Running a company car increases your tax bill and restricts your choice of car. If their car is just a perk, some employees feel they'd be better off opting out of company car schemes.
A Ford Mondeo 1.8 Zetec costs a company car driver in the standard 22% tax band about £800 a year in tax. That kind of money only buys a year's car insurance and servicing for that car, so a company car is a generous perk. But employers have to tie up capital buying cars or making lease payments, so you could be offered £3,000 or more if you choose to opt out.
To help you weigh up the attractions of company motoring against a fatter pay cheque, use this COMPANY CAR...? OR CASH? checklist:
| COMPANY CAR...? | | OR CASH? | |
| FOR: |
|
FOR: |
|
| A shiny new car every three or four years |
|
Choice of buying new, leasing or buying used |
|
| No servicing bills |
|
Own the car - any car you choose |
|
| No depreciation |
|
Drive a better quality but older car |
|
| No insurance premiums |
|
No company car tax liability |
|
| No ownership hassles |
|
Increases your disposable income |
|
| A newer car than you could afford otherwise |
|
May improve your pension entitlement |
|
| |
|
Bigger mileage allowances for business use |
|
| AGAINST: |
|
AGAINST: |
|
| Choice of cars is usually restricted |
|
Depreciation |
|
| Get stuck with a car you don't get on with |
|
Insurance premiums |
|
| Annual tax liability of £500+ depending on car |
|
Service bills |
|
| If you lose your job, you lose the car |
|
Cash sum in lieu of car is taxable |
|
| No insurance no-claims bonus |
|
Possible increase in NI deductions |
|
|
For a more detailed calculation, click here Company car or cash?
