Reply to: New car on PCP or lease - tax question

[SandyD]

Nor am I so rather than just make stuff up I trawled Autotrader for 5 minutes.

Toyota Prius - new = c. £32,000
Toyota Prius - 3 years old = c. £18,000
Toyota Prius - 8 years old = c. £10,000

So make sure you buy one more than 5 years old to get the best depreciation.

I am not going for a Prius, new Prius starts from 24K I think, depends on the specifications, but yes, the prices above can be right, HOWEVER, you didn't list the mileage as well, the warranty is either 5 year or first 50K miles only.. I have seen cars which are 3 year old and have an extremely high mileage, most Prius that has under 20K mileage would have been priced around 20K... that's a depreciation of 4K only, plus you do not get 2 year interest free PCP, and no old car scrap scheme worth 2.5K

[SandyD]

Are you sure about that? I find that very hard to believe. Aren't they a bit new to be making 5 year predictions? I've always fancied an electric car as it would suit my other half's travelling but I'm concerned the batteries need replacing in a 3 to 5 year window and a couple of K a pop. A hybrid might not depreciate for 5 years but if the batteries turn out to need replacing the price will drop off a cliff edge. Also as hybrids become more mainstream that future planning could change considerably.

I'm not 100% convinced.

Yes the price drops after the 5 year warranty, or first 50K miles whichever comes first, but I didn't want a car which is almost 5 years, so opted to research hybrids around 1 to 1.5 year old, and I found the price for the model I wanted doesn't depreciate considerably, easy to do your research on this, and no wonder uber/taxi drivers all want to have a hybrid, and run a bazillion mile on it.

I would have loved to have an electric, but they are all too small for my needs, (the Tesla is a bit too expensive for me lol) I thought I saw a large Nissan Leaf, perhaps that's OK, mind you I didn't see it on their website, an electric would be the best of course from tax pov.
Renault last year announced the new Kadgar which is a plug in hybrid, I was hoping I can get that, was waiting for it this year, but unfortunately they haven't released it yet.

[Maslins]

I've always fancied an electric car as it would suit my other half's travelling but I'm concerned the batteries need replacing in a 3 to 5 year window and a couple of K a pop.

This basically applies to me too. Some of the car manufacturers are getting round this by you buying the car, but leasing the battery. Sort of solves the problem, but then puts you back in a situation where you're committing to a pay monthly thing.

Also as the tech is in its fairly early days, get the feeling that in 3-5 years new electric cars will be significantly better than ones available now. Whereas for petrol/diesel, the technology is fairly well established so not such dramatic improvements.

[Lance]

Are you sure about that? I find that very hard to believe. Aren't they a bit new to be making 5 year predictions? I've always fancied an electric car as it would suit my other half's travelling but I'm concerned the batteries need replacing in a 3 to 5 year window and a couple of K a pop. A hybrid might not depreciate for 5 years but if the batteries turn out to need replacing the price will drop off a cliff edge. Also as hybrids become more mainstream that future planning could change considerably.

I'm not 100% convinced.

Nor am I so rather than just make stuff up I trawled Autotrader for 5 minutes.

Toyota Prius - new = c. £32,000
Toyota Prius - 3 years old = c. £18,000
Toyota Prius - 8 years old = c. £10,000

So make sure you buy one more than 5 years old to get the best depreciation.

[northernladuk]

Anyone else thinking the outcome of this thread will be 'It's more tax efficient to do it personally' as always?

[northernladuk]

Agree.... I did want a few years old car which is hybrid, and low mileage, but as I said hybrid cars at that age, and reasonable mileage wont depreciate considerably in the first 5 years, not like other cars e.g. Merc or BMW, where the depreciation is extremely high the moment you take it out of the show room..

Are you sure about that? I find that very hard to believe. Aren't they a bit new to be making 5 year predictions? I've always fancied an electric car as it would suit my other half's travelling but I'm concerned the batteries need replacing in a 3 to 5 year window and a couple of K a pop. A hybrid might not depreciate for 5 years but if the batteries turn out to need replacing the price will drop off a cliff edge. Also as hybrids become more mainstream that future planning could change considerably.

I'm not 100% convinced.

[SandyD]

I don't think people are saying instead of getting a company leased car you should buy a brand new car personally. They're saying you should buy a 5-10 year old car personally. Plenty like that which will still be running fine for years, and only cost a few £k to buy, plus you still get to claim 45p/mile for business miles even though the depreciation is now trivial.

Company car is fine if you definitely want a shiny new car regardless...but don't be tricked into thinking it's the most financially efficient option just because your company gets some tax relief.

I wrote a blog post with my views on company cars here. It's a couple of years old, but the bulk of the logic still holds true.

Agree.... I did want a few years old car which is hybrid, and low mileage, but as I said hybrid cars at that age, and reasonable mileage wont depreciate considerably in the first 5 years, not like other cars e.g. Merc or BMW, where the depreciation is extremely high the moment you take it out of the show room.

My old car is a petrol guzler, costs me a a fortune in petrol, high road tax (£450 a year) every service means something needs to be replaced, that's at least another £500 to £1000 a year... so costing me almost double what its worth every year.

[WTFH]

, but with a new car, there is a 2 year interest free PCP ...

...
- Have 2 year interest free PCP (by buying a new instead of used)
...

Look forward to your replies, I don't mind anyone pointing out my ignorance and issues with the above logic, if there is anything I missed please go a head and point it out.

PCP = Personal Contract Purchase

If it is being bought by a company, then you won't get a PCP on it, you're looking at Business Contract Hire (or similar)

[northernladuk]

Company car is fine if you definitely want a shiny new car regardless...but don't be tricked into thinking it's the most financially efficient option just because your company gets some tax relief.

I think this comes close to the best answer. If the OP wants a new car but can't afford it personal they get it via the company. If they want be most efficient method then buy it personally.

This comment at the end of their post is exactly what I mean...

Again... yes if you have the cash price for a car sitting in your personal account, this would be the best way, but if you don't, then buying a company car may not be a bad option compared to taking the full car price as divs.

OP just needs to work out what the real aim of this exercise and then pick on of the two options above. I'm not sure picking at all the numbers when in reality they don't have the cash reserves is really achieving anything, particularly when numbers threads often go so badly wrong on here.

To be fair as well looking at the OP's last post they've made the decision already and it's pointless trying to convince them otherwise.

[Maslins]

I don't think people are saying instead of getting a company leased car you should buy a brand new car personally. They're saying you should buy a 5-10 year old car personally. Plenty like that which will still be running fine for years, and only cost a few £k to buy, plus you still get to claim 45p/mile for business miles even though the depreciation is now trivial.

Company car is fine if you definitely want a shiny new car regardless...but don't be tricked into thinking it's the most financially efficient option just because your company gets some tax relief.

I wrote a blog post with my views on company cars here. It's a couple of years old, but the bulk of the logic still holds true.

[SandyD]

Yes I agree and everyone knows if you have the ability to fund a car purchase from your personal funds, then this is the most tax efficient way.

But assuming you have no other income but from your Co, then this personal fund would have been taken out of your Co, and already paid the SA tax on it So if buying a new car for £30K, and you took this money out of the co, then this purchase already cost you £12K at 40% or £6K at 20%

If the car is purchased buy your company, you'd be paying extra BIK(depending on the CO2 emission) something like 3K a year for BIK (as long as the PCP is running, lets assume its for 2 years)
Your Co will also pay NI around 1K

On the other hand, your Co will claim less tax due to depreciation of 4 to 5K a year ( lets say for 2 years)

The reason I am going for a new car is that from my research into Hybrid cars, with long warranty e.g. 5 years like in the case of Toyota, the difference in the price of a new and nearly new (e.g. 1 year old) is very minimal , something like 2 to 3K difference, yes this was a surprise for me, but with a new car, there is a 2 year interest free PCP - that gives me a chance to save for the end sum payable aat the end of the 2 year interest free.

In addition, for a used car, the exchange for my old banger (which I drove to death for the last 11 years) would be a few hundreds if not less as the engine in my present car is not running well, but if I purchase a new car using the car scrap scheme I can get anything between 2.5K and even more (depending on the car you are going for)

So Cons:
-Paying BIK
(you could do capital contribution to reduce your BIK)

Pros:
- Have 2 year interest free PCP (by buying a new instead of used)
- Get at least 2.5K for my old car
- Co claims up to 5k depreciation for 2 years (offset the cost of the vehicle against Corporation Tax )
- All car expenses e.g insurance, road tax, service etc etc is covered by company
(apart from Fuel, so its not worth Co paying for the fuel as that would incur extra BIK)


Again... yes if you have the cash price for a car sitting in your personal account, this would be the best way, but if you don't, then buying a company car may not be a bad option compared to taking the full car price as divs.

Look forward to your replies, I don't mind anyone pointing out my ignorance and issues with the above logic, if there is anything I missed please go a head and point it out.

[vwdan]

Agreed, but please don’t buy a knackered old Jag like the poster above as this will turn you into

1. That bloke in the pub who bangs on about how his Jag cost less than a new Ford Fiesta
2. That bloke waiting for the AA in the freezing rain by the side of the M6, smug in the knowledge that all the sensible people in new Fiestas who are zooming past him are subsidising his AA membership

Old, not knackered £1000 and that bad boy took me up and down the country, drama free!

I'll concede Point 1

[Ebenezer]

Agreed, but please don’t buy a knackered old Jag like the poster above as this will turn you into

1. That bloke in the pub who bangs on about how his Jag cost less than a new Ford Fiesta
2. That bloke waiting for the AA in the freezing rain by the side of the M6, smug in the knowledge that all the sensible people in new Fiestas who are zooming past him are subsidising his AA membership

[fatJock]

Not always, for example I am getting a new car, I do need it as my old car is on its last leg, I do not have the funds from my personal account to pay for a the car, so my options are to: either withdraw cash from company and buy it personally, then pay very high tax on the withdrawn money. Or get it as a company car, yes I need to pay BIK tax however, my company will actually be at least 4K better off for claiming annual depreciation on the car.
Best to speak to your accountants and see best option for you, of course if you have the funds sitting in your personal account, use that, but if you don't then look at various options depending on your circumstances and of course the type of car, the taxes are different depending on the type of car... electric is best, but hybrid is good too for tax issues.

I see others have chipped in with some of the flaws on your comments but I hope it works out for you 🙂

Let us know how you get on driving that car off the forecourt and losing cash straight off (Car depreciation | AA).

Buy a used car and run it to the death, rinse and repeat or lease.

[vwdan]

It is less risk of hassle, and perhaps will result in reduced stress.
New cars go wrong as well. New cars don't reduce stress in and of themselves.

It is a personal choice. I did it once and will never do it again. It was nice to have a new car, but when I handed it back all I could think was that for the same money I'd own a nicer, older car outright.
I then bought an older, nicer car, for the same money as a 2 year lease. I've had it 2yrs and 3 months now (so it's paid for itself) and intend to get another 2 years from it.

New cars do - but if it's on PCP or a lease it's not your problem. Especially the latter because you're not even worrying about "warranties". To me, that massively reduces any stress because I just don't care or worry about. Worst case, if it breaks down, we call the RAC and somebody fixes it and we have a courtesy car or a rental in the meantime.

Like I say, I can see both sides - and I mean that quite literally. When I'm up and down the country, away from home, I like the fact my Mrs (with the little one) has a nice lease car where any drama is somebody elses problem and issues are unlikely.

For me, I'm more content with an older car and saving cash. I'm actually due a new motor and I'll probably just buy something silly for a few grand like another V6 Jag that I sold last year, but I'm happy looking after the fixing it bits myself and I'll cope if it breaks down somewhere.