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Guidance notes for car loans

Eligibility

Staff must be confirmed in post to qualify for a car loan.

(a) All staff who have completed their probationary period

(b) You must be over 18 to have a loan agreement

The loan

(a) You can borrow up to 50% of gross salary, with a maximum of £15,000.

(b) The loan must not exceed the purchase price of the new or second-hand car, including delivery and number plates. Other items, such as road fund licence (road tax), metallic paint, extended warranty, insurance and other extras can not be included.

(c) The value of the car that is being replaced will be deducted from the cost of the car that you buy. That value will be the actual trade-in price, disposal or write-off value, or a used car guide value if retaining the old car. (Any outstanding loan on the car will not be included)

(d) The balance of the loan must be repaid if you cease to work for the Council; and you must not sell the car without the prior consent of the Council, at which time the balance in full must be repaid.

(e) The cheque must be made out to the garage/seller of the vehicle.

Engineer's report

(a) An application to buy a second-hand car must be accompanied by an independent engineer’s report stating the roadworthiness, value and estimated future life of the car. It cannot be done by the garage who is selling the car.

(b) Second-hand cars that are under 12 months old and have less than 20,000 recorded mileage are not required to have an engineer’s report.

Loan period

Those people on a temporary contract would need to have a loan in line with the length of their contract.

(a) Cars less than 4 years old - up to 5 years maximum

(b) Cars 4 years old or more - up to 4 years or estimated future life of the car, whichever is the least.

Interest

(a) The interest rate is fixed at the rate applicable when the loan is taken out.

(b) The current interest rate is 2.5% reducing balance.

(c) Please be aware that there could be a tax implication from the interest on the car loan. If the interest rate is below the annual recommended HMRC rate, the individual will be taxed on the difference, through their P11d at the end of the year. The amount could vary each year, dependant on the HMRC rate, currently at 2.5%.

Monthly repayment guide based on 2.5% interest

A guide to monthly repayments

Loan amount

Loan period of 2 years

Loan period of 3 years

Loan period of 4 years

Loan period of 5 years

£15,000

£641

£433

£329

£266

£14,000

£599

£404

£307

£248

£13,000

£556

£375

£285

£231

£12,000

£513

£346

£263

£213

£11,000

£470

£317

£241

£195

£10,000

£428

£289

£219

£177

£9,000

£385

£260

£197

£160

£8,000

£342

£231

£175

£142

£7,000

£299

£202

£154

£124

£6,000

£257

£173

£132

£107

£5,000

£214

£144

£110

£89

£4,000

£171

£116

£88

£71

£3,000

£128

£87

£66

£53

£2,000

£86

£58

£44

£36

£1,000

£43

£29

£22

£18

The car

(a) If you will be using the car for business, the type of car must be suitable for the performance of the official duties for which it is required.

(b) The car must be registered in your name.

(c) If the car is to be used for council business it must by covered by a fully comprehensive insurance policy in which the Council’s interest is recognised. You must submit the policy for inspection when required.

Car loan transfers

If you have a current car loan, the old loan can be repaid in full or the balance transferred on to the new loan provided that the balance on old loan, plus the amount required for the new loan do not exceed the value of the new car.

Example 1

Balance on old loan - £4,750
New loan amount required - £6,500
Total loan required - £11,250
Value of new car - £13,000

Total loan required is less than value of new car, so loan and transfer OK.

Example 2

Balance on old loan - £4,500
New loan amount required - £10,000
Total loan required- £14,500
Value of new car - £13,000

Total loan required exceeds value of car by £1,500, so the maximum amount we can lend for new loan is £8,500.

The total loan must not exceed 50% of gross salary, with a maximum of £15,000.

The maximum loan period is 5 years but may be less depending on the age of the car.

Contact information

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