In order to place a salary value on the company car, we calculate the approximate cost of providing
the car if the employee were to purchase and run it, instead of being provided with a vehicle by the company.
The figures produced give a realistic guide, in both net cost and gross salary terms, for the value of the car.
They take into account the following factors
Manufacturer
Select the make of car or manufacturer from the list. Choose from the main manufacturers that have been
included or select ‘Other’.
Engine Size (cc)
Enter the size of the engine measured in cubic centimeters eg 1998 cc from the car specification
Carbon Dioxide Emissions (CO²) g/km
Enter the size of the engine measured in cubic centimeters eg 1998 cc from the car specification
Car List Price
Enter the list price of a brand new car of that make and model that is applicable for P11D purposes.
Depreciation
It is assumed that the employee buys a car equivalent to that provided as a company car. For the purpose of
this exercise, a new vehicle is purchased. Critics may argue that an alternative vehicle may be bought, but this
would not help in evaluating the actual benefit value of a new company car.
Having bought the car, it is sold three years later and a replacement is bought. The current depreciation rates
have been set by comparing a range of models for each manufacturer.
Loss of Interest
If a company car had been purchased, savings would not have been spent and therefore, would have
earned interest in a Bank or Building Society savings account. The current savings account interest rate is
applied to the assumed capital expenditure (i.e. list price of the car). The average of a number of Bank and
Building Society rates is calculated including the Halifax, Britannia and Nationwide.
Insurance
Insurance is based on fully comprehensive coverage with three years No Claims Discount, for a driver
covering 20,000 miles per annum, in a car of similar engine size. The figures are based on quotes received
from four major insurers.
Breakdown Subscription
AA Membership Subscription including Relay.
Vehicle Excise Duty
For vehicles registered on and after 1 March 2001 the amount is calculated according to CO² emission
figure and fuel type.
Running Costs
Running costs which would normally be paid for by the company have to be paid for by the individual.
Utilising The AA's motoring costs data, the cost of oil, servicing, repairs and replacements is based on
10,000 business and 10,000 private miles. Petrol expenditure is based on current prices and is calculated
for 10,000 private miles.
Net Value of a Company Car
The company car is a taxable benefit. If this perk is not provided, tax does not have to be paid, and in
this respect the individual is better off by that amount. Annual net value of the company car
is: Actual cost of the car – Tax liability.
Note that tax liability will differ for the two tax bands (i.e. 20% Tax Payer and 40% Tax Payer).
For litigation purposes, this will be the figure required to obtain the level of compensation.
Salary Value of Car
Many companies are now offering company car holders cash alternatives in order to replace their vehicle.
This is the cash sum added to their gross salary to cover the cost of the replacement.
Applying basic assumptions for tax and national insurance, the net value of the car is grossed up to show the
additional income required to cover the cost of the vehicle. It should be noted that these gross figures are
intended as a guide only. They do not take into account any factors which may impact on an individual’s tax
liability.