At CarLease UK we deal with a substantial number of enquiries from company car users; people who have to drive for their job. Often they are faced with the dilemma when presented with a choice of staying in a company car scheme or opting out (frequently referred to as a company car or cash allowance). Although CarLease UK supply a large number of cars directly to businesses for use by their employees, there are good reasons as to why employees, if given the choice, would look to a company car or cash allowance. In particular, there are important car taxation/benefit in kind implications to consider (all of which we can advise upon on a consultative basis).
It is thoroughly important that, as an employee, you consider all factors before delving into the acquisition of a new vehicle. This doesn’t just relate to the more obvious considerations such as tax, mileage allowances, insurance or servicing but more subtle ones, for example a car which is fit for purpose and is in-keeping with company policy; a Mercedes cabriolet deal may not be the most appropriate for everyone.
In the case of an individual company car driver electing to opt out of the company car scheme, the first part of the process is to understand the actual amount being offered to facilitate the car or cash (car allowance) arrangement.
It is important to note that a cash for car scheme is added to the annual salary of that employee and, as such, will be subject to the relevant rate of the employee’s personal income tax rate. For example if you receive an annual allowance of £6000.00 and you are a 40% taxpayer, you could receive just £3600.00 after tax. Clearly it is crucial to understand the amount being offered by an employer; ensure you use the link to HMRC in order to calculate your actual spending power.
As the car would be procured on a personal contract hire basis, there would also need to be thought given to the insurance cost for the vehicle (comprehensive and in your name) and any servicing or maintenance (your responsibility unless a dedicated package is included). Many drivers opting out of a scheme quickly forget to include these within an allotted budget when enquiring with CarLease UK.
Additionally, there are a couple of important facts which also need consideration. Firstly, the employee will no longer be subject to company car tax (or benefit in kind) and secondly, it may be possible to claim an allowance for mileage for business miles travelled. This essentially covers the costs for both maintenance and fuel.
CarLease UK have included a link to the HMRC website to help you understand the facts relating to allowance for mileage. Of course should you require any further guidance on any of the above, we are more than happy to assist.
Without doubt we encourage most of our prospective customers to enter into a personal car leasing agreement. Ultimately, when you buy a car you undertake all risks for depreciation of the car/van and any subsequent resale.
At CarLease UK, we can clearly illustrate that personal car leasing is both financially beneficial and at the same time protects you from many of the risks of ownership, in particular a situation which provides certainty of cost. Speak to one of our account managers who will be delighted to help you make an informed decision.
CarLease (UK) Ltd t/a CarLease UK, e-car lease and VanLease UK is Authorised and Regulated by the Financial
Conduct Authority – our Firm Reference Number (FRN) is 706617.
Carlease (UK) Ltd t/a CarLease UK, e-car lease, VanLease UK and School Minibus Leasing UK is a credit broker and not a lender and will introduce you to a limited number of finance providers which have been carefully selected by us - please note that we do not provide independent financial advice. The finance providers that we use may make payment to us if you elect to enter into an agreement with them. The amount we receive will affect what you pay for your vehicle. The commission received may or may not be capped in accordance with that finance company’s policy. We may also receive an extra amount based on how much business we provide to that finance company, the types of products you take from the finance company and the quality of our service. For Regulated Customers you can ask us about the payments we receive from the finance company so long as this is in good time before the agreement is made. Failure to maintain rentals may result in the vehicle being withdrawn (this may affect your credit).
All images on this website are for illustrative purposes only and may not reflect the actual vehicle which is delivered to you. All prices shown are subject to change at any time and are subject to credit status and vehicle availability.
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