In association with Renault Business
Company car vs car allowance - which is best for you?
Getting a company car sounds like a real ‘you’ve made it’ moment but is it actually the right choice for your circumstances? We explain the pros and cons of accepting a fleet car...
It’s Monday. Raining. You get called into a meeting with the boss. That can’t be good. But it is! He’s offering you a company car. You surely must jump at the chance. Or should you? Actually, in some cases you might be wise to say: “Thanks, but no thanks.”
It depends entirely on your personal circumstances, but while there are undoubtedly a huge number of benefits to choosing a company car, it might not be the best choice for you. A cash alternative might better suit you.
It requires a bit of time and thought, but we can help. We’re about to explain to pluses and minuses associated with each choice, so you can map out the best route for you.
Then, once you know what you need, we can offer advice on picking the best car model.
Why should I take a company car?
For a kick off, it’s the simple option. You don’t have to think about and research which car you want to get next, because your options are all listed on your firm’s company cars list. That saves you a whole load of time on internet searches right away.
On top of that, you don’t have all the hassle of bartering over the trade-in price for your current car (or selling it privately), then placing the order for your new car – after which you need to wait for the thing to actually turn up.
The simplicity of a fleet car continues throughout your ownership period, because all the background stuff, such as servicing, repairs, insurance and breakdown cover, is sorted out by your firm’s fleet manager.
And of course, you get a shiny new car every three or four years.
Try our company car tax calculator
Why should I take a car allowance instead?
The alternative to a company car is the cash allowance. That's a sum from your employer to buy the car you want, and it can be a great option. It will be a similar amount to what your company would have paid to lease a fleet car, minus personal income tax.
The good news is that you end up with an asset you can sell and replace whenever you want, which means you aren’t stuck with the same set of wheels for three or four years (or however long the leasing agreement happens to be).
You're not restricted to the cars on your employer’s company cars list either – you can choose anything you want, within reason.
Some companies don’t allow models such as coupés or convertibles on the fleet-car choice lists so you could reasonably choose one of these, but make sure your company will be happy for you to turn up as its representative in a drop-top or sports car.
How much could I get if I skip the company car?
The allocated money will be roughly what your company would have shelled out in leasing costs, possibly with a few caveats.
To find out exactly what you could be entitled to, just ask your fleet manager, HR department or payroll staff.
One thing to remember is that the company car allowance will be added to your annual salary, which means you’ll have to pay tax on it at your personal tax rate. You need to do the sums, because you’ll likely have less to spend on a private car than the value of the company car lease you’ve said no to.
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 have to buy a car, plus shell out for the insurance, annual VED and maintenance costs.
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.
And if you're keen to keep benefit-in-kind tax down, we can help there too – see our cheapest company cars page.
Read more fleet and company car advice
For all the latest reviews, advice and new car deals, sign up to the What Car? newsletter here
