pain with the milage your doing but worth a look.

[Herts Clarets]

Personally hate electric car but the tax benefits are excellent. If you lease it before you take money as income you would get a much nicer electric car for the same effective cost as they are very low benefit in kind.

Don’t know if it’s an option or would be a pain with the milage your doing but worth a look.

If you are doing 35k miles a year, I wouldn't go near an electric vehicle. Completely impractical for high mileage driving.