Company vehicle or mileage reimbursment?

[trout14]

I am trying to figure out what is most cost effective. Currently I have a company car, and just found out they are getting new leases for the following 5 years, but in the last couple of months it was up in the air, so  I started looking at buying a vehicle. The company car is fully paid for, I have no expense what so ever. They provide a gas card. I can only use the vehicle for work though. If I have my own car i get reimbursed .51$ per mile, and then of course also use it for my own personal use. Is there a formula to figure out the cost/benefit of a company car vs personal?

[GizmoTX]

How much personal driving do you do? How much for work?

[trout14]

12-15000 for work, 5000 personal. I have another vehicle that I currently use. 1999 landcruiser.

[reader2580]

If your company allows use of personal cars instead of company cars do they have requirements on how new the car has to be?  Could you operate a car the company approves of for less than about $500 a month based on 12,000 miles you mentioned?  You might find a company car to just be less hassle especially considering what happens in case of a crash.

A friend of mine gets almost $600 a month to buy a car for company use plus per mile reimbursement for gas and operating expenses.

[James]

13,500 miles times 51 cents per mile is $6,885. If you purchased a used Prius you could get 13,500 miles of gas for $810 (at $3 per gallon), leaving $500 per month for payments and maintenance. Obviously the huge savings comes from not having the second vehicle cost, second vehicle insurance, second vehicle lower mpg, upkeep, etc. I think you would make money over time considering only the work driving, or at worst break even after insurance and other costs. But when you factor in the ability to use that same vehicle for personal use I think you come out much better with your own vehicle.

All of this depends on you not driving an expensive gas hog. I think you could go with any number of vehicles, but my recommendation is colored by your close to 20k miles per year of driving in total between work and personal. I would stick with the high mpg in the proven form of the Prius. You could purchase a new one for $500 per month and be better off than the company car, but not make much on the deal. Purchasing a used one would provide much greater savings and allow money for maintenance, insurance, upkeep, etc, leading to the reimbursement being a nice money maker for you versus the company car and separate personal vehicle.

Obviously if you rolled extra reimbursement payments into the cost of the vehicle and paid it off early (or used other money to pay cash for a vehicle) you wouldn't pay as much interest. But with low interest rates right now (I got 2.5%), it can be better off to make payments for your car and invest your money in the market instead of paying it off early. But that is just personal preference...

[bigstack]

isn't there a tax implication with a company car? aka you have to claim the value of it (aka 500 a month for 12 months) as income?

(i may be totally wrong on this, never had to deal with it myself just recall a friend mentioning it.)

[reader2580]

The only time you should get taxed for a company car is if you are allowed to use it for personal use, and then only to the extent it is used for personal use.

[JRB_NW]

Sometimes it comes down to more than just dollars - comfort at the end of the day, safety, driiving pleasure, etc all are important if you're driving a lot, especially in traffic. My last job before retiring I was a field Systems Engineer in the Pacific Northwest, providing software support for servers in data centers throughout Oregon and Washington. Beautiful country, nice roads, sometimes bad weather, and heavy traffic around Seattle. Sometimes I would get out of an account in Seattle at 6pm, facing a 4 hour drive back to Portland. To make the most of it, I wanted a nice car.

Most of the guys took the company car (a base Detroit model) and gas card, even though they had to PAY $250/mo for it (to cover personal use). I instead took the reimbursement option which was to be paid $200/mo plus .15/mi for actual miles driven. Driving a minimum of 1000 miles/mo for work calls (often more) I was being PAID at least $350 ($200 + $150) instead of PAYING $250 for the company car.

The delta of $600/mo plus allowed me to afford driving late model (but used) Saab and Volvo sports sedans with nice amenities (moonroof, leather, great seats and stereo) instead of a car with zero driving pleasure. I always bought highly depreciated models with low miles, and besides the comfort, they got better mpg too. Did it cover the entire ownership cost? No, but it came close, and the car was also available for my personal use.

[Geldsnor]

The only time you should get taxed for a company car is if you are allowed to use it for personal use, and then only to the extent it is used for personal use.

In Europe that would not be the case. For example in The Netherlands you have to add 14% / 20% / 25% (depending on how 'green' the car is) of the catalog value of the car to your income, as soon as you use the car privately for more than 500km per year.

So if you have a 25% 40.000€ car, you have to each year add 10.000€ to your income (which will likely be taxed with 52%, welcome to The Netherlands).
As you can imagine this really changes the calculation whether or not using a company car is beneficial. It all depends on your local laws and personal usage.

[BlueMR2]

I've had both in the past:

The company car I had as a regional IT support tech, I was also allowed to drive for my own person use (and still use the company gas card).  However, it cost me $400/mo to have that company car (and this was back in the mid-90's)...  That was a ton of money when I was only making around $25k a year, but I was young, stupid, and the 5 year old used I car I'd recently bought was turning out to be terribly unreliable.

As a regional (smaller region though) IT support and training specialist years later, I was getting mileage at the government rate to drive my small 2 seat sportscar.  Despite the higher than normal cost of operation of a sportscar (tires, etc, it actually gets great MPG), I figure I still made some money on it because the government figures were really high (I guess they presume everyone is driving gas sucking clown SUVs for work).

[James]

I figure I still made some money on it because the government figures were really high (I guess they presume everyone is driving gas sucking clown SUVs for work).

I agree. I currently get the government specified rate when I travel for work, which is about 120 miles once a week or so. At 54 cents per mile I make a lot of profit driving a 50 mpg Prius. For a while they said we could pick up the company car at work and drive that instead if we wanted to avoid using our personal vehicle, and some others did that, but I always thought that was funny. Why not take the 54 cents a mile. But they were driving 12mpg trucks so it made more sense...

And regarding taxes, we don't pay taxes on that reimbursement, I assume the same would be for the OP, the reimbursement would be non-taxed.

[reader2580]

For those that travel a lot for work, what about liability for accidents if driving your personal vehicle for company travel?  If you're a true mustachian and don't have collision/comp then you're stuck paying for another vehicle if it get totaled while driving for work.  If it is a company car you probably aren't liable for anything and the company just gets you another car.

[James]

For those that travel a lot for work, what about liability for accidents if driving your personal vehicle for company travel?  If you're a true mustachian and don't have collision/comp then you're stuck paying for another vehicle if it get totaled while driving for work.  If it is a company car you probably aren't liable for anything and the company just gets you another car.

My company insurance covers all work travel, even in my personal vehicle. Last year a colleague had a rock break his windshield, he let our boss know who called the insurance company. The next day a company came and replaced his windshield at work. OP would just need to find out what the situation is at his employment. Even if using your own insurance for the company travel that doesn't mean it's a bad deal, just something to factor in.

[trout14]

Some good information. I drove my own vehicle a few years ago and did go with a used prius. I made money by driving even after all the costs. I would not get a prius this time, but a nicer, less fuel efficient vehicle that would fit the family better. Driving the company car, 100% paid for. Driving my own, the 51 cents/mile is my total reimbursement. I believe I can claim the difference between my reimbursement and the federal limit, which I think is 57.5 cents. I would pay cash, and looking for around 16K, 2008 audi a6.

Of course, that extra cash would go towards my 2nd at 5.25% if I keep the company car.

[franklin w. dixon]

I'm in a very similar situation (reimbursed at 57.5 cents per mile) and had to buy a car recently. Here's what it looks like so far:



So I'm up by eight bucks! Plus, oh yeah, free car.

[turketron]

I'm firmly in the "buy your own" camp for all the reasons stated above. Get a decently used fuel-efficient car, take their reimbursement, and pocket the difference. Plus, paying for everything yourself and getting reimbursed (vs. the gas card option) could net you some sweet credit card points too :D

[James]

I'm firmly in the "buy your own" camp for all the reasons stated above. Get a decently used fuel-efficient car, take their reimbursement, and pocket the difference. Plus, paying for everything yourself and getting reimbursed (vs. the gas card option) could net you some sweet credit card points too :D

I use a BP card for all my gas, 5% off and no hassle with points or getting the cash back or any hassle. Just drops the price at the pump by 5% for up front savings all the time.

[going2ER]

I use my own vehicle for work purposes. I've never clearly tracked what it has cost me or what I have earned since its been a number of years. Yes, I'm slow at this whole FIRE thing.

I bought a Mazada 3 with 0% financing. On my biweekly paycheque I am provided with a car allowance and plus I recieve mileage, so it works out great for me. It allows me to have a reliable vehicle with great gas mileage. The warranty also covers unlimited milage. My last trip for work I spent $60 on gas and was reimbursed $250 for milage, plus my regular car allowance.  Other times I have had a paid off car for years and that is when its really beneficial.

It does cost a slight bit more for insurance coverage for your vehicle if you use it for employment, but I am thinking it was maybe $10/year.

[JRB_NW]

For those that travel a lot for work, what about liability for accidents if driving your personal vehicle for company travel?  If you're a true mustachian and don't have collision/comp then you're stuck paying for another vehicle if it get totaled while driving for work.  If it is a company car you probably aren't liable for anything and the company just gets you another car.

My employer required anyone driving their own car to have proof of full coverage insurance at fairly high limits (I believe 50K/250K/500K or something like that).

[BlueMR2]

For those that travel a lot for work, what about liability for accidents if driving your personal vehicle for company travel?  If you're a true mustachian and don't have collision/comp then you're stuck paying for another vehicle if it get totaled while driving for work.  If it is a company car you probably aren't liable for anything and the company just gets you another car.

Same deal as if you just drive a vehicle to work.  Pull some cash from your stash and buy another reasonably priced used car.

[use2betrix]

My last company I was at they gave us a gas card to cover 100% of gas (I drove a diesel truck) and also a $650/mo truck allowance, which wasn't taxed. I came out well ahead.

Even at the standard mileage rate of 57.5 cents/mile you'll come out ahead almost no matter what you drive.

[elaine amj]

DH and I had this conversation recently. He had to drive about 4 hours away for a work conference and could choose between the company car or his own personal vehicle  with mileage reimbursement (54 cents/km).

His preference was to use the company car to save "wear and tear" on his car. I argued that the mileage reimbursement more than made up for any "wear and tear". I did convince him finally - but more because it's a hassle to book/pick up/return the company car.

[reader2580]

Mr MM usually talks about a cost per mile to operate a car of 50 cents per mile.  If your cost is less than 50 cents a mile then you can make a little profit on company miles.  It isn't just the cost of gas to drive those extra miles.  The more miles the sooner you need to be buying another vehicle.