Author Topic: Company car or car allowance  (Read 1542 times)

mustache110

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Company car or car allowance
« on: September 15, 2019, 07:54:27 AM »
Need some help from the all knowing board, particularly those that are better at the mathz.

My wife is taking a job in sales and they are giving her the option of a company car or driving our personal vehicle with a car reimbursement allowance.

We are definitely not car people, so there is no thought to the cool factor of the car, other than it has to be a decent car to have customers in and safe to drive. We currently own a 2014 Ford Fusion that is paid off with around 80k miles on it. She will likely drive around 20k per year, and we would replace at around 120-150 before maintenance gets too heavy.

The company will pay a fixed reimbursement of $330 per month for the car, maintenance, insurance, etc plus $.17 a mile.

So, I get $3400 + $3960 = $7360 per year if we choose the allowance, plus we also have the asset for this car and others in the future.

How do you value this against the company car to see which is the better deal? Any calculations for this?

Thanks!!


mustache110

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Re: Company car or car allowance
« Reply #1 on: September 15, 2019, 08:06:10 AM »
Forgot to add that if I did the company car I would be selling the car, so the value of the asset shouldn’t matter either way I don’t think.

terran

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Re: Company car or car allowance
« Reply #2 on: September 15, 2019, 08:11:48 AM »
Can you use the company car for personal use? If so, will that be taxable income?

Will the reimbursement for use of your personal car be taxable income? Are there restrictions on the type and year of car that will force you to buy another car sooner than you would normally? And are there restrictions that would force you to have/buy a more expensive car than you would normally? How much does gas cost where your wife lives/works.


the_fixer

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Re: Company car or car allowance
« Reply #3 on: September 15, 2019, 08:12:57 AM »
Is she allowed to have family or other people in the car and is she the only one allowed to drive it.

Is she allowed to use it outside of work hours, errands, vacations road trips?

Previously I had a company car that your spouse was allowed to drive, you could drive it outside of work for personal use and they took care of all maintenance and expenses.

My current company I am only allowed to use the car during business hours and no one is allowed in the car that is not a company employee and I am charged a commuting fee each day (a few dollars).

In the old situation it was great I did not need to own a car the new situation i am stuck with a company car in my driveway that is useless to me outside working hours.

My co-worker has to drive home, drop off the company car and then drive 10 mins back the way he came to pick his kid up from pre-school everyday.

The details might matter have her check into them a little.

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Fishindude

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Re: Company car or car allowance
« Reply #4 on: September 15, 2019, 08:47:30 AM »
I think the allowance is typically the best way to go as there are no restrictions regarding what you can do with the car, etc.
Having said this, the figures mentioned are not high enough to buy and maintain a very nice new car, and it gets worse if some of the payment is taxable.

I'd take the company car, use it for work only and keep your own car for personal use.

englishteacheralex

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Re: Company car or car allowance
« Reply #5 on: September 15, 2019, 09:13:24 AM »
I'm not an expert, only chiming in to say that cars are much, much, much more expensive to drive and maintain than most people realize. There are a LOT of variables at play in this decision, but my knee-jerk is to say company car. Driving 20k miles/year is very expensive. Probably more than the money they are providing as an allowance.

minimustache1985

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Re: Company car or car allowance
« Reply #6 on: September 15, 2019, 09:35:21 AM »
Do they pay gas in either option?  Also consider what kind of job related wear the job may have on the car.

My last job I didn’t have the option, they issued me a company car where they covered all costs including gas.  However, IRS rules are that home-first stop and last stop-home are your commute which are personal miles, so the taxable benefit was that percentage of the monthly lease cost plus a flat rate per personal mile.  I’d want to know if the 330 +.17mileage is considered a true reimbursement (non taxable) or not, and if the .17 is for wear and tear or for gas.

It depends on the industry of course but my job was a combination of sales and service (I did the routine service at my customers) which meant having testing reagents, samples, parts, etc in my trunk.  I’m glad it wasn’t my personal car because of the type of work as well as the quality of roads I was sometimes on, and the amount of forklift traffic around where I sometimes had to park (nothing ever happened, but I would have been more nervous about it if I owned the vehicle).  Just other things to consider.

mustache110

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Re: Company car or car allowance
« Reply #7 on: September 15, 2019, 09:44:17 AM »
Can you use the company car for personal use? If so, will that be taxable income?

Will the reimbursement for use of your personal car be taxable income? Are there restrictions on the type and year of car that will force you to buy another car sooner than you would normally? And are there restrictions that would force you to have/buy a more expensive car than you would normally? How much does gas cost where your wife lives/works.

We can use the company car for personal use but It is taxable income.

The car reimbursement will not be taxable as long as we meet the program requirements of keeping a car no older than 7 years, which we would do. The car does have to be of a certain price point, which they basically aim at around the cost of a new sedan. You can buy a used car as long as the original model was equal to that price, so we can buy a 3 year old car as long as it was originally $25k when it was new.

Gas is around $2.10 at the moment.
« Last Edit: September 15, 2019, 09:54:01 AM by mustache110 »

mustache110

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Re: Company car or car allowance
« Reply #8 on: September 15, 2019, 09:47:08 AM »
Is she allowed to have family or other people in the car and is she the only one allowed to drive it.

Is she allowed to use it outside of work hours, errands, vacations road trips?

Previously I had a company car that your spouse was allowed to drive, you could drive it outside of work for personal use and they took care of all maintenance and expenses.

My current company I am only allowed to use the car during business hours and no one is allowed in the car that is not a company employee and I am charged a commuting fee each day (a few dollars).

In the old situation it was great I did not need to own a car the new situation i am stuck with a company car in my driveway that is useless to me outside working hours.

My co-worker has to drive home, drop off the company car and then drive 10 mins back the way he came to pick his kid up from pre-school everyday.

The details might matter have her check into them a little.

Sent from my Pixel 2 XL using Tapatalk

We can use for personal use, but it is taxable.
« Last Edit: September 15, 2019, 09:53:34 AM by mustache110 »

mustache110

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Re: Company car or car allowance
« Reply #9 on: September 15, 2019, 09:50:08 AM »
Do they pay gas in either option?  Also consider what kind of job related wear the job may have on the car.

My last job I didn’t have the option, they issued me a company car where they covered all costs including gas.  However, IRS rules are that home-first stop and last stop-home are your commute which are personal miles, so the taxable benefit was that percentage of the monthly lease cost plus a flat rate per personal mile.  I’d want to know if the 330 +.17mileage is considered a true reimbursement (non taxable) or not, and if the .17 is for wear and tear or for gas.

It depends on the industry of course but my job was a combination of sales and service (I did the routine service at my customers) which meant having testing reagents, samples, parts, etc in my trunk.  I’m glad it wasn’t my personal car because of the type of work as well as the quality of roads I was sometimes on, and the amount of forklift traffic around where I sometimes had to park (nothing ever happened, but I would have been more nervous about it if I owned the vehicle).  Just other things to consider.

Yikes, that sounds very hazardous to a vehicle..I wouldn’t want my car anywhere near that either! Luckily, hers is just customer visits.

They would pay for gas in the company car scenario, but not for personally vehicle. That is the mileage reimbursement, which to me is low.

minimustache1985

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Re: Company car or car allowance
« Reply #10 on: September 15, 2019, 10:55:31 AM »
Do they pay gas in either option?  Also consider what kind of job related wear the job may have on the car.

My last job I didn’t have the option, they issued me a company car where they covered all costs including gas.  However, IRS rules are that home-first stop and last stop-home are your commute which are personal miles, so the taxable benefit was that percentage of the monthly lease cost plus a flat rate per personal mile.  I’d want to know if the 330 +.17mileage is considered a true reimbursement (non taxable) or not, and if the .17 is for wear and tear or for gas.

It depends on the industry of course but my job was a combination of sales and service (I did the routine service at my customers) which meant having testing reagents, samples, parts, etc in my trunk.  I’m glad it wasn’t my personal car because of the type of work as well as the quality of roads I was sometimes on, and the amount of forklift traffic around where I sometimes had to park (nothing ever happened, but I would have been more nervous about it if I owned the vehicle).  Just other things to consider.

Yikes, that sounds very hazardous to a vehicle..I wouldn’t want my car anywhere near that either! Luckily, hers is just customer visits.

They would pay for gas in the company car scenario, but not for personally vehicle. That is the mileage reimbursement, which to me is low.
7k a year will be heavily reduced by gas driving 20k miles- with them covering gas on the company issued car I would probably opt for that.  If it was 7k AND a gas card then I’d lean the other way, but $330 for depreciation, maintenance, and insurance when expected mileage is 20k seems low, as does the .17 for gas (which IME doesn’t jump up drastically when gas does).  For comparison my first job I had a primary office but supported company field sites and was reimbursed mileage to the tune of the IRS approved rate which in 2019 is now 0.58/mile.  20k miles on THAT reimbursement rate would be $11,600- substantially over the $7,360 this reimbursement program would get you.

 

Wow, a phone plan for fifteen bucks!