One-third of UK’s population still use their car to get to work and this means 63% of the working population commute to work by car, RAC says.
Commuting by car can be so dull but there are ways to save money as well as making your daily commute more exciting than ever. In this post, I am going to show you how you might be able to save thousands of pounds and still enjoy motoring.
1. Ditch your company car and save £10,000
Company car schemes are not always the best option for employees and this is not always fully explained to staff.
If you think having a company car is a ‘benefit’ or ‘good perk of the job’, then think again.
Company car schemes are great for the employers because this is a way of giving staff something ‘nice’ but its consequences in your net income is not always explained fully.
For example, if you have been given a choice of either taking a company car allowance in a form of additional cash or to be on a company car scheme, you should think carefully which is the best option for you.
Your employer may offer you something in a region of £4,000 to £8,000 as an alternative to a company car depending on your job role, your position or job title.
Let me give you an example based on 2018/19 tax rates in England;
Let’s say your gross salary is £35,000 per annum
You have been offered a choice between not having a company car but you get £5,000 extra as an allowance or a company car which is a brand new BMW 3 Series Saloon 318 Sport worth about £28,000.
If you take the £5,000, you will have to have your own car and maintain it yourself.
Assuming this is a simple income tax calculation (without pension or other income sources), your take-home pay per month will be;
Take Home Pay With Cash Allowance: £2,548 per month (gross salary of £35,000 plus £5,000 allowance)
Take Home Pay With Company Car: £2,131 per month (gross salary of £35,000 plus a BMW 318 Sport)
This is because you will be paying more income tax by having the use of a brand new car privately as well as for work.
Yet, if you choose to have the cash you will have additional £417 coming into your pocket each month, which is £5,004 for the year. It is typical that you are tied to
Obviously, this is an example and the savings are dependent on three factors;
Your Current and Future Gross Salary (determines your tax bracket)
Cash Allowance Offered
Cost of the company car offered.
Comcar.co.uk is a brilliant website for you to check exactly how much you will be paying in additional income tax by entering the vehicle details.
2. Return the car that’s on PCP and save £22,000
Having the car on PCP (Personal Contract Plan) has made it possible for many people to drive a new car by paying a monthly fee. There are strict contractual obligations such as a limit on annual mileage and any damages to the car which you will be penalised if not met.
This is because while you have the full use of the car, in reality, you don’t own it, which is not much different to buying a car on a personal loan or a hire purchase.
With PCP however, at the end of the period, you have the option to return the car in the condition agreed at the start of the contract and walk away or purchase it with a lump sum called balloon payment which is the amount agreed at the beginning.
Many people opt to exchange it with another car on PCP so enter into another contract with obligations and you might get into the cycle of renewing your car every 3-4 years, forever. This is a good way for the car dealers to keep customer’s loyalty and for the car makers to keep consumer’s loyalty to their brand.
To have the car on PCP, you will have the car typically for 2-4 years and will be committed to making a monthly payment of £200-400 or more depending on the agreement, the car you choose and what deposit you have to put down.
Offers on PCP deals change frequently so this is just an example available at the time of writing this article, but a BMW 320d M
This monthly payment is made after you have paid your income tax so, it comes out from your monthly net pay. With the above example of £35,000 gross income, your net monthly pay of £2,265 will be reduced to £1,936. And in 48 months you will have paid £15,792 in monthly payment.
This means you will have paid £22,151 including the deposit paid at the beginning for the car, and at the end of the four-year contract, you still don’t even own it.
3. The alternatives
While driving a brand new car is quite exciting in the beginning but like any other cars on the road, as soon as you drive it out of the showroom it starts depreciating in value. So your car immediately becomes a ‘used car’.
So, when was the last time you owned something different that said something about you?
I know you might need a car to transport other members of staff, but really, do you actually need a brand new car?
In a quick search, I have found some cars that might just transform your daily commute from dull to exciting, all for less than £7,000.
Alfa Romeo Spyder Convertible,
Jaguar XK8 Convertible,
Porche Boxter 986,
Nissan 350Z, Year Year 2006, 65,000 miles
Some people are scared off from buying cars which are over 10 years old because something major might go wrong.
But let’s be realistic;
For older cars, you don’t worry about not having maker’s dealer stamps on your service book and there are a plenty of good quality independent garages and even mobile mechanics nowadays so you don’t have to pay the premium of having your car repaired by a major dealership.
Also, unlike cars built in the 1970s and 80s, modern cars are well built especially the ones that are considered to be prestige.
Besides, if you can buy one for less than £7,000 which is about the amount of the deposit you will have to put down on a new BMW on a PCP contract, it is unlikely you will spend £15,000 maintaining the car you have bought secondhand.
Even if you spend £5,000 on engine service and maintenance over the 4 year period and the car falls apart at the end of it, you will still have saved £10,000 in 4 years!
And not to mention having a commuting experience exhilarating than you might have had in the brand new vehicle you are scared to drive it properly in case you scratch it.
Save AND reduce CO2 emissions
Yes, like you, I do consider the impact on the environment and we all want to do our bit to not to damage the environment.
Often it is easy to say to ourselves, the newest cars including electric cars are the most environmentally friendly.
But that’s a sort of sweeping statement made by someone who has not considered the impact on the environment during manufacturing of batteries used in many electric cars.
For example, the nickel used in the manufacturing of batteries is mined in the way it produces sulphur dioxide and is a cause of major environmental concern, as I refer to the article in the Guardian Nickel mining: the hidden environmental cost of electric cars.
In terms of CO2 emission produced during the manufacture of cars, according to an analysis by The Guardian, How green are electric cars?, an average electric car produces 8.8 tonnes of CO2 in comparison to 5.6 tonnes in producing an average petrol car.
Nealy half of the CO2 produced in the manufacture of an electric car is in producing the battery.
I think it is all about having the right balance and the right perspective in making our choices.
Because by not replacing your cars too often you are also making a good choice in reducing CO2 emitted during manufacturing.
It might also enable you to do something else rewarding other than the money you have saved.
How about giving someone a lift or do a care share in your new awesome sports car from the past decades and let the wind pass through your hair on the way to work.
It might just make someone smile and feel good for the day.
I hope this article has given you some useful information but let me know what you think.
Join the discussion by commenting below.
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