What if employees provide their own cars?

Arriving at a satisfactory 'Cash for Cars' allowance is simply the beginning of the process. Drivers relinquishing their company car then have to source and maintain their own vehicles.

Personal Contract Plans (PCP’s)

This route is often considered to be the easiest way to replicate the convenience of a company car, but with the contractual arrangements between the driver and supplier so that no benefit in kind is involved. PCP’s effectively protect drivers from financial risk such as uncertain depreciations.

However, some individuals may have difficulty obtaining credit, so the funding cost will reflect this. In addition, economies of scale may impact on vehicle discounts, maintenance costs and tyres.

A less obvious cost element with most PCPs is that the final deferred payment will be structured to provide some equity for the driver when the contract terminates. This is good news in the sense that a deposit will be readily available to begin the next PCP agreement, but in the short term the driver’s monthly outlay may be higher.

The insurance factor

Opted-out drivers should be aware that insurance will be a significant element of the running costs they will need to cover.

Insurance through fleet policies will not penalise the young or poor risk, but drivers opting out may find in some cases that they are effectively uninsurable for the prestige car they used to drive. Many insurance companies have started applying the driver's company no claims allowance to their private insurance, if opting out of a company vehicle, thus lowering the premiums.