In this article, we take a look at the pros and cons of getting a company car. We also look at your alternative option – the cash allowance.
A company car is a vehicle provided by a company to an employee for business and private use. It can seem like a great idea, especially if your role involves lots of travel. Less hassle, with less research and planning and no need to get involved with all the paperwork can appeal to lots of people.
However, if you opt out of the company car scheme and get a cash allowance you could end up saving and getting a better deal (and car).
THE COMPANY CAR: THE BENEFITS
Less hassle: you won’t have to get involved with too much paperwork.
You (might) get a new car every few years – again without the hassle of choosing or doing the dirty work.
You won’t have to worry about servicing, insurance, breakdown, maintenance and all the other costly and time-consuming aspects of owning your own car.
THE COMPANY CAR: THE DOWNSIDES
Not much choice. You may be severely restricted on which car you’ll be offered – depending on CO2 emissions, fuel type and many other factors.
Tax. Benefit in Kind – BIK – is a tax you’ll have to pay for the personal use of the car.
As you never actually own the car, if you leave your job, the car will stay with your employer.
THE CAR ALLOWANCE: THE BENEFITS
You can choose whatever car you want – without restrictions on fuel, CO2 emissions etc.
If you buy outright, you will own the car and can sell it in future.
If you already own a car, the allowance might help ease other financial burdens.
THE CAR ALLOWANCE: THE DOWNSIDES
You must take the finance out yourself, in your own name, do all the paperwork and take care of insurance, maintenance and tax.
Tax! The company car allowance is subject to your rate of personal income tax.
If your new role involves high mileage, this can make personal schemes expensive.