Is it worth getting a company car or is a car allowance better?

A company car sounds great but is it the best option for you? Here we explain the pros and cons of accepting a fleet car or opting for the cash allowance and buying privately...

White Seat Ateca in a car park

If your firm's fleet manager is willing to give you a company car, you'd be a fool to refuse – or would you? Well, not in every case.

You see, while there are plenty of benefits to taking up the offer of a fleet car, in some circumstances, opting for the cash alternative is the more sensible choice.

If you're facing the "company car or cash alternative" dilemma, we can help. Here, we'll set out the pros and cons of each option to help you decide the best route for you.

And once you've decided that, we can point you in the right direction for advice on picking the best car model in either case.

Read on to find out whether a company car or cold hard cash is the best option for you...

Read more fleet and company car advice

What are the benefits of taking a company car?

It’s the easy option right from the start, because you’ll have a specific selection of vehicles to choose from – as set out in your firm's company cars list. That saves you drawing up a shortlist of potential models then researching them all.

You won’t have to go through all the rigmarole of placing the order for your new car, getting a good price for your trade-in then potentially waiting months for delivery.

Plus, when you do start to run your new fleet car, all the housekeeping, such as servicing, repairs, insurance and breakdown cover, will be taken care of.

You’ll also have a new car every three or four years.

Try our company car tax calculator

What are the pros of taking a car allowance? 

If you choose to take the cash option then use the money to buy your own car, you’ll end up with an asset that you can sell whenever you want – you won’t be stuck with the same car for three or four years.

Better still, the new-car market is your oyster, so you’ll have a far wider range of cars to choose from than if you’d stuck with the options listed by your employer. For example, some companies will not allow models such as coupés, convertibles on the fleet-car choice lists.

If you go for the cash allowance, it will be a similar amount to what your company would have paid to lease a fleet car (minus personal income tax).

Read more: The best SUV company cars

How much money could I get if I opt out?

The cash you'll be offered instead of a company car will be roughly what your employer would have paid to lease the car, possibly with a few caveats depending on their calculation method.

If you want to know exactly how much money is on the table, ask your fleet manager, HR department or payroll staff.

Bear in mind that the car allowance will be added to your annual salary, so it will be subject to your rate of personal income tax. That means you'll have less to spend on a private car than the value of the company car lease you would have enjoyed.

For example, a 40% taxpayer with a car allowance of £5,500 added to their salary could end up with just £3,300 after tax. From that you’ll not only have to fund the private car, but pay for your own insurance, maintenance and road tax.

Read more: How BIK company car tax works

I’ll take the cash – help me choose the best model

We can definitely help you out here... at What Car?, we make it our mission to test all the new car models on the road and rate them against one another.

Once you've decided which class of car you want – whether it's family hatchback or luxury SUV – simply see our relevant top 10 guide. You can find them all here.

I’ll get a company car – but which one is best?

If you've decided to take a company car, check out our best cars lists in various categories, which rank models by suitability for fleet car drivers.

Best company cars

Best electric company cars

Best PHEV company cars

Best SUV company cars

Best small company cars

And if you're keen to keep benefit-in-kind (BIK) tax down, we can help there too – see our cheapest company cars page.

Read more fleet and company car advice

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