Convince me to make the change!

[PNWTaycan4S]

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.

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!

If you’ve got the cash, do the dash.

It’s the most amazing toy you’ll have fun in since, for me and I suspect you, a long time ago. Smooth, beautiful, ballistically fast, and drives better in many ways than my 964. A joy in these wacky times.

Take the plunge and don’t look back!

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[Gogs]

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

Mmm, that math is not correct. You don’t save 40k of tax on a 100k car!!

 

[JamieG]

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

Thanks for the link! Plenty of information in there. I'm moving houses to a new build in October, with the car being delivered in December. So, looks like I need to find a car charging friendly electricity supplier!
(Also asking the developer the quantity of electrical phases and fuse amps!)

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

My accountant is too! However, after checking this with my car dealer and my father's accountant (who is also getting a Taycan for the same reasons), who I'd consider much more knowledgeable, is of the same opinion that PCP is a form of hire purchase and the car is an asset of the company. Thus, eligible for this tax relief.

My car dealer has asked their business manager to provide me with the PCP legal wording to pass to my accountant to satisfy this subject.

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.

If you’ve got the cash, do the dash.

It’s the most amazing toy you’ll have fun in since, for me and I suspect you, a long time ago. Smooth, beautiful, ballistically fast, and drives better in many ways than my 964. A joy in these wacky times.

Take the plunge and don’t look back!

I'm fully intending to
Just trying to work out the extra cost between my Velar and Taycan. Deducing the multiple tax reliefs. Excluding the emotion of acquiring the better car!

 

[Persuader]

Mmm, that math is not correct. You don’t save 40k of tax on a 100k car!!

You do if you are a high earning self employed tax payer. Full 100% 1st year capital allowance reduces your profits by £100K. Therefore you are not paying 40% tax on this £100k which equates to £40K.
Obviously there will be a CGT addition when you sell the car but in year one if you choose to claim the full 100% 1st year allowance and your self employed earnings are high enough then you will save £40K tax. In fact you are also saving another 2% Class 4 National Insurance contributions on top of this.

 

[Neighs]

And VAT

 

[JamieG]

And VAT

I'm not VAT registered (yet), so no benefits there currently

 

[Gogs]

I did not realise that. Interesting. The vat thing.... can self employed claim vat on an electric vehicle that is used for personal use? I don’t think so. Also this self employed 40% are you 100% sure on this? I doubt the tax man would consider this an expense related to the self employed earnings? I’m no expert, just asking the question.

 

[Gogs]

I think you guys are misled. Gov website suggests mileage. https://www.gov.uk/capital-allowances/business-cars

 

[JamieG]

If I'm correct in thinking, Persuader is relating to the personal tax advantages.
Currently, I withdraw money from my company to my personal account to pay for my Velar. Doing so, I incur a 40% tax penalty on any money withdrawn. (This tax bracket varies depending on personal income)
With the Taycan, as the company is paying for the car, I do not incur this 40% penalty as I'm not withdrawing anything to my personal, but I still have all the benefits of driving a car. A very nice car!

This 40% is saved for me on car loan payments, road tax, car insurance. See my spreadsheet in OP.

 

[DragonRR]

You do if you are a high earning self employed tax payer. Full 100% 1st year capital allowance reduces your profits by £100K. Therefore you are not paying 40% tax on this £100k which equates to £40K.
Obviously there will be a CGT addition when you sell the car but in year one if you choose to claim the full 100% 1st year allowance and your self employed earnings are high enough then you will save £40K tax. In fact you are also saving another 2% Class 4 National Insurance contributions on top of this.

You are a higher rate tax payer.. cars is £100k.. You take money out of the company to buy it so roughly £140k to get £100k.. Cost to the company - £140k

However, maybe I'm completely wrong here but the company can claim... half of the vat back on the car AND offset the car against corp tax at least in year one then the cost to the company.. well it seems to be less than £80k. Therefore the company appears to be saving £60k plus on a £100k car. It still costs around the £80k figure but vs you buying it personally.. there is a big saving.

 

[Persuader]

I did not realise that. Interesting. The vat thing.... can self employed claim vat on an electric vehicle that is used for personal use? I don’t think so. Also this self employed 40% are you 100% sure on this? I doubt the tax man would consider this an expense related to the self employed earnings? I’m no expert, just asking the question.

The VAT cannot be claimed. I am totally sure that higher rate self employment tax payers can offset the cost as a business expense and potentially save 40% tax on the cost of the vehicle in year one. But yes to do it properly you would have to apportion the saving based on business use vs private use. But this apportionment is up to you as long as you have evidence to back up business mileage vs private.

 

[Persuader]

If I'm correct in thinking, Persuader is relating to the personal tax advantages.
Currently, I withdraw money from my company to my personal account to pay for my Velar. Doing so, I incur a 40% tax penalty on any money withdrawn. (This tax bracket varies depending on personal income)
With the Taycan, as the company is paying for the car, I do not incur this 40% penalty as I'm not withdrawing anything to my personal, but I still have all the benefits of driving a car. A very nice car!

This 40% is saved for me on car loan payments, road tax, car insurance. See my spreadsheet in OP.

No. I am not referring to this. Good points though.

 

[Persuader]

I think you guys are misled. Gov website suggests mileage. https://www.gov.uk/capital-allowances/business-cars

No. That is just an option you can utilise instead if you wish to do so.

 

[Persuader]

The point I am making is that the business tax savings of purchasing an electric car through a company also apply to non limited self employed. The huge top line savings to a higher rate SE taxpayer of 40% (+2%NI) is only similar to the saving you make buying via a Ltd company ie. 19% corporation tax plus the savings on dividend tax 7.5% or 32.5% on monies you would have drawn if you was buying it personally.

 

[Persuader]

You are a higher rate tax payer.. cars is £100k.. You take money out of the company to buy it so roughly £140k to get £100k.. Cost to the company - £140k

However, maybe I'm completely wrong here but the company can claim... half of the vat back on the car AND offset the car against corp tax at least in year one then the cost to the company.. well it seems to be less than £80k. Therefore the company appears to be saving £60k plus on a £100k car. It still costs around the £80k figure but vs you buying it personally.. there is a big saving.

No you can only claim half the vat if you are leasing "contract hire" and in this case you cannot claim capital allowances.

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