Plenty of people think that getting a company car is a big perk of a job. However, the rising costs of running company cars means that itâ€™s now often the better choice to lease or buy your own vehicle. A big part of the reason for this is the amount if costs to tax a company vehicle.
The government changed the way company cars are taxed in 2002. Where previously the amount of tax you would pay was based on the number of miles driven, it is now based on the carâ€™s CO2 emissions as well as the list price. Your income-tax band will also affect how much you pay for tax. Due to this pricing structure, the amount of money you pay each year for your company car can put a big dent in your salary.
Of course there are some key benefits that come with driving a company car – There is little administration for you to worry about and youâ€™re often given a choice of tax-friendly cars with low emissions. However there are also some compelling reasons to opt out of your company car scheme and get your own vehicle.
Saving money is one of the biggest advantages of opting out of a company car scheme. If you donâ€™t care about having a brand new car then you can cut down your monthly payments considerably. You can find some excellent cars at an affordable price in the used market, however this involves a serious investment in time to find the right car. You then have the added worry of the cars depreciation after handing over a sizeable chunk of your hard earned cash.
If you donâ€™t want to go through the hassle of buying a used vehicle then leasing a car is an excellent option. When leasing, youâ€™re able to get the vehicle of your choice without having to worry about selling the vehicle on when you are done with it. With Permonthâ€™s best lease deal, you also benefit from having no mileage restrictions and can hand the car back after only 26 months.
Another big benefit of opting out of a company car scheme is that youâ€™re able to choose your own vehicle. This is no small thing as most people find buying a car to be a very personal purchase. Whether you choose to buy or lease your car, youâ€™ll be able to select it based on criteria that are important to you.
Although companies often give employees a selection of a few cars to choose from, thereâ€™s no comparison to being able to select the exact make and model of car you want. Many people choose to opt out of their company car solely for this reason.
How it works
If you like the idea of opting out of your company car scheme then youâ€™re likely wondering how exactly it works. When you opt out of a company car, you are entitled to additional money that you would have paid to tax the company car. Itâ€™s a fairly simple concept but knowing exactly how much youâ€™ll receive from your employer is a bit more complicated.
There is no set rate for the amount of money youâ€™ll be offered by your employer. This is because everyone has different financial circumstances and therefore the money youâ€™ll be offered will be based on your income-tax band amongst other things. If youâ€™re afraid that youâ€™ve not been offered a fair rise from your employer then you should seek legal advice. You should also find out if the rise youâ€™re offered is pensionable or not.
Whether buying or leasing your own vehicle is worth it for you will depend on your personal circumstances. You should find out from your employer how much youâ€™d receive if you opted for â€˜cash for carâ€™ and then take into account how much funding your own vehicle would cost.