Car Allowance vs. Car Scheme Explained
The company car lease sector is facing a major tax hike. What’s to blame? The introduction of WLTP-based company car tax and VED increases. This means that for employees with a company car, they will see a significant increase in how much their car costs them. The increased cost will come as a larger tax on their salary or total income.
Most employees who are offered a company car scheme will also be entitled to a company car allowance (sometimes called a car cash allowance) as a more flexible alternative. You will be able to opt-out of your company car scheme in exchange for a monthly cash allowance that you can use to source your own company car.
Company car allowances are usually paid as part of a salary package. The advantage here is that instead of paying Benefit in Kind Tax (referred to as “BIK”) on your salary for the company car you have, your car allowance is taxed at your normal rate of income tax and not determined by the car’s carbon emissions or value.
How do I opt-out of my company car scheme and use my company car allowance?
The first step is to check your employment contract or to speak to your Human Resources department to find out what company car allowance you are entitled to. Then all you need to do is instruct them that you would prefer to take the car cash allowance than have a company car.
Now you can have any car you want. You are no longer restricted by corporate-car-bands that prevent you from having a more prestige vehicle than your boss. You will be able to get much more car for your money by leasing a car with Leasehub. We use a panel of finance providers to find the cheapest price for each car. Most company car schemes only use one finance provider, regardless of the price.
How do I use my company car allowance to lease a new car?
Personal Contract Hire is the same type of finance used for company car schemes. Basically, it’s just described as “personal” for individuals rather than “business”. You can use some of your car allowance towards the car and pocket the rest. Or you could contribute a bit of your own money each month to lease a more premium car. You just need to consider:
1. What type of car you want e.g. SUV, Coupe, Estate, Hatchback, etc.
2. How many miles you drive per year (min. 5,000 max. 35,000).
3. How long you want the car for (between 2 and 5 years).
4. Whether you want a maintenance package which covers the cars routine servicing and maintenance costs.
Those with a company car allowance typically want a low initial payment. Therefore they are only paying for the vehicle using their cash allowance and not any of their savings. You can request a quote from us with no initial payments, meaning all your payments will be the same.
Check out our Top Offers to see the offers available to use with your company car allowance or Call the Team on 0330 024 6406.
Can my employer use Lease for their company car scheme?
Yes, they can. The advantage of using Leasehub is that we can use a panel of lenders to find the best rates for your vehicles, rather than being restricted to manufacturer finance if using local dealerships. We have corporate partnerships with SMEs and public agencies where employees and the family of employees benefit from a corporate discount to our services. We can supply all the cars on our website and can include maintenance packages for those high mileage drivers. Our team can advise you on the Benefit In Kind impact each car will have.
If you are interested in a corporate partnership with Leasehub, contact our Leasing Specialists via email@example.com or Call the Team on 0330 024 6406.