Lucky employees are given the choice of joining a company car scheme or opting for a car allowance, but how do you choose?
If you love your ‘76 Ford Cortina and wouldn't drive anything else then it’s a no-brainer - take the car allowance - but for the other 99.9% of the driving population, the choice of opting in or out of a company car scheme can be a game of financial dominoes so we’ll highlight the key differences to help you make the right decision.
Benefit Comparison: Cash Allowance vs Company Car
An employee car allowance:
- gives an employee financial support to run a personal vehicle
- means the driver is responsible for all car maintenance, servicing, insurance (including for business journeys) and breakdown cover
- is paid via PAYE and therefore subject to income tax (at 20% or 40%)
A typical company car scheme:
- is based on contract hire leasing giving drivers access to a brand new car every few years
- includes all car maintenance, servicing, insurance and usually breakdown cover
- has less/limited vehicle choices to fit within a company brand, budget or policy
- is taxable as a Benefit in Kind based on the CO2, fuel type and P11D value of the car.
A car allowance is for...
Satisfied souls who just want to pocket the cash because they own a perfectly good car that runs well and suits their business requirements as well as their home life.
Tenacious people who are particular about which car they drive and don’t feel that any of the options on the company car scheme suit them/their lifestyle.
Road runners who get good business mileage rates from their company. Mileage rates can make a real impact on choices if someone drives many, many business miles per year.
Locals who only rack up a handful of miles a year can keep personal lease rental payments nice and low to get the most from an allowance.
Petrol heads who aren't fussed about fuel economy or phased by the price at the pumps. They’ll find a car allowance less restrictive on vehicle choice if they’re willing to pay the associated premiums. (And we mean “petrol” literally, as company cars are often diesel.)
A company car scheme is for...
Efficiency kings and queens who want all the admin and vehicle upkeep off of their radar and sitting firmly on someone else’s shoulders.
Easy-going people who don’t want to suffer the boredom of researching car specifications and rates.
Green lovers who, like their budget-conscious employer, like the thought of low tax and low CO2.
Wannabe truckers! Those guys and gals who spend hours-on-end driving up and down the country, racking up some serious annual mileage, which would make personal monthly rentals very unattractive.
Smart cookies who have spotted that their company offers teeny tiny business mileage rates for personal vehicles.
How can drivers be sure that their employee “benefit” actually benefits them?
Choice is a wonderful thing but how can a driver know they’re making the right financial decision when there are dozens of variables at play?
If you’re a driver for one of our fleet management customers, we've got a super-dooper way to tell you exactly which car benefit is best for you: it’s a short form that takes everything into account and does the complex sums for you, from company car tax to business mileage, so that you know, once and for all, if you should opt in to your company car scheme or take the cash.
Give us a call or use the contact us form and we’ll get the “opting out?” form emailed to you in a jiffy. Pop in your numbers and you’ll get a definitive answer as to which car benefit works out best for your pocket. Deliberation over.
Opting Out Made Easy
Opting out doesn't mean going it alone. If you choose a cash allowance, we can help you get the best value car for your money and support you throughout the lease. It's the service company car fleets get so why shouldn't you too?