Company Car, Should I keep Personal

[tmathews]

Hello All!

I am new to Mr Money Mustache and am stoked to join the community. I am 25 Years old and have a 10 year goal of retirement by 35. Now on to my most pressing issue:

I am going to be receiving a company car very soon. With this car, I will not be responsible for gas payments or anything of the sort. 100% of my car bills will be covered. With this, I am struggling to decide if I want to keep my personal vehicle once I receive the company car. I still owe $3,000 on my personal vehicle with an added $100/month for insurance. I work for an incredible company that would allow me to use my company car for personal use, as long as it doesn't involve lengthy road trips. I have a Honda Element and love it to death. I can take it anywhere and always sleep in it while on the road. Practically speaking, it's the perfect car for me. It stows all of my climbing, surfing and mtn bike gear with ease and would make for a great weekend car. But I would love to not have a car/insurance payments. Would it be wise to keep the car, or should I rid of it? Thanks!!!

[mcrow]

Speaking from a purely money perspective you should sell your element, get out of debt on it and take the free ride. Having a free car +gas+maintenance is great, don't spoil it by keeping a car that is costing you money that you maybe won't use that much.

OTOH, if the company car doesn't suit your purposes for your personal use you have a choice to make. However, for long trips you could rent a car.

[Greg]

Have you asked if they would cover your expenses on your personal car instead?

[mcrow]

Have you asked if they would cover your expenses on your personal car instead?

While unlikely, it is worth a shot.

[William]

IMO, the Element should go no matter what.  It's a question of whether you buy a cheaper car or stick with just the company car.

For me, I would use just the company car and enjoy it!

[GregO]

I think if you add up the costs that you would have with keeping the car, you'll realize that it's not worth it just to use for weekend trips and save a few bucks by not having to stay at a hotel or camp.  Just for the heck of it, here's an estimate of the annual costs for the car.  You could find much better values yourself, I'm just taking some guesses:

$1200 - insurance
$1500 - deprecation (roughly 15% of the value of the car)
$400 - maintenance
$100 - license renewal/taxes
? - interest on car loan
? - parking costs at your residence
? - others I forgot?

That totals up to at least $2200/year in costs.  And then the kicker, the opportunity cost from the money could invest if you sold the car.  If I stick with the $10,000 estimate, you'd have $7000 left plus the $2200 in expenses saved to invest after you paid off the car.  That's $644 ($9200 x 7%) you lose out on in opportunity costs this year, which compounds every year.

That $3000/year could pay for some expensive hotel rooms and rental cars for your weekend excursions...

[ToeInTheWater]

not exactly sure what your setup is, but when i had a company car, i had to report personal vs business miles every year

the (value of the vehicle * the % personal miles) became a taxable benefit - something that definitely had to be planned for.

this was still a great deal.  i did not keep my own vehicle. 

b

[Cressida]

not exactly sure what your setup is, but when i had a company car, i had to report personal vs business miles every year

the (value of the vehicle * the % personal miles) became a taxable benefit - something that definitely had to be planned for.

this was still a great deal.  i did not keep my own vehicle. 

b

This is true, but many companies just gross up the employee's salary to cover the tax, as part of the benefit. If they don't do that, then yes, it's an expense to you. Either way, they should be deducting it from your paycheck. If they're not, they're out of compliance with the IRS.