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No Simple Answer On Cash Allowances, Says Toomey Opticar

Mixed fleet specialists Toomey Opticar says that businesses need to keep an open mind when considering the best way to pay cash allowances to their drivers.

Businesses can choose between an employee car ownership (ECO) scheme or a traditional cash allowance. Under an ECO, an employee receives a budget from their employer, via their monthly salary, which funds the finance, maintenance and insurance costs of their vehicle, which the employee legally owns. This option is best suited for drivers with high business mileage.

Alternatively, the driver receives a cash allowance, again via their salary, towards their car costs but must maintain and insure the vehicle themselves.

Peter Eldon of Toomey Opticar said: “There are so many variables when considering how to pay any form of car benefit that there is no single best option. An ECO will be the least-cost route in one case, and a company car in another.

“For example, an ECO for a 40 per cent taxpayer in a Ford Mondeo diesel estate 2.0 Zetec, with a total mileage of 18,000 miles and business mileage of 12,000 – where the driver pays only for their business fuel – would cost their employer £5,650. A traditional cash allowance option for the same car, which would fund the same maintenance and insurance services, would cost the business £8,500.

“But a 22 per cent taxpayer in a different car would produce a whole new set of results, where the cash allowance might be a viable option. The reality is that no single method can meet all situations and be truly cost and tax-efficient and that the best solution is to offer properly managed, mixed option car benefit.”

“The big reason for not offering a cash option these days has to be that the employer will find it very difficult to make sure that the driver selects a vehicle that is fit for business purpose, meets the company image requirement or is business insured, properly maintained and tax. With the legislation relating to corporate responsibility and duty of care, the idea of a straight cash offering must a less viable option.”

Toomey Opticar provides a unique online mixed fleet solution for customers, which enables the employer and the employees to maximise benefits in terms of cost, tax, administration and vehicle choice.

For more information call 01582 518181.