Take car allowance or drive company vehicle?

[maat55]

The amount of mile you put on the car is the most important factor, IMO. The more miles you put on the car the cheaper the car needs to be and get better gas mileage. If the amount of miles is high, I would take the company car. Low miles, I would take the allowance, and buy a nice but inexpensive car. Medium miles, I would take allowance and buy cheap car that gets good gas mileage.

[LivingAlmostLarge]

Interesting. That more mileage = company car. But Snave if you had a company car did you have to pay for repairs/oil changes, etc like if you got the reimbursement? Or was that all still covered?

[Scanner]

My neighbor is a drug rep. and he wrestles with this. He seems to go for the car allowance, which is what the forum leans here and I am sure it's not even $1000/month he gets.

He does tell me the drug co.'s have strict guidelines on keeping it clean and garaged though. I guess they don't want them walking up to DisneySteve's practice in an old beat-up Buick covered in mud.

So. . .he probably goes to the car wash every 2 weeks to keep it spiffy and washes it himself when he has the time. So, there's that added expense where I probably wash my cars 1x/quarter and wax with Nu-Finish 2x/year.

And yes, mileage/gas is an issue. . .he logs in some mileage per year.

SOmething tells me his car allowance was $600/month but I could be wrong.

Another issue may be your taxes:

Do you file a Schedule C? I wonder how it would work - if you are getting 12K/year, of course that's income, but maybe that's given to you on a 1099 w/out taxes taken out. Now. . .if you file a Schedule C (Sole Proprietor business return), you may get to deduct 80-100% if you lease the car. I am not a fan of leasing at all but in this case, it may actually make sense if you are getting an allowance.

The repairs would be under factory warranty - you lease a car for $0.00 down and $400/month. . .you have $600/month for gas and insurance.

Plus you now have some writeoffs. . .lease payments and car insurance.

I would ask your accountant for his/her perspective.

[disneysteve]

He does tell me the drug co.'s have strict guidelines on keeping it clean and garaged though. I guess they don't want them walking up to DisneySteve's practice in an old beat-up Buick covered in mud.

The sad thing is the reps all drive nicer cars than me. I've got my 1998 Toyota and they never have anything more than about 2 years old. Personally, I couldn't care less what they drive. I'd rather see the companies let the reps drive older cars and lower the cost of the drugs.

[jc3900]

All I have to say is two words: TOYOTA YARIS. Take the allowance.

[Snave]

Interesting. That more mileage = company car. But Snave if you had a company car did you have to pay for repairs/oil changes, etc like if you got the reimbursement? Or was that all still covered?

I do have to pay for repairs, oil change, etc... I don't put a ton of miles on a year, only about 25,000. I have some of my sales people that work for me that put on 50-75K a year and they go with the company car. I would also in that instance. I wouldn't want to run the value down in 1 year. Again, I net about $8500 out of it a year. A $19-20,000 car + insurance + maintainance should be paid in 3 years. Then there will still be a little value on the car, so I am ahead. Now, if I have major repairs, that's another story.

[maat55]

Trying to determine what is low, medium, and high miles for a specific cars is the hard part.

[Snave]

The sad thing is the reps all drive nicer cars than me. I've got my 1998 Toyota and they never have anything more than about 2 years old. Personally, I couldn't care less what they drive. I'd rather see the companies let the reps drive older cars and lower the cost of the drugs.

I used to be in that industry years ago and the drug companies get there cars on the cheap. For example, look at a company like J&J where you have so many different divisions of a company from medical device to pharmaceutical to retail, etc... They are buying tens of thousand of cars and get them for next to nothing. They are buyng in such bulk. Fleet cars are sold extremely cheap to companies. There is also a reason that they turn the cars over at certain mileage points and after so many years. For them, they can return them to fleet at a mileage point where they are not completely devalued and fleet can re-sell them. They run the numbers to know what mileage vs. maintainance, etc... will cost them the least amount of money. Therefore, that helps them keep the cost down. I used to be in house at my company and know enough about some of this stuff to just be a little dangerous! That's why you see them turning cars over every two - three years. They are in the business of science and they even have car buying down to a science as well.

[LivingAlmostLarge]

They put a lot of miles on those cars right? So when you see them at 90k but 3 years old on a used car lot those are like that or rental cars?

[Snave]

My old company turned them over around 65K or 70K. I am in a different industry now, but those that take the company car with my current company turn it over about every 75K. Again, they probably are buying these in such bulk that they are getting them for next to nothing. I know my old company ended up pulling Ford (not sure which manufacturer, but think it was Ford) from our choices one year b/c Ford pulled the contract. Ford was loosing money on Fleet vehicles b/c they were selling them for less than it cost to produce them. Again, I think they basically give them away at cost and in some instances below cost. Remember, it is advertising for them to have so many Ford's on the road. It looks good for their market share, etc... So, the company buys the company car at $13,000 - $14,000 new (and we are talking about Ford Tauras, Pontiac Grand Prix, etc.... It is driven for 2-3 years and then fleet re-sells it for 8-9,000. So, it costs about $5000 to have the sales person in that car for 3 years. Plus, there is low maintainance in that time, so that way they can avoid those costs. If they keep them longer, they risk the car depreciating more and the maintainance going up. So, after a certain mileage and year, the maintainance and depreciation cost the company more money.

[markio26]

my son used to have a company car until 2 yrs ago... he did not want to change... then he decided to take the money.. he now owns a jeep cherokee, and a ford probe, he alternates which vehicle he will drive to work and enjoys it more... no more worrying about the kids staining the seats in the car, he can smoke in his car, etc.. i don't know what his allowance is, he just got promoted last tuesday, so, it has increased... i think it used to be $1200... a month.. or $12000 a yr.. in a lump sum...

[Rick01]

I would definitely take the car allowance, and being frugal I would opt for an economy car and keep whatever was left over. But, that's just me.