# Company car vs car allowance-best option?



## diver (22 May 2015)

Hi all,

Just about to change jobs. I currently drive and always have driven a company car, fully expensed etc. in any other jobs I've had.

I average between 35,000-40,000km business miles per annum.

New employer (UK based) is offering me 2 options:

A. Car allowance of 825 euro a month, paid with my salary so it would incur tax, prsi etc at 41%. I would have to factor in the cost of leasing, taxing, insuring, servicing/maintenance and running the car out of this allowance, I would claim mileage at UK civil service rates.

B. An Audi A3 company car, fully expensed i.e. taxed, insured, serviced etc. Nice car but too small for the type of equipment I'll be carrying. 

Considering the model they're offering as a company car, I feel they're actively encouraging me to obtain my own car as they don't normally provide company cars, they don't for their employees in the UK.

I've spoken to a couple of garages re leasing something bigger than an Audi A3 and both said that as I exceed 20,000km a year, they wouldn't consider me for a lease.

I'm not great at running figures here but I'm guessing I'll have to renegotiate on the size of company car option?  I'm concerned that I would be quite out of pocket if I managed to find a car to lease and exceeded the mileage terms on a lease contract.

Has anyone got any suggestions? Thanks in advance.


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## vandriver (22 May 2015)

To clarify,will you be getting €825 a month with UK civil service rates on top for all business mileage?


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## Jon Snow (22 May 2015)

Well if you take the allowance you'll end up taking home about 5k of the allowance and assuming you do 35k business km's you'd receive about 12k in tax free mileage.

So you'd have 17k to fund the purchase, running & maintenance of whatever car you want. 

Alternatively if they give you a company car you'd have to pay BIK on 6-12% of the car value (reducing your take home pay by whatever 3-6% of an Audi A3 is)...


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## diver (22 May 2015)

vandriver said:


> To clarify,will you be getting €825 a month with UK civil service rates on top for all business mileage?



Yes, 825 euro before tax paid with salary each month


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## mathepac (22 May 2015)

Your employer cannot pay you UK civil service rates tax-free in Ireland, they can only use Revenue rates, which will be lower I believe.


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## diver (22 May 2015)

Jon Snow said:


> Well if you take the allowance you'll end up taking home about 5k of the allowance and assuming you do 35k business km's you'd receive about 12k in tax free mileage.
> 
> So you'd have 17k to fund the purchase, running & maintenance of whatever car you want.
> 
> Alternatively if they give you a company car you'd have to pay BIK on 6-12% of the car value (reducing your take home pay by whatever 3-6% of an Audi A3 is)...



Just so I can get this clear in my head, the maths look like this:

Car allowance after tax 5k per year = 416 euro per month
35k business km's per year = 2916km per month 
12k tax free mileage per year = 1k per month
Monthly allowance 416 + 1k monthly tax free mileage = 1,416 per month, 17k per year.

Audi new car value (list price) 30,000k 
6% of car value = 1,800k per year, 150 per month BIK
12% of car value = 3,600k per year, 300 per month BIK

Car allowance wins clearly in this scenario if I'm correct?

Thanks all for your help, maths isn't my strong point!


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## vandriver (22 May 2015)

Have you done any analysis of your 3 year costs to come to the conclusion that a is better than b.
To put it gently,if you've always had company cars,then you have been insulated from minor details like depreciation (likely near 6k a year),fuel (3k),servicing (500 a year),tyres,interest(700 a year ave),insurance(do you even have a ncd in your own name?) and the unquantifiable other expenses likely to bite you like crashes,hire cars,big jobs like dpf,dmf etc.
What I am saying is that it not as clear cut as this way I get 17k,that way I pay 3 k .
Another consideration is that if the job doesn't work out,you still have the hefty repayments in your name.
And finally (!) If it applies,you would find mortgage approval more difficult with a large car loan going out each month .


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## diver (22 May 2015)

I've now come up against another stumbling block! I've rang two leasing companies this morning and they've told me it's not common at all in Ireland to lease a car to an individual unless that individual is registered for VAT. It's done commonly in the UK but not here. If I were lucky enough to find a company willing to lease to me as an individual, it would make it quite expensive as I wouldn't be registered to claim a VAT refund.

It seems my only option if I were to drive the car of my choice rather than opt for a company car is to go the financing route. I'm not keen to use my own cash reserves to fund a deposit on a car.

There must be lots of others in this scenario........what does everyone else do??


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## diver (22 May 2015)

vandriver said:


> Have you done any analysis of your 3 year costs to come to the conclusion that a is better than b.
> To put it gently,if you've always had company cars,then you have been insulated from minor details like depreciation (likely near 6k a year),fuel (3k),servicing (500 a year),tyres,interest(700 a year ave),insurance(do you even have a ncd in your own name?) and the unquantifiable other expenses likely to bite you like crashes,hire cars,big jobs like dpf,dmf etc.
> What I am saying is that it not as clear cut as this way I get 17k,that way I pay 3 k .
> Another consideration is that if the job doesn't work out,you still have the hefty repayments in your name.
> And finally (!) If it applies,you would find mortgage approval more difficult with a large car loan going out each month .



Vandriver, thanks for pointing out everything, this is exactly what I need as I've been cushioned with a company car for most of my working life, this is exactly what I need!

I would have no individual no claims discount worked up, insurance will be high for first couple of years.

I've been given a permanent contract from the start, with 3 months notice either way if things don't work out but as you say, that's a lot of use if the car is sitting in the driveway and things haven't worked out for whatever reason.

Luckily, no new mortgage plans in the off-ing, I'm staying put!


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## vandriver (22 May 2015)

Just a suggestion,if the car budget is around 30k,and the A3 is too small,a Skoda Octavia Combi Style (top spec) is around 28k,or 30 with the dsg auto box.


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## kceire (26 May 2015)

Why are you leasing?
Why not use the allowances to buy your own car?

Also, civil service rates reduce after 6k give or take and the km rate drops to 20 odd cents per km. currently 59c per km for a car over 1.5L up to this figure.


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## Gordon Gekko (26 May 2015)

The car allowance usually wins in my experience.


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## diver (27 May 2015)

kceire said:


> Why are you leasing?
> Why not use the allowances to buy your own car?
> 
> Also, civil service rates reduce after 6k give or take and the km rate drops to 20 odd cents per km. currently 59c per km for a car over 1.5L up to this figure.



The reason I want to lease is I don't want to use savings/take out a bank loan on a car that might end up sitting in my driveway if for any reason this job doesn't work out!


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## diver (27 May 2015)

Gordon Gekko said:


> The car allowance usually wins in my experience.



I agree, it usually does. However, I'm a little cautious about buying a car after almost 20 years driving a company car. I'm inclined to take the offer of the company car, see how the job goes and possibly take a car allowance in a couple of years time.


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## Gordon Gekko (27 May 2015)

I know when I looked at it myself, it was a no brainer.

I get a car allowance of €10k per annum. I do around 8k business kilometres per annum. So I get around €5k in "mileage". All said, I end up with around €10k per year. I have to tax, insure and fill the car myself. Plus I have to get it serviced and replace tyres etc. The whole lot probably costs me around €5k a year in total. I bought something for €25k which was around €60k new. It's probably depreciating at €3k a year. In total, I reckon I make €2k a year on the whole deal.

If my employer provided the car, it'd cost me around €9k a year.


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## diver (27 May 2015)

Gordon Gekko said:


> I know when I looked at it myself, it was a no brainer.
> 
> I get a car allowance of €10k per annum. I do around 8k business kilometres per annum. So I get around €5k in "mileage". All said, I end up with around €10k per year. I have to tax, insure and fill the car myself. Plus I have to get it serviced and replace tyres etc. The whole lot probably costs me around €5k a year in total. I bought something for €25k which was around €60k new. It's probably depreciating at €3k a year. In total, I reckon I make €2k a year on the whole deal.
> 
> If my employer provided the car, it'd cost me around €9k a year.



Gordon, thanks for this. My circumstances are a little different:

I do anywhere between 35,000-40,000 business kms per year, that means more servicing, more frequent tyre changes, more wear and tear.

The allowance on offer to me is €9,900 per annum gross.

I'd have to tax and fill the car myself. The other biggie for me is I've no No Claims Discount built up as I've had a company car for years = high insurance costs for the first couple of years at least.

I can't see where I'd even make a cent on having a car allowance, I'd worry about breaking even.

Thanks for your thoughts though, it's good to thrash these things out!


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## peteb (28 May 2015)

You can get a letter of driving experience from your previous employers fleet policy. Most insurers will allow you a full introductory discount.


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## Gordon Gekko (28 May 2015)

diver said:


> Gordon, thanks for this. My circumstances are a little different:
> 
> I do anywhere between 35,000-40,000 business kms per year, that means more servicing, more frequent tyre changes, more wear and tear.
> 
> ...



So you'd get €18k per annum net in car allowance and mileage but have to pay for everything yourself?

I'd take that!


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## Jon Snow (29 May 2015)

Gordon Gekko said:


> So you'd get €18k per annum net in car allowance and mileage but have to pay for everything yourself?
> 
> I'd take that!



Agreed, it's an absolute no brainer, 18k net between allowance & mileage, based on 40k km's...

Diesel cost for the year of maybe 4k, tax & insurance 1k, 2k for servicing & tyres, leaves 11k to play with towards the purchase of a decent vehicle of OP's choice...

Compared to an alternative of actually netting less pay due to a BIK charge on a car not of his choosing and which he will never own...


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