Company Car Vs Car Allowances - What are your experiences as employers/employees?

In my last company we had the choice of a car or a car allowance - I opted for the allowance as when you leave the company, the car is still yours. It was also good the way they did it - when you started a job with them you could get the whole year's allowance upfront to enable you to buy a car if you didn't have a suitable one. You could only do this in the first year though.

The only downside was that the car had to be of a certain specification (age, size, mileage) but even then it was much less restrictive than the choice of cars if you went for the company car option.

I would go for the car allowance option every time.

Hth

We've stayed in the company scheme until now for reasons of convenience - everything is paid for and sorted for you, right down to the tax disc.

However, we're changing cars very soon and are seriously considering opting out because we're planning to get a smaller car and save money - MrH's job has changed so he mostly works from home rather than doing 2 journeys to London every week, plus it will be nice to have some spare cash to cover nursery fees ?

We think (if we've done our calcs right) that it works out cheaper to opt out even for the same car, because of the way the tax works, though that is sometimes offset by the fact that company car suppliers can get discounts on list price through economies of scale.

As an employee:

We can take car or allowance. Car - everything paid for except personal fuel. On maternity of long term sick you may keep the car.

Allowance. Not paid during maternity leave or long term sick.

Worth checking what your individual company policy is if you would be inconvenienced greatly without a car in any of these situations.

That's wrong for maternity - I think you were always entitled to keep your non salary benefits during OML, and as of August 2008 (I think) the law was extended to cover AML too.

As an employee... have always taken the allowance option, as I'm not bothered about driving an 02 Focus (until last year a 96 Almera!) - money in my pocket means more to me than a nice new car. Also, my company have recently been more generous with the allowance as they decided to cancel the car scheme to new employees, and wanted to tempt people out of cars as they came up for renewal - must have made more sense for tax / administration for the company.

Only downside is that I may return part time after maternity leave... my allowance will then be pro rata, whereas if I had chosen a car, the car would still have been whole - not just two wheels and a front end ?

My old company provided the option of car or car allowance if it wasn't a 'job need' to have a car. As I did very few business miles, I would have been taxed heavily for having a company car, more than it would cost in servicing per year, so I went for the allowance as I had a perfectly serviceable car, then saved it up to buy a nice car a couple of years later!

They also did an incentive of more money per month if you took the car allowance e.g. you got £340 towards a company car, or £370 if you took the cash allowance. You also got the difference back if you chose a lower grade car than you were entitled to e.g. if your grade meant you could have £450 towards a car but you took a car from the £340 category, you got the difference as car allowance. These were introduced more recently, I can only assume because there were benefits for the company!

These were for company cars that were benefits of being a particular level, I think there were different rules if it was a needs-based car.

Our policy definately states (car allowance) not during maternity or long term sick. Don't know if it is a breech of any laws.

The company car tax system has now changed, so it doesn't make any difference how many miles a year you do. It's just based on your tax rate and the list price and CO2 emissions of the car

It's definitely in breech of the laws around maternity leave.

Ah didn't know that, it was two years ago when I left. Mind you, I think I'd still go for the car allowance as I'm not that bothered about having a new car every 3-4 years.

I had company cars in 2003-4 as I moved into a sales role and didn't have a choice. Losing my car allowance and paying more tax meant I lost around £500 a month from my take home pay. Unless you run an expensive car then it wouldn't cost that much!

Since then I've always taken the car allowance and am now on my 2nd lease car which effectively means a new car every 3 years, first year tax paid, recovery paid and as I've currently got a Golf GTi low maintenance costs.

Thank you - very helpful all of you.

I currently have a company car with all social fuel paid which it would be a bit of a blow to lose but then I guess I don't do as many miles as I used to anyway.

How is the car allowance taxed - as part of income?

Yes car allowance is taxed as extra income so added to your salary rather than taken off your personal allowance like company car tax.

I'm lucky in that my company give fuel cards to employees with car allowances who do business miles as well as company car drivers so I get both benefits!