The cash vs company car debate

  • Deciding between the cash or company car scheme?
  • There are pros and cons to both choices
  • Here we take a closer look at which could be best for you
  • Deciding between the cash or company car scheme?
  • There are pros and cons to both choices
  • Here we take a closer look at which could be best for you

Moving up the career ladder and gaining access to the company car scheme can not only be really exciting, it can also offer some big savings in maintenance, repair bills and fuel costs over the car you currently own.

But it doesn’t always make sense for everyone and when presented with a cash alternative, many decide to opt out of the scheme.

So which is best for you? Here we take a closer look at the pros and cons of both choices.

Company car scheme

One big perk to choosing a company car is that you no longer have to worry about maintenance, servicing, or dealing with the stress of selling the car at the end of the lease, plus you're not personally tied into a financial contract. If you leave your current job, the car stays there.

Insurance is also covered and so is breakdown recovery – most companies also cover any costs associated with accidental damage but it’s worth checking your driver’s handbook first.

You do have to pay tax though and if you want to keep costs low, picking a car with low CO2 emissions is key. That said, having the tax costs of your company car in one monthly payment can help you plan your finances – no unexpected bills to worry about.

If fuel is also part of your package then you’ll need to pay Car Fuel Benefit each month like your company car tax, but if you’ve got a decent-sized commute every day you'll still save a fair amount of money each month.

You also get a brand new car every three or four years and with it the latest connectivity technology, driver assistance systems and fuel-efficient engines.

The company car has been considered a perk for many years now and although it still is today, there are lots of private leasing deals and PCP offers that include servicing, maintenance and even insurance, so it’s worth taking a closer look and crunching the numbers to see which delivers the biggest savings.

Pros:

  • No unexpected bills, just a set fee every month plus maintenance and insurance are covered
  • A new car every three or four years
  • Access to the latest kit and fuel-saving technology

Cons:

  • Restrictions on choice
  • You never own the car

 

Taking the cash

Not everyone is able to opt for the cold, hard cash option at work, and the sum offered can vary from company to company. Some offer as much as £8,000 per annum subject to tax and split across 12 months.

One of the biggest perks of opting for the cash is that if you already own a car or have a small commute, it can be a big cash injection for your household.

Some decide to spend the extra allowance on a new car which, depending on the financial agreement you enter into, could be yours to sell at the end of the term.

You also get the freedom to choose which car you want whereas the company car scheme is usually limited to certain car manufacturers, CO2 outputs and fuel type; so if you’ve had your eye on a hot hatch or convertible, there’s nobody to answer to – except perhaps your husband or wife.

Company car drivers have to pay a monthly tax bill as well as a Car Fuel Benefit charge if they don’t pay for their own fuel so you’ll save here too, but if you opt to buy a car yourself you’ll need to budget for servicing and maintenance costs and if any repair work is required, you’ll have to foot the bill for that too.

If you use your own car to travel for work, make sure you check your employer's Driving at Work handbook because some companies have an age limit, CO2 emission cap or even restrictions on the number of seats or doors your car must have if you wish to use your own vehicle for business.

If you do, you can charge your employer a mileage fee to cover both fuel and the cost of maintenance. The rate set by the government is 45p per mile up to 10,000 miles a year.

One thing to bear in mind is that if you take out a financial agreement for a new car, regardless of any change to circumstances, you are obligated to pay until the end of the term. Company car drivers can just walk away if they leave the business.  

Pros:

  • You have the freedom to buy any car you want
  • Cash sum may help ease financial burdens
  • You keep the car as an asset

Cons:

  • You pay tax on the monthly allowance
  • Could be tied in to a financial contract if you decide to use the money for a car
  • May have to budget for servicing and maintenance costs

Still unsure which option is right for you? Perhaps the following articles could help:

Top low-tax diesel company cars

Guide to reclaiming business mileage

Your complete guide to BIK tax

Latest Advisory Fuel Rates announced

A pickup as a company car?

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