Business Lease Vs Outright purchase in the UK

schwar

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With Taycan, if you account for absolutely everything and you spec the car relatively high. Taking into account the personal usage, interest (or lease cost) etc. I have found that a 3 year HP with a big deposit is the cheapest way overall.
Surely with HP, you get the same benefits as an outright purchase (like 100% First Year Allowance) but the additional cost of borrowing the money? While the interest might not be huge, all things being equal, HP would still make it more expensive overall than buying outright?

I aimed to go in the HP direction, but my accountant said if the option was there to buy outright, why would you incur the borrowing cost, which could be £10k or more? Has anyone seen each scenario (buy, HP, lease) cost out anywhere? It might give future purchasers something useful to digest?





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///Marty

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Hey Marty,

I'm also director of a limited company I majority own and I was asking myself a lot of the same questions as you last December. I was fully down for the company to lease the car and take advantage of the BIK advantages, where I normally just lease privately.

While I'm not entirely happy with the idea of buying the car outright, this is what I've had recommended as the most TAX effective thing to do. On the advice of my accountant, we're going to take advantage of the 100% First Year Allowance (FYA). To ensure we could do this the car need to be purchased by the 31st March.

https://www.gov.uk/hmrc-internal-manuals/capital-allowances-manual/ca23153

Having said that, some places online say it is going to be extended beyond that point (although not on the government website as far as I can see).

My car is currently being built and should complete on the 20th, so I'm really excited, even if I'm still not entirely happy with paying out for the car in one big chunk. I have no idea how long it takes from being complete to ready at the dealership - but practically the nearer it gets to the 31st of March the better for me (although emotionally I wish I had it already).

Good luck with the decision and with your business too.

Josh

P.S. Judging by your profile, we seem to have the same taste in cars, I'm got an M4 Competition at the moment.

Hi Schwar,

Thanks for your detailed reply.

It seems I have some serious decision making to do, congrats on your purchase and I bet you are incredibly excited. Im already having sleepless nights about it and haven't even put a deposit down yet. :rolleyes:

We do indeed and I've had BMW's (and a sneaky Audi - couldn't resists the lure of the v8) since I was in my early 20's.

Currently on my 3rd M3 and my last one was an e46 M3CS which I miss dearly but I think will be OK when I finally get my bum in a Porsche. 😂
 
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///Marty

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Similar position but approached a bit different. Went down contract hire route for same reasons as above but not overly concerned about owning the end product due to depreciation etc. Used VW finance for ease and lower initial rental amounts. Would not "invest" a ton of cash into a car at this time (in my view/context).
The investment thing is an interesting point. My broker quote is also for business contract hire and although its still a big chunk of money, some of the points raised re: BIK going up and cars out of warranty certainly make this a more favourable option and keep the cash in the accounts. 👍
 

RG2020

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Hang on, if you purchase the car and use the FYA, don't you have to pay the VAT? So the £90K remains £90K? I'm confused, which is pretty easy in this case.
No you're right I wasn't totally clear there. The £73k is after CT deduction at 19%, which happens to be only 1% less than the VAT hence why there was confusion.

My bad!
 

robborover

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The investment thing is an interesting point. My broker quote is also for business contract hire and although its still a big chunk of money, some of the points raised re: BIK going up and cars out of warranty certainly make this a more favourable option and keep the cash in the accounts. 👍
Cash is king!
 

Taycanturbolondon

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Surely with HP, you get the same benefits as an outright purchase (like 100% First Year Allowance) but the additional cost of borrowing the money? While the interest might not be huge, all things being equal, HP would still make it more expensive overall than buying outright?

I aimed to go in the HP direction, but my accountant said if the option was there to buy outright, why would you incur the borrowing cost, which could be £10k or more? Has anyone seen each scenario (buy, HP, lease) cost out anywhere? It might give future purchasers something useful to digest?
of course using cash would be the cheapest option. but i think i can make more money out the 100k i borrowed than the 10k in interest over the entire term. just as a comparison to lease/pcp etc
 

grahamsimmonds

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Don't forget the other advantages of a company car. All servicing, tyres, insurance and public charging costs are reimbursable as expenses. The cost of a home charger is also reimbursable. The company can claim all of the VAT back on these items. Get a charger installed at work and the company can pay your energy costs without any tax liability as there is no BIK element.

Basically, until the 0% BIK runs out in March, driving around a Taycan Turbo S for 7 months will have cost me nothing personally. Year 2 will cost me approx. £600 (1%) and Year 3 £1200 (2%).
 

RG2020

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Don't forget the other advantages of a company car. All servicing, tyres, insurance and public charging costs are reimbursable as expenses. The cost of a home charger is also reimbursable. The company can claim all of the VAT back on these items. Get a charger installed at work and the company can pay your energy costs without any tax liability as there is no BIK element.

Basically, until the 0% BIK runs out in March, driving around a Taycan Turbo S for 7 months will have cost me nothing personally. Year 2 will cost me approx. £600 (1%) and Year 3 £1200 (2%).
Seems like we’re getting away with something doesn’t it!! I hope the benefits extend beyond 2023
 

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