How to best approach car allowance

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Topic Author
Murr
Posts: 36
Joined: Fri Mar 24, 2017 2:33 pm

How to best approach car allowance

Post by Murr »

Turning to Bogleheads for a situation I can't seem to figure out even after a forum search as I know the question has been asked before.
I am starting a new job in early Nov which will have a car allowance as opposed to fleet vehicle. Not the best time to buy, I know. I currently have a fleet vehicle and as such will be needing to get a new car for the role. Details are as follows; $800/month(taxable) plus mileage reimbursement at $.56/mile, no min age requirement on vehicle or type.
I have zero debt(including no mortgage) and really prefer to stay that way. Questions:

-is buying better then leasing? I have always purchased my cars but not sure in this scenario. I would drive between 12-15K miles/yr. I would pay cash as I am well underway with my financial plan and have the means to do so
-being a director level role in a sales org, do I use this opp to save a buck and go for something like an Accord or would you step it up?
-I am wanting a newer car; 2-3 years old max and from looking around it seems to be used cars in that age are almost as much as new; go with new, right?

Thanks in advance for all the wisdom being shared!
coldaudio
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Joined: Sat Nov 17, 2012 11:21 am

Re: How to best approach car allowance

Post by coldaudio »

That's a great allowance! Do you ever have to drive with clients in your car? I'd probably lean towards a small-ish SUV over a car, but shy away from German luxury brands due to maintenance costs.

I'd also buy something over leasing; at the end of the day, you'll be getting it "for free" and can sell it later on if you decide to purchase something newer.

I used to have a similar mileage reimbursement value, and still made money on the deal owning an F-150. That was without an allowance. Unless you buy something $60k+, you're coming out ahead big time.
wfrobinette
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Re: How to best approach car allowance

Post by wfrobinette »

Murr wrote: Wed Oct 06, 2021 2:05 pm Turning to Bogleheads for a situation I can't seem to figure out even after a forum search as I know the question has been asked before.
I am starting a new job in early Nov which will have a car allowance as opposed to fleet vehicle. Not the best time to buy, I know. I currently have a fleet vehicle and as such will be needing to get a new car for the role. Details are as follows; $800/month(taxable) plus mileage reimbursement at $.56/mile, no min age requirement on vehicle or type.
I have zero debt(including no mortgage) and really prefer to stay that way. Questions:

-is buying better then leasing? I have always purchased my cars but not sure in this scenario. I would drive between 12-15K miles/yr. I would pay cash as I am well underway with my financial plan and have the means to do so
-being a director level role in a sales org, do I use this opp to save a buck and go for something like an Accord or would you step it up?
-I am wanting a newer car; 2-3 years old max and from looking around it seems to be used cars in that age are almost as much as new; go with new, right?

Thanks in advance for all the wisdom being shared!
I would check with the new org to see what other folks in your role are driving.
Topic Author
Murr
Posts: 36
Joined: Fri Mar 24, 2017 2:33 pm

Re: How to best approach car allowance

Post by Murr »

Thank you both. I wouldn't be taking many clients out as I will have reps on my team who would probably do most of the driving; maybe occasionally.
It is a good point to gauge the "culture" of the org to see what others drive. Its a biopharm org so more engineering type then flashy.
niceguy7376
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Location: Metro ATL

Re: How to best approach car allowance

Post by niceguy7376 »

$800 a month plus Mileage reimbursement at IRS levels.
That is a very good deal (if not the best deal).

If you stick with this job for 3 years, you would have made nearly 29K. So if you buy any decent size car of 30K+, you still will come out way ahead (essentially a free car).

So dont skimp and go with something that is comfortable (if you are driving for work, comfort is definitely a must) and good appearance.
You dont want to be driving a 7+ year old car with mileage on it.
Workaholic
Posts: 604
Joined: Thu Jul 18, 2013 6:55 am

Re: How to best approach car allowance

Post by Workaholic »

Murr wrote: Wed Oct 06, 2021 2:05 pm Turning to Bogleheads for a situation I can't seem to figure out even after a forum search as I know the question has been asked before.
I am starting a new job in early Nov which will have a car allowance as opposed to fleet vehicle. Not the best time to buy, I know. I currently have a fleet vehicle and as such will be needing to get a new car for the role. Details are as follows; $800/month(taxable) plus mileage reimbursement at $.56/mile, no min age requirement on vehicle or type.
I have zero debt(including no mortgage) and really prefer to stay that way. Questions:

-is buying better then leasing? I have always purchased my cars but not sure in this scenario. I would drive between 12-15K miles/yr. I would pay cash as I am well underway with my financial plan and have the means to do so
-being a director level role in a sales org, do I use this opp to save a buck and go for something like an Accord or would you step it up?
-I am wanting a newer car; 2-3 years old max and from looking around it seems to be used cars in that age are almost as much as new; go with new, right?

Thanks in advance for all the wisdom being shared!
If I were you, I'd prioritize comfort, safety, and reliability above all else. I would probably go a step above an Accord or Camry...maybe look at a Lexus ES or an RX if you're thinking a small SUV. $800 / month should cover either of those payments.
Topic Author
Murr
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Joined: Fri Mar 24, 2017 2:33 pm

Re: How to best approach car allowance

Post by Murr »

Workaholic wrote: Wed Oct 06, 2021 4:58 pm
Murr wrote: Wed Oct 06, 2021 2:05 pm Turning to Bogleheads for a situation I can't seem to figure out even after a forum search as I know the question has been asked before.
I am starting a new job in early Nov which will have a car allowance as opposed to fleet vehicle. Not the best time to buy, I know. I currently have a fleet vehicle and as such will be needing to get a new car for the role. Details are as follows; $800/month(taxable) plus mileage reimbursement at $.56/mile, no min age requirement on vehicle or type.
I have zero debt(including no mortgage) and really prefer to stay that way. Questions:

-is buying better then leasing? I have always purchased my cars but not sure in this scenario. I would drive between 12-15K miles/yr. I would pay cash as I am well underway with my financial plan and have the means to do so
-being a director level role in a sales org, do I use this opp to save a buck and go for something like an Accord or would you step it up?
-I am wanting a newer car; 2-3 years old max and from looking around it seems to be used cars in that age are almost as much as new; go with new, right?

Thanks in advance for all the wisdom being shared!
If I were you, I'd prioritize comfort, safety, and reliability above all else. I would probably go a step above an Accord or Camry...maybe look at a Lexus ES or an RX if you're thinking a small SUV. $800 / month should cover either of those payments.
Thanks Workaholic; my wife had the same feedback, she wants an RX
Workaholic
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Joined: Thu Jul 18, 2013 6:55 am

Re: How to best approach car allowance

Post by Workaholic »

Murr wrote: Wed Oct 06, 2021 5:02 pm
Workaholic wrote: Wed Oct 06, 2021 4:58 pm
Murr wrote: Wed Oct 06, 2021 2:05 pm Turning to Bogleheads for a situation I can't seem to figure out even after a forum search as I know the question has been asked before.
I am starting a new job in early Nov which will have a car allowance as opposed to fleet vehicle. Not the best time to buy, I know. I currently have a fleet vehicle and as such will be needing to get a new car for the role. Details are as follows; $800/month(taxable) plus mileage reimbursement at $.56/mile, no min age requirement on vehicle or type.
I have zero debt(including no mortgage) and really prefer to stay that way. Questions:

-is buying better then leasing? I have always purchased my cars but not sure in this scenario. I would drive between 12-15K miles/yr. I would pay cash as I am well underway with my financial plan and have the means to do so
-being a director level role in a sales org, do I use this opp to save a buck and go for something like an Accord or would you step it up?
-I am wanting a newer car; 2-3 years old max and from looking around it seems to be used cars in that age are almost as much as new; go with new, right?

Thanks in advance for all the wisdom being shared!
If I were you, I'd prioritize comfort, safety, and reliability above all else. I would probably go a step above an Accord or Camry...maybe look at a Lexus ES or an RX if you're thinking a small SUV. $800 / month should cover either of those payments.
Thanks Workaholic; my wife had the same feedback, she wants an RX
They are very nice! My mother is on her 3rd or 4th RX and has had no complaints! Reliable, comfortable, and surprisingly economical. Although the interior design is getting a bit long in the tooth, I think it's due for an overhaul next year.
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Nate79
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Re: How to best approach car allowance

Post by Nate79 »

Remember that this car allowance is just compensation. Your employer is paying you $9600 per year compensation and calling it a car allowance. But that doesn't mean it should have any influence on what you should or shouldn't buy because this income should figure into your entire financial picture.
Workaholic
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Re: How to best approach car allowance

Post by Workaholic »

Nate79 wrote: Wed Oct 06, 2021 5:27 pm Remember that this car allowance is just compensation. Your employer is paying you $9600 per year compensation and calling it a car allowance. But that doesn't mean it should have any influence on what you should or shouldn't buy because this income should figure into your entire financial picture.
The way I understand most car allowance provisions is that it's "use it or lose it" so if you don't use the full $800, I don't imagine your employer is going to cut a check for the remainder and put it in your paycheck. At least at my company, they give you X amount and you can go over and pay out of pocket but if you go under that amount, it reverts back to the company. So I would disagree, you shouldn't not view this as compensation as it will not add to your bottom line if you don't use it.
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Nate79
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Re: How to best approach car allowance

Post by Nate79 »

Workaholic wrote: Wed Oct 06, 2021 5:31 pm
Nate79 wrote: Wed Oct 06, 2021 5:27 pm Remember that this car allowance is just compensation. Your employer is paying you $9600 per year compensation and calling it a car allowance. But that doesn't mean it should have any influence on what you should or shouldn't buy because this income should figure into your entire financial picture.
The way I understand most car allowance provisions is that it's "use it or lose it" so if you don't use the full $800, I don't imagine your employer is going to cut a check for the remainder and put it in your paycheck. At least at my company, they give you X amount and you can go over and pay out of pocket but if you go under that amount, it reverts back to the company. So I would disagree, you shouldn't not view this as compensation as it will not add to your bottom line if you don't use it.
That's not the normal situation. In most cases the employer doesnt know or care how much you spent for a car (usually have a minimum age). You get $800/month whether you bought a car in cash for $20k or have a $800/month lease. That's why everyone was posting about coming out ahead.
Topic Author
Murr
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Joined: Fri Mar 24, 2017 2:33 pm

Re: How to best approach car allowance

Post by Murr »

Nate79 wrote: Wed Oct 06, 2021 5:27 pm Remember that this car allowance is just compensation. Your employer is paying you $9600 per year compensation and calling it a car allowance. But that doesn't mean it should have any influence on what you should or shouldn't buy because this income should figure into your entire financial picture.
Good way to frame it Nate; my original thought was to buy what I would buy if there was no allowance, hence the Accord comment
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BolderBoy
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Re: How to best approach car allowance

Post by BolderBoy »

Murr wrote: Wed Oct 06, 2021 2:05 pmI am starting a new job in early Nov which will have a car allowance as opposed to fleet vehicle.
Unless you are willing to buy something overloaded and overblown off the lot, get your auto order in NOW! I'm 8 weeks in waiting on my new auto and they are saying the build will begin Nov 1 with hopeful delivery in December.

Great auto allowance, BTW.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Parkinglotracer
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Re: How to best approach car allowance

Post by Parkinglotracer »

Money is money - a great deal like this allowance should be treated with respect and used in accordance with your life values I’m my humble opinion. Buy the same car you would buy if it was coming out of your wallet. For me that would be a nice Accord or Camry. Besides my wife’s new Accord with leather seats, we have a 2008 Lexus ES with less than 50K miles and a 2014 Sienna with 60K miles (both purchased on Craigslist.)

With the car and mileage deal you have you should be able to have some serious extra money to do with what suites your life values. Congrats !
DoubleComma
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Re: How to best approach car allowance

Post by DoubleComma »

Workaholic wrote: Wed Oct 06, 2021 5:31 pm
Nate79 wrote: Wed Oct 06, 2021 5:27 pm Remember that this car allowance is just compensation. Your employer is paying you $9600 per year compensation and calling it a car allowance. But that doesn't mean it should have any influence on what you should or shouldn't buy because this income should figure into your entire financial picture.
The way I understand most car allowance provisions is that it's "use it or lose it" so if you don't use the full $800, I don't imagine your employer is going to cut a check for the remainder and put it in your paycheck. At least at my company, they give you X amount and you can go over and pay out of pocket but if you go under that amount, it reverts back to the company. So I would disagree, you shouldn't not view this as compensation as it will not add to your bottom line if you don't use it.
Most car allowance are NOT use it or lose it. It’s just an add on to your salary. This is a great deal the OP has. I’ve never seen allowance & mileage; personally I’ve had an allowance + fuel being expensed, but mileage factors in all the cost of ownership.

Pre TCJA tax law change and a you could take a taxable allowance and then write off mileage car allowances we one of the greatest deals around.
DoubleComma
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Re: How to best approach car allowance

Post by DoubleComma »

Murr wrote: Wed Oct 06, 2021 6:04 pm
Nate79 wrote: Wed Oct 06, 2021 5:27 pm Remember that this car allowance is just compensation. Your employer is paying you $9600 per year compensation and calling it a car allowance. But that doesn't mean it should have any influence on what you should or shouldn't buy because this income should figure into your entire financial picture.
Good way to frame it Nate; my original thought was to buy what I would buy if there was no allowance, hence the Accord comment

Accord, Camry, Maxima, Malibu and previously the Taurus and Fusion we routinely called Corporate Cruisers. We all drove them ~30k miles a year. I bet you fit right in with an accord.
Topic Author
Murr
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Re: How to best approach car allowance

Post by Murr »

DoubleComma wrote: Thu Oct 07, 2021 7:53 pm
Murr wrote: Wed Oct 06, 2021 6:04 pm
Nate79 wrote: Wed Oct 06, 2021 5:27 pm Remember that this car allowance is just compensation. Your employer is paying you $9600 per year compensation and calling it a car allowance. But that doesn't mean it should have any influence on what you should or shouldn't buy because this income should figure into your entire financial picture.
Good way to frame it Nate; my original thought was to buy what I would buy if there was no allowance, hence the Accord comment

Accord, Camry, Maxima, Malibu and previously the Taurus and Fusion we routinely called Corporate Cruisers. We all drove them ~30k miles a year. I bet you fit right in with an accord.
Corporate Cruisers....very accurate. I figure I cant go wrong with an Accord. I appreciate all the feedback
Topic Author
Murr
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Re: How to best approach car allowance

Post by Murr »

So, quick update, OP here. My wife and I walked a few lots today and the most recent Accord's styling just isn't for us. With 2 teenage boys and a good chance my wife is driving the "new" car while our other car(2016 Forester) is at the airport she wants a little more room. With that in mind, we spent a lot of time looking at a new Highlander Hybrid and Sienna Hybrid. The Sienna just seems to make sense; tons of room, great mileage and reasonably priced. The Highlander is more visually appealing but not sure if the $9K diff is worth that. Anyone have experience with 2021 model of either?
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firebirdparts
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Re: How to best approach car allowance

Post by firebirdparts »

Nate79 wrote: Wed Oct 06, 2021 5:27 pm Remember that this car allowance is just compensation. Your employer is paying you $9600 per year compensation and calling it a car allowance. But that doesn't mean it should have any influence on what you should or shouldn't buy because this income should figure into your entire financial picture.
This is 100% the answer. Your lifestyle is yours alone. This is just money. If there is an expectation of what your car will look like, which would reflect on your performance appraisal at work, then by all means take that into account.

If you buy an RX, (or any lexus) it'll be presentable long after you finish making the payments.

Anyway, money is good, cars are good.
A fool and your money are soon partners
Topic Author
Murr
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Re: How to best approach car allowance

Post by Murr »

OP here; thanks for all the guidance and suggestions. We used the advice above to approach this as a purchase I would make regardless of "allowance" or not. After a day spent trying to find any new car we could consider(literally, 2 Toyotas on the lot and Honda dealer was marking up everything $5K); we settled on a 2020 Accord LX with only 9K miles on it. It is essentially new and even at the base trim has the essential bells and whistles. Overall, I feel good about the purchase and glad I didn't overspend. It certainly is tough; what starts as "I want an Accord" turns into "I want leather and then for a few thousand more I can get a CPO Lexus; why not just get the GX you always wanted for $55K!). I needed to restate my true needs to myself many times. Glad I stayed the course....for now....ha
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