Early Retirement Extreme Forums

Early Retirement Extreme Forums » Money Questions

1. 

   belgiandude
   

   Novice
   Joined: Mar '12
   Posts: 4

   As I am in the salary negotiation phase of a new job, I need to choose between a company car with free gasoline or 400 euros additional monthly salary (before tax).
   For me, it is really a tough choice, as I have (counter)arguments for both options.

   Car:
   - I do not really need it, as I am most likely going to cycle the 15 kilometers to the office.
   - It is not environment friendly
   + I will have more mobility
   + I do not need to pay for public transport (i.e. about 60 euro/month)

   Money:
   - Taxes are high. 400 euro will result in only 200 after taxes.
   + I can save 1200 euro / month instead of 1000 euro / month

   My parents, friends, and girlfriend pressure me to take the car, but I am not convinced. What would you guys do?

   Posted 1 year ago #
2. 

   J.O.S.H.
   

   Apprentice
   Joined: Mar '12
   Posts: 35

   At the risk of saying the trivial, take the money. 20% higher savings is a lot (although I think you'll still be able to save even more going forward), and you'd be surprised at the mobility you can have on a bike. If everyone is pressuring you to do something and you aren't convinced, sounds like you've made up your mind, but feel free to use this response to do what you want to do anyhow. :)

   Posted 1 year ago #
3. 

   dot_com_vet
   

   Master
   Joined: Jan '11
   Posts: 376

   If it's a BMW with free gas, I'd probably go for the car. :-) I'm a car guy though, which at face value isn't ERE friendly.

   Posted 1 year ago #
4. 

   Fiddle
   

   Novice
   Joined: Aug '11
   Posts: 19

   Hi,

   I currently have a company car with free petrol and if i was offered to swap this for a 20% increase in my monthly savings i would not take the swap. This is because my savings rate is already high and the car is an estate that i have put a bed in the back of and my girlfriend and i tour around every weekend we have free. This makes the journey to ERE MUCH more tolerable for me and my specific circumstances. However if i wasnt interested in weekend touring as a method of destressing from work i would probably take the money.
   I suggest to think about how you can use the car and the free petrol to maximum benefit to your lifestyle before you decide to give it up for the increased savings %.

   Posted 1 year ago #
5. 

   aussierogue
   

   Master
   Joined: Nov '11
   Posts: 340

   yeh i think you need to look at this deal in conjuntion with your total income and savings rate..

   seems to me you are earning some good coin and saving at a pretty good rate and because taking the car doesnt make a huge difference i may take the car if i was in your position.

   still ride your bike...

   heres an idea - take the car, ride the bike and sublet the car to someone and make more cash...

   Posted 1 year ago #
6. 

   belgiandude
   

   Novice
   Joined: Mar '12
   Posts: 4

   @dot_com_vet It is indeed a small BMW.

   @Fiddle My girlfriend and I usually travel abroad once a month with either efficient public transport or cheap rynair/wizzair flights (less than 60 euro go and return). If I take the car my travel budget would reduce as we save on transport/accommodation. I need to make the calculations.

   @Aussierogue I need to look into whether I can sublet the car. I think it won't be allowed, though. My savingsrate is somewhere between 50 and 60 percent. It should be rather easy to increase this, as I do not have made any optimizations in my spending yet.

   Posted 1 year ago #
7. 

   aussierogue
   

   Master
   Joined: Nov '11
   Posts: 340

   dont tell anyone important you gonna sublet it

   just make sure on the contract it says other drivers can use it..

   Posted 1 year ago #
8. 

   JohnnyH
   

   Expert
   Joined: Jul '10
   Posts: 1,363

   Will you be able to change from one to the other? For example, can you use the car for a year then switch over to 20% pay increase? Or are you committed to the car for indefinitely?

   If you can change this every year, you get enough time off to travel and gas is unlimited and free I'd strongly consider using the car to tour the surrounding area for a year or two.

   Some quick math tells me you'd need probably 1k miles a month to make the car worthwhile... I could do that if I was going to tour much of Europe. If I couldn't (not enough time off) I would probably take the extra 200 eu.

   Also, it might be hard to go from a car lifestyle to one without.

   Posted 1 year ago #
9. 

   George the original one
   

   Expert
   Joined: Jul '10
   Posts: 1,938

   Cash = +20% to savings rate
   Car = 0% to savings rate (or worse)

   A car will lead to other expenses, not just fuel & insurance.

   I do like aussierogue's idea of subletting, but then it's more complication in your life.

   Posted 1 year ago #
10. 

    Mo
    

    Master
    Joined: Jul '10
    Posts: 442

    parking, maintenance, insurance...

    If you don't need it, you don't need it. Take the cash if you don't need the car.

    If you've never had a car before, you won't miss it. Cars can be somewhat like an addiction-- once you have one it really takes some effort to get rid of.

    Posted 1 year ago #
11. 

    belgiandude
    

    Novice
    Joined: Mar '12
    Posts: 4

    I will take the additional money for two reasons.
    First, I have never had a car before and I do not want to get used to it.
    Second, thanks to some cycling initiatives from the government, I also will end up paying less taxes if I go by bicycle to the office. Which makes the decision a no-brainer.

    @Mo These costs are paid for by the company.

    @JohnnyH Switching from a car to no-car is not possible, because the company has rather inflexible leasing contracts.

    Posted 1 year ago #
12. 

    dragoncar
    

    Expert
    Joined: Oct '10
    Posts: 1,287

    Big question is, will you have to pay taxes on the car? The following seems to imply you would:

    http://www.deloitte.com/view/en_BE/be/services/tax/tax-news-and-publications/3a623d2485ff3310VgnVCM1000001a56f00aRCRD.htm

    In which case, the cash is a no-brainer for your situation.

    Posted 1 year ago #
13. 

    KevinW
    

    Master
    Joined: Aug '10
    Posts: 576

    Between cash and noncash benefits, my default choice is always cash. Fringe benefits, points, miles, and rebates all come with strings attached. Cash can be spent anywhere any time. Also priorities tend to change over time. Just because a car might seem more valuable than the cash right now, that could easily change in the future.

    Also, by default I avoid depending on employer fringe benefits. Depending on the salary is bad enough without adding other needs into the mix. I don't like the golden handcuffs of having transportation, insurance, banking, etc. all tied to a particular employer.

    Posted 1 year ago #
14. 

    DutchGirl
    

    Master
    Joined: Sep '11
    Posts: 479

    @BelgianDude from DutchGirl (hi hi): Woohoo, I think you made the right decision. It's 140 more euros each month (200 euros more salary minus 60 euros to pay for public transport), it will save you the temptation of taking the car instead of the bike, and it will save you a lot in parking fees, car repair hassles etc.

    And in the Netherlands you would indeed also need to pay income taxes on the car, you would be considered to get for example (depending on the car) 1/5th of the car's value as extra income annually; and then have to pay taxes on that. So say the car is 20k euros, you would be considered to have received 4k euros more income that year, and would be ask to fork over 2k euros extra to the government.

    Posted 1 year ago #
15. 

    Scott 2
    

    Journeyman
    Joined: Feb '12
    Posts: 189

    There are two more reasons to take the money:

    1. When a corporation cuts back, benefits are one of the first thing to go.

    2. When salary based calculations are made (raises, bonuses, profit sharing, etc.) the higher your base pay, the better. This is especially true of raises, where compounding over the years can become huge.

    Posted 1 year ago #
16. 

    BeyondtheWrap
    

    Journeyman
    Joined: Jul '10
    Posts: 265

    Take the money, and use it to buy your own transportation at a lower cost (the public transport at 60/month).

    Posted 1 year ago #

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