new car- buy/lease etc ?

[killiefaetheferry]

not very experienced with 'motors' so hoping for a 'steer'...............(sorry )

If you were self-employed and did only local/short trips so low mileage, what is the best option for a vehicle regarding cost v tax deductable etc - buy a car with a loan, lease a car, or any other economically sensible options ?

[Glasgowmancity]

13 minutes ago, killiefaetheferry said:

not very experienced with 'motors' so hoping for a 'steer'...............(sorry )

If you were self-employed and did only local/short trips so low mileage, what is the best option for a vehicle regarding cost v tax deductable etc - buy a car with a loan, lease a car, or any other economically sensible options ?

If Vat registered, lease, if not pcp/bank loan (depends if you are planning on keeping the car beyond 3/4 years)

[PapofGlencoe]

i live really close to my work so don't need it as a commute option.

Only use it to go away at the weekend, shop or go back to my local town now and again.

I must admit I don't get the whole leasing thing at all.  Folk paying upwards of 200-300 a month on a car.  Just seems a waste to me.  But depends on people's priorities.  

If you're not too fussed about having something brand new you'll get a reasonably working Astra for £1500 maybe 05-06 reg around 60-75k miles.  Cars are built to get to around 100k miles these days.  It's a feat of engineering really and design.  Why people need to have something new is beyond me.  I've done around 6-8k a year.  That's low mileage.  

 

 

ah iv'e actually just realised you're doing it via tax deductable.  Not sure how that all works, to be honest.

[killiefaetheferry]

It may be carrying an advert/logo painted on, so should probably be at least nearly new. Yes, it's the tax deductable stuff we are trying to understand. Had an email back from accountant but it doesn't specify which is actually the cheapest/most tax deductable option. Just wondered if there was a clear winner of the possible options in the circumstances described. E.g. - do you get a really nice car for 300 a month lease and get 250 'back' as tax deductible, or simple loan at 200 a month and 100 tax deductible but you own the car at the end etc.......we are a bit worried we will make the wrong choice and it turns out to be a costly schoolboy error 

[killiefaetheferry]

1 hour ago, Glasgowmancity said:

If Vat registered, lease, if not pcp/bank loan (depends if you are planning on keeping the car beyond 3/4 years)

pcp ?

[fishcumnock]

Drugs !

[euan2020]

ok - not looked into this in years since exam time 

I don't think anyone can answer until you  provide specific facts, and then can work around there - including your level of turnover which then indicates what tax rate you pay, and what level of relief you get. 

likely involving make, model of vehicle, reasonably accurate estimation of yearly mileage, year of vehicle purchase

given you are driving low amount of miles - simplified approach looks to be an option for self employed, but would imagine also includes the fuel, so max allowance is GBP 4,500 each year

https://www.gov.uk/simpler-income-tax-simplified-expenses/vehicles-

below gives you details of written down allowances if use that approach 

https://www.gov.uk/capital-allowances/business-cars 

Operating Lease you would obviously be able to claim back VAT (assuming you are VAT registered) and Nett lease fee could be offset against your potential profits (saving 20% to approx 50% depending on your profits and offset against top tier ) 

https://www.gov.uk/capital-allowances/business-cars 

I think if vehicle is below 130g COS then allowance is 18% per year ie on GBP20K Vehicle GBP 3600 per year

If over 130g Co2 then 8% allowance per year so GBP 1800 on GBP20K

Obviously be also able to push through business side of fuel, repairs blah blah blah 

I think if the vehicle is below 75g COS (or electric) - you can claim the full amount as tax deductible.

https://www.gov.uk/capital-allowances/first-year-allowances

Above is me just scratching for 10 mins  

There is also issue of cashflow - operating lease for a business might be more affordable than lump sum up front - plenty of businesses are profitable on paper, but don't collect their cash, so impacts cash flow - you might be better tieing up cash in working capital like Inventory or Tools etc  

[ShedTA]

Depends what car you want. You can get access to more expensive cars with a lease or PCP deal, but you will effectively pay twice as much interest as you would from a loan. Most lease deals seem to be at more than 6% Apr but you can get a loan for less than 3% so a loan is always a better deal. But as I say depends what level of car you need/want.

You can probably get a £25/30k car for £250 - 300 per month leased. But you never own it and you are just paying the depreciation effectively. A PCP deal is similar but you get the option to buy at the end. 

Looked at all this recently decided to go with the car loan option and just pay it back. Won't do many miles so far should retain fair value.

[they've_been_suckered]

8 hours ago, ShedTA said:

Depends what car you want. You can get access to more expensive cars with a lease or PCP deal, but you will effectively pay twice as much interest as you would from a loan. Most lease deals seem to be at more than 6% Apr but you can get a loan for less than 3% so a loan is always a better deal. But as I say depends what level of car you need/want.

You can probably get a £25/30k car for £250 - 300 per month leased. But you never own it and you are just paying the depreciation effectively. A PCP deal is similar but you get the option to buy at the end. 

Looked at all this recently decided to go with the car loan option and just pay it back. Won't do many miles so far should retain fair value.

I still don't get what the attraction with PCP is. The car manufacturers/dealerships have done an amazing job of convincing people it's a good idea. 

I took a low APR loan over 2 years to buy a 1yo ford. Will own it at the end and then effectively run it for a pittance until I feel like it's time to change. Compare that to a PCP deal on something like a BMW where I'd hand it back and start all over again with £250-300/month payment. 

[euan2020]

1 hour ago, they've_been_suckered said:

I still don't get what the attraction with PCP is. The car manufacturers/dealerships have done an amazing job of convincing people it's a good idea. 

I took a low APR loan over 2 years to buy a 1yo ford. Will own it at the end and then effectively run it for a pittance until I feel like it's time to change. Compare that to a PCP deal on something like a BMW where I'd hand it back and start all over again with £250-300/month payment. 

some folk (many who can't afford it) like living hand to mouth and want to have a "new" car frequently - although i can see their point of view about repair costs - no concept on saving - normally there is a statement made that most families only have 3 months worth of savings as an example

If they are earning some people are happy for that to be part of their budget - I guess same as Cell contracts - Due an upgrade, but its not free - you are paying for it (now where is my Nokia 3330 ;-) ) 

In like of Aberdeen a lot of younger employees were straight onto good contracts, so this is how they wanted to live - although i heard last year Audi had around 20 cars, where the keys got handed back - possible that was the PCP deals

Edited January 26, 2017 by euan2020

[ShedTA]

2 hours ago, they've_been_suckered said:

I still don't get what the attraction with PCP is. The car manufacturers/dealerships have done an amazing job of convincing people it's a good idea. 

I took a low APR loan over 2 years to buy a 1yo ford. Will own it at the end and then effectively run it for a pittance until I feel like it's time to change. Compare that to a PCP deal on something like a BMW where I'd hand it back and start all over again with £250-300/month payment. 

It works as a vehicle to be able to drive a car that you couldn't afford to buy. but its an expensive option - you never own much of it - even after say a 3 year period.

but some people are happy to allocate £300 per month of their budget to enable them to drive a nice car.

[ShedTA]

1 hour ago, euan2020 said:

some folk (many who can't afford it) like living hand to mouth and want to have a "new" car frequently - although i can see their point of view about repair costs - no concept on saving - normally there is a statement made that most families only have 3 months worth of savings as an example

If they are earning some people are happy for that to be part of their budget - I guess same as Cell contracts - Due an upgrade, but its not free - you are paying for it (now where is my Nokia 3330 ;-) ) 

In like of Aberdeen a lot of younger employees were straight onto good contracts, so this is how they wanted to live - although i heard last year Audi had around 20 cars, where the keys got handed back - possible that was the PCP deals

agreed. its a quick way to access a fairly expensive car. but its a dear option.

[they've_been_suckered]

2 hours ago, euan2020 said:

some folk (many who can't afford it) like living hand to mouth and want to have a "new" car frequently - although i can see their point of view about repair costs - no concept on saving - normally there is a statement made that most families only have 3 months worth of savings as an example

If they are earning some people are happy for that to be part of their budget - I guess same as Cell contracts - Due an upgrade, but its not free - you are paying for it (now where is my Nokia 3330 ;-) ) 

In like of Aberdeen a lot of younger employees were straight onto good contracts, so this is how they wanted to live - although i heard last year Audi had around 20 cars, where the keys got handed back - possible that was the PCP deals

Ironically my car was ex-PCP purchased second hand from the forecourt 

the market is flooded with them as people trade up/down early within a 2-3year deal.

[Glasgowmancity]

19 hours ago, killiefaetheferry said:

It may be carrying an advert/logo painted on, so should probably be at least nearly new. Yes, it's the tax deductable stuff we are trying to understand. Had an email back from accountant but it doesn't specify which is actually the cheapest/most tax deductable option. Just wondered if there was a clear winner of the possible options in the circumstances described. E.g. - do you get a really nice car for 300 a month lease and get 250 'back' as tax deductible, or simple loan at 200 a month and 100 tax deductible but you own the car at the end etc.......we are a bit worried we will make the wrong choice and it turns out to be a costly schoolboy error 

If you are VAT registered, the Vat can be "claimed back" against the VAT you take in.  If you go bank loan only the interest is allowable as an expense (+ a percentage for a capital allowance)

[PapofGlencoe]

3 hours ago, ShedTA said:

agreed. its a quick way to access a fairly expensive car. but its a dear option.

It's a great line that.  It's so illogical yet true.

The comparisons with phone contracts don't wash for me.  The benefit between Smartphone and a Nokia is plain.  The difference between a Car less than ten years old and a standardish new Car are minimal unless it's a hybrid and your environmentally conscious.  

 

[sbcmfc]

2 minutes ago, PapofGlencoe said:

It's a great line that.  It's so illogical yet true.

The comparisons with phone contracts don't wash for me.  The benefit between Smartphone and a Nokia is plain.  The difference between a Car less than ten years old and a standardish new Car are minimal unless it's a hybrid and your environmentally conscious.  

For some people it's a status symbol.

Other people spend a lot of time in their cars.

Some people just like nice new cars.

Others are more pragmatic and just need a car.

[deecie]

There's absolute bargains to be had in the leading game, provided that you're not too fussy.

Only downside I've found sofar is that I have to use the main dealer for servicing, and that means Arnold Clark. Other than that, all good.

[PapofGlencoe]

58 minutes ago, sbcmfc said:

For some people it's a status symbol.

Mental eh.  Folk must be upto their eyes on tick.  If I ever hear someone's bought a new car immediately think what a muppet.

[sbcmfc]

7 minutes ago, PapofGlencoe said:

Mental eh.  Folk must be upto their eyes on tick.  If I ever hear someone's bought a new car immediately think what a muppet.

It's all about priorities.

Ive only bought (on finance) a new car once, but I was in my early 20s, and it came with a years free insurance which was worth about £1000.

I was paying less per month had a brand new car (with 4 new tyres no need for MOT, servicing for 2 years...) and got the insurance included.

It made sense at the time, although working full time and living with your parents you maybe do have more money than sense.

For a lot of people it's about the monthly payment than the actual cost.