Company car tax or cash alternative?

Should I take an offer of a company car, or opt for the cash alternative instead? This is a question many prospective company car users ask, so our simple guide sets out the pros and cons of both...

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A company car might seem like a great, hassle-free deal, but there are benefits to opting out of a scheme – even if you have to drive for your job and would need to buy a new car privately.

Pros of opting out

Buy a car outright and you'll be investing in an asset that you'll be able to sell in the future.

You'll also be able to choose from a wider range of cars than your employer might offer. Some schemes will offer cars from only one brand, or will veto stylish models, such as coupés and convertibles.

If you opt out you’ll get a cash allowance that will be roughly what your employer would have paid to lease the car (minus any income tax due on it). You can use this to fund the purchase of your own vehicle, and you don't even need to worry about haggling, because What Car?'s New Car Buying service does that for you.

Pros of taking a company car

Choosing a company car involves less research and planning than buying privately, and the lease company will probably take care of all the housekeeping.

Servicing, maintenance, insurance and breakdown cover will be paid for so you’ll have no unexpected bills to pay.

Car being serviced

You’re likely to get a new car every three or four years.

If you take a cash allowance instead, this 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.

What should you do next?

Ultimately, if you do your homework, you can end up with a great car using either the company car scheme or taking a cash alternative. You’ll find the information below useful to get the best deal.

OK, I’ll take a company car. What should I choose?

If you’re after a plush saloon, read our round-up of the best and worst executive company cars.

I think I’ll take the cash. I want to know more about private lease deals

Here’s our straightforward guide to new car leasing. We explain the differences between the various types of finance and explain which might be the best for you.

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