Convince me to make the change!

[JamieG]

Hi guys, I'm trying to convince myself that there's too many incentives that will far outweigh the cons of larger monthly payments than my existing car deal and the depreciation of the Taycan over a 3 year PCP deal and what decision to take at the end. Please help convince me!

Here is a finance spreadsheet I've been working on.
Here is my PCP offer.
Here is my car spec.

In the UK, we have a 0% company car tax incentive on electric vehicles.
Essentially meaning, if your company buys a £90,000 electric vehicle, then your company tax cost for that tax year will be reduced by £90,000. If you do not use all this amount up, it can also be passed back from the previous tax year and you'll receive a rebate.
(In my mind this reads; choose to pay company tax and receive nothing in return, or buy an electric car and pay zero company tax - free car!)

I currently have a Range Rover Velar on a personal hire purchase agreement.
To pay this and the insurance and road tax, I have to withdraw a dividend from my company each month. My personal tax bracket is 32.5%.

Looking at what I can afford, I can comfortably make the £901 monthly payment for the Taycan. I could also save the additional £1400 per month to make the final balloon payment. Though it would make sense to put this amount (£51k) into paying off my house mortgage!

After reviewing my spreadsheet, my questions would be:

1. Roughly what is the extra monthly/year cost of changing from the Velar to the Taycan?
2. What will I have lost in estimated depreciation value on the Taycan at the end of the agreement? Saw something here about MSRP, but don't quite understand that.
3. Would I be wise to roll my Taycan equity into a new Porsche car, or make the final balloon payment? Considering the developments of battery technology.
4. Each branch I've spoken to have advised me to add the performance battery pack option as it will help with the residual value. But I can't see the cost of this option (£4600) nearly repaying itself in residual value after 3 years. Am I correct in thinking this?
5. Is there any other monetary benefits I'm not thinking about in making this switch? Other than receiving the cash lump sum of my Velar back to my personal account without being taxed?

In my mind:

Pros:

• Better car (looks/drive).
• No more refuelling/saving earth.
• Cash lump sum paid back to my personal account.
• If my spreadsheet is correct, the cost of the car will be roughly be reduced by £25-30k through tax benefits.
• I'd expect combustion cars to depreciate faster in value than EV's once they become to be proven.

Cons:

• Larger monthly payments (if intending to pay balloon amount).
• Losing boot space for my labrador dog (only other car in the household is a Vauxhall Astra!)
• Not purchasing the equity of the car like I currently am with the Velar.
• In 17 more months, I'd have paid off my Velar and own it outright with no further monthly car payments. Whereas I'm tying myself into a new 3 year commitment with the Taycan and no guarantee of owning it outright by the end.

Other Notes:

• In the 19 months of having the Velar I have only done 8,000 miles. I work from home and don't really have to commute to work meetings. 4-6 of these months I would have normally done more miles if COVID wasn't a thing.
• I could make use of the government bounce back loan.

Thanks ever so much in advance!

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[mikeyyn]

Hi guys, I'm trying to convince myself that there's too many incentives that will far outweigh the cons of larger monthly payments than my existing car deal and the depreciation of the Taycan over a 3 year PCP deal and what decision to take at the end. Please help convince me!

Here is a finance spreadsheet I've been working on.
Here is my PCP offer.
Here is my car spec.

In the UK, we have a 0% company car tax incentive on electric vehicles.
Essentially meaning, if your company buys a £90,000 electric vehicle, then your company tax cost for that tax year will be reduced by £90,000. If you do not use all this amount up, it can also be passed back from the previous tax year and you'll receive a rebate.
(In my mind this reads; choose to pay company tax and receive nothing in return, or buy an electric car and pay zero company tax - free car!)

I currently have a Range Rover Velar on a personal hire purchase agreement.
To pay this and the insurance and road tax, I have to withdraw a dividend from my company each month. My personal tax bracket is 32.5%.

Looking at what I can afford, I can comfortably make the £901 monthly payment for the Taycan. I could also save the additional £1400 per month to make the final balloon payment. Though it would make sense to put this amount (£51k) into paying off my house mortgage!

After reviewing my spreadsheet, my questions would be:

1. Roughly what is the extra monthly/year cost of changing from the Velar to the Taycan?
2. What will I have lost in estimated depreciation value on the Taycan at the end of the agreement? Saw something here about MSRP, but don't quite understand that.
3. Would I be wise to roll my Taycan equity into a new Porsche car, or make the final balloon payment? Considering the developments of battery technology.
4. Each branch I've spoken to have advised me to add the performance battery pack option as it will help with the residual value. But I can't see the cost of this option (£4600) nearly repaying itself in residual value after 3 years. Am I correct in thinking this?
5. Is there any other monetary benefits I'm not thinking about in making this switch? Other than receiving the cash lump sum of my Velar back to my personal account without being taxed?

In my mind:

Pros:

• Better car (looks/drive).
• No more refuelling/saving earth.
• Cash lump sum paid back to my personal account.
• If my spreadsheet is correct, the cost of the car will be roughly be reduced by £25-30k through tax benefits.
• I'd expect combustion cars to depreciate faster in value than EV's once they become to be proven.

Cons:

• Larger monthly payments (if intending to pay balloon amount).
• Losing boot space for my labrador dog (only other car in the household is a Vauxhall Astra!)
• Not purchasing the equity of the car like I currently am with the Velar.
• In 17 more months, I'd have paid off my Velar and own it outright with no further monthly car payments. Whereas I'm tying myself into a new 3 year commitment with the Taycan.

Other Notes:

• In the 19 months of having the Velar I have only done 8,000 miles. I work from home and don't really have to commute to work meetings. 4-6 of these months I would have normally done more miles if COVID wasn't a thing.
• I could make use of the government bounce back loan.

Thanks ever so much in advance!

Hi, I am looking to do something similar.
Won't you also be eligible for the 0% Benefit in Kind on company cars too. Or have you factored that in already? We need a UK tax accountant to tell us

 

[JamieG]

Hi, I am looking to do something similar.
Won't you also be eligible for the 0% Benefit in Kind on company cars too. Or have you factored that in already? We need a UK tax accountant to tell us

Funny you should say that, I had the same conversation with my accountant today. His response:

"Firstly, for the current tax year (2020/21) fully electric cars have a 0% benefit in kind tax rate which increases to 1% in 2021/22 and 2% in 2022/23.

The company may be able to claim a 100% First Year Allowance deduction in the capital allowance computation reducing the taxable profit by the value of the car. To qualify for this the company would need to own the electric car either outright or through a hire purchase or similar contract.

Looking at https://ev-database.uk/car/1237/Porsche-Taycan-4S it would appear that currently there is no benefit though as detailed above it will increase in 2022 and 2023."

However, I'm not too clued up on BIK's and what this would save me.

We then had the discussion about whether a PCP qualifies you as 'owning the vehicle', which my Porsche dealer seems to believe I would. His response:

"I am not a ‘Tax Advisor’ so need to be careful with information/recommendations that I give you but I am not sure that your Accountant is correct with this. A lot of the Taycans we have sold so far have been sold to companies on a PCP and they have claimed their Capital Allowances. A PCP is a Hire Purchase agreement not a Lease Purchase agreement and I believe it is on balance sheet funding as opposed to Business Contract Hire and certain other Leases. The car is registered to the business not the finance company as it would be on the BCH.

Rules change all the time, I don’t know the nature of your business or tax arrangements and, as I said, I’m not legally allowed to give tax advice. I can only say that a PCP is definitely Hire Purchase and we have had quite a few Accountants buy Taycans on a PCP so worth checking it."

Also, as a side note, the 0% company car tax incentive also applies to charging equipment. So if you buy the ~£1000 Anderson Charging Point, this will also come off your company tax bill!

 

[Gogs]

Porsche PCP is expensive. The rate is high. I looked into this quite extensively and decided against Porsche pcp.

 

[Gogs]

Any yes if you have your own ltd co, get the company to buy it! Makes perfect sense from a tax perspective.

 

[JamieG]

Porsche PCP is expensive. The rate is high. I looked into this quite extensively and decided against Porsche pcp.

I'm currently paying 5.9% APR and 5.73% interest rate per annum for my Velar. Porsche is 6.4% in comparison. Did you do a hire purchase instead? Or bought outright?

 

[Gogs]

I'm currently paying 5.9% APR and 5.73% interest rate per annum for my Velar. Porsche is 6.4% in comparison. Did you do a hire purchase instead? Or bought outright?

I did a HP at 2.1% Llyods. Happy to send you details. PM me.

 

[Persuader]

"Essentially meaning, if your company buys a £90,000 electric vehicle, then your company tax cost for that tax year will be reduced by £90,000"

This is totally incorrect. It will reduce by £90000 the amount that you calculate your % tax on. Not reduce your company tax by £90000.

Definitely get the Taycan you won't regret it.

 

[JamieG]

"Essentially meaning, if your company buys a £90,000 electric vehicle, then your company tax cost for that tax year will be reduced by £90,000"

This is totally incorrect. It will reduce by £90000 the amount that you calculate your % tax on. Not reduce your company tax by £90000.

Definitely get the Taycan you won't regret it.

Do you mean it will reduce depending on my company taxable profits?

My defining line from my accountant was:

"You are correct regarding the capital allowances HMRC allow a 100% deduction for the cost of the electric car in the capital allowances calculation.

Yes the taxable profits will be reduced by the value of the car but please note if you were to dispose of the car in the future the disposal value would be treated as a balancing allowance in the capital allowance pool as you have had full relief in year 1 i.e. added back to the taxable profit."

 

[Gogs]

It’s 100% tax deductible. Meaning it’s treated as an expense in the business. Same when you sell it, treated as profit. Make sense?

 

[JamieG]

Yep that’s perfectly clear. As a £90k expense, it will effectively make my company tax owed as zero (factoring in my profits). Maybe my wording in the OP wasn’t technically accurate, but the premise is accurate

 

[DragonRR]

Cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means with electric cars, you can deduct the full cost from your pre-tax profits. On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year.

https://www.edfenergy.com/electric-cars/tax-road-company

 

[louv]

tl;dr

The Taycan is not logical.
The Taycan is emotional.

You are overthinking this.
IMHO.

Buy it if you can afford to have this much joy in your life.

 

[Kilsoj]

Funny you should say that, I had the same conversation with my accountant today. His response:

"Firstly, for the current tax year (2020/21) fully electric cars have a 0% benefit in kind tax rate which increases to 1% in 2021/22 and 2% in 2022/23.

The company may be able to claim a 100% First Year Allowance deduction in the capital allowance computation reducing the taxable profit by the value of the car. To qualify for this the company would need to own the electric car either outright or through a hire purchase or similar contract.

Looking at https://ev-database.uk/car/1237/Porsche-Taycan-4S it would appear that currently there is no benefit though as detailed above it will increase in 2022 and 2023."

However, I'm not too clued up on BIK's and what this would save me.

We then had the discussion about whether a PCP qualifies you as 'owning the vehicle', which my Porsche dealer seems to believe I would. His response:

"I am not a ‘Tax Advisor’ so need to be careful with information/recommendations that I give you but I am not sure that your Accountant is correct with this. A lot of the Taycans we have sold so far have been sold to companies on a PCP and they have claimed their Capital Allowances. A PCP is a Hire Purchase agreement not a Lease Purchase agreement and I believe it is on balance sheet funding as opposed to Business Contract Hire and certain other Leases. The car is registered to the business not the finance company as it would be on the BCH.

Rules change all the time, I don’t know the nature of your business or tax arrangements and, as I said, I’m not legally allowed to give tax advice. I can only say that a PCP is definitely Hire Purchase and we have had quite a few Accountants buy Taycans on a PCP so worth checking it."

Also, as a side note, the 0% company car tax incentive also applies to charging equipment. So if you buy the ~£1000 Anderson Charging Point, this will also come off your company tax bill!

My accountant was adamant that pcp was leasing not hp. I got them a blank copy of the Porsche contract for pcp and after looking at it agreed it was a hp

 

[Persuader]

Cars with CO2 emissions of less than 50g/km are also eligible for 100% first year capital allowances. This means with electric cars, you can deduct the full cost from your pre-tax profits. On a car costing around £40,000 this could amount to a tax relief of £7,600 in the first year.

https://www.edfenergy.com/electric-cars/tax-road-company

Or even £16000 if you are self employed and a higher(40%) taxpayer. Or even £40000 on a £100000 car!

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