Car Leasing
09-03-2011, 06:00 PM
#1
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Car Leasing
My company has decided to stop supplying company cars and is giving me an allowance instead.
Has anyone had experience in leasing cars or is it best to buy a car on credit and pay the monthly premium?
I don't do loads of miles at present, but can change due to my job (Construction Manager).
Any advise, experience?
Thanks
Andy
Has anyone had experience in leasing cars or is it best to buy a car on credit and pay the monthly premium?
I don't do loads of miles at present, but can change due to my job (Construction Manager).
Any advise, experience?
Thanks
Andy
09-03-2011, 06:04 PM
#2
Problem being with lot of these plans is they restrict mileage, and there are return conditions etc....which can be costly. Depending on how the money stacks up I'd go with straight HP myself. You own the car, you have the benefit of owning it at the end and no stupid conditions.
Been in the finance game for 22 years, and you'll never just give the car back at the end of the term and walk away....doesn't happen.
Been in the finance game for 22 years, and you'll never just give the car back at the end of the term and walk away....doesn't happen.
09-03-2011, 06:18 PM
#3
PassionFord Post Whore!!
Your company is going against the flow then. Following the first successful prosecution for Corporate manslaughter, most employers are getting cash-takers back into company cars so they can control "fitness for purpose", maintenance and repairs, etc.
Because of this I'd suggest that you get something in writing that covers what happens if, a year down the line, the company decide to put you back in a company car and you still have 12-24 months finance to pay. That is a real risk for you and it needs to be addressed up front by way of a guarantee to meet any costs, or that you WON'T be taken out of the cash scheme for X months - and then take your finance to match that period.
You need to do the sums for yourself, taking account of the cost of tax disc, insurance, servicing, repairs, tyres, oil, etc. Offset these costs with the car allowance (net of tax and NI - ask if there is any salary sacrifice element), the Benefit In Kind you won't be paying any more, and any mileage payments you can expect to receive. ( If these are less than 40p/mile for 10,000 miles per annum, and 25p/mile for any above that, you can claim tax relief on the shortfall. If you are paid more, the surplus is taxable.)
Leasing doesn't work for an individual because you can't get the VAT back on the monthly rentals.
Any other method of funding is fine, but I'd lean towards a PCP deal like Ford Options. With these, you only pay the depreciation on the car, plus the interest on the money owed. The car makers often subsidise their finance for these, and offer deposit contributions etc.
Your anticipated mileage and return condition are important - they both have a direct bearing on the resale value used to calculate the depreciation so that is fair enough so long as they stick to BVRLA guidelines - and they are freely available ahead of handback time!
Because of this I'd suggest that you get something in writing that covers what happens if, a year down the line, the company decide to put you back in a company car and you still have 12-24 months finance to pay. That is a real risk for you and it needs to be addressed up front by way of a guarantee to meet any costs, or that you WON'T be taken out of the cash scheme for X months - and then take your finance to match that period.
You need to do the sums for yourself, taking account of the cost of tax disc, insurance, servicing, repairs, tyres, oil, etc. Offset these costs with the car allowance (net of tax and NI - ask if there is any salary sacrifice element), the Benefit In Kind you won't be paying any more, and any mileage payments you can expect to receive. ( If these are less than 40p/mile for 10,000 miles per annum, and 25p/mile for any above that, you can claim tax relief on the shortfall. If you are paid more, the surplus is taxable.)
Leasing doesn't work for an individual because you can't get the VAT back on the monthly rentals.
Any other method of funding is fine, but I'd lean towards a PCP deal like Ford Options. With these, you only pay the depreciation on the car, plus the interest on the money owed. The car makers often subsidise their finance for these, and offer deposit contributions etc.
Your anticipated mileage and return condition are important - they both have a direct bearing on the resale value used to calculate the depreciation so that is fair enough so long as they stick to BVRLA guidelines - and they are freely available ahead of handback time!
09-03-2011, 06:28 PM
#4
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it also depends on how long you want to be paying hp for, and also have you got a deposit to put down, the bigger the better, didn't vauxhall have a put 20-50% down with 3 years 0% finance, dont quote me 
it was something like that,
must be some good deals going somewhere
it was something like that,must be some good deals going somewhere
09-03-2011, 06:36 PM
#5
PassionFord Post Troll
you will only be able to claim:
40p for the 1st 10,000 business miles travelled and 25p per mile thereafter as 'allowable expenses' as you wil be using your own car for work.
But:
You will be incurring all the costs, servicing, depreciation etc etc.
If you are going to lease, I'd be looking at a deal that includes all the vehicle maintenance of the period of the lease. the monthly lease may be slightly more expensive, but it'll be worh it as you wont be paying for servicing etc.
IMHO having a company car is always a better option than a 'cash allowance' in your wages as an alternative and being told to get your own.
EDIT: to explain the above point:
company provides a car worth 'say' 20K and the car has a Co2 rating that put it in the 20% tax bracket, so the 'taxable benefit' to the employee is 20% of £20K = £4000.
The employee is a 20% taxpayer, so the tax payable on the benefit is £4000 x 20% = £800 per year in tax. So that employee has £20K worth of car on his/her drive for £800 per year!.
contrast that with the company giving the employee an extra £500 per month in their wages instead of a company car. the £500 is taxed via the pay packet at 20%, so again if the employee is a 20% taxpayer £500 x 20% = £100, so after tax, the employee has £400 net to go out and buy a car, tax it, insure it, run it for business etc etc...not quite a good deal is it!!!.....
Also need to take into account the security of your job. there have been horror stories of companies who have gone down this route, the employeers have signed themselves up to a 3 year 'options' type deal for a car and then the company has gone bust, leaving the ex employees on a personal contract lease they cant pay for........
If you had a company car and the company went under, you'd just have to give the car back....
just food for thought........
40p for the 1st 10,000 business miles travelled and 25p per mile thereafter as 'allowable expenses' as you wil be using your own car for work.
But:
You will be incurring all the costs, servicing, depreciation etc etc.
If you are going to lease, I'd be looking at a deal that includes all the vehicle maintenance of the period of the lease. the monthly lease may be slightly more expensive, but it'll be worh it as you wont be paying for servicing etc.
IMHO having a company car is always a better option than a 'cash allowance' in your wages as an alternative and being told to get your own.
EDIT: to explain the above point:
company provides a car worth 'say' 20K and the car has a Co2 rating that put it in the 20% tax bracket, so the 'taxable benefit' to the employee is 20% of £20K = £4000.
The employee is a 20% taxpayer, so the tax payable on the benefit is £4000 x 20% = £800 per year in tax. So that employee has £20K worth of car on his/her drive for £800 per year!.
contrast that with the company giving the employee an extra £500 per month in their wages instead of a company car. the £500 is taxed via the pay packet at 20%, so again if the employee is a 20% taxpayer £500 x 20% = £100, so after tax, the employee has £400 net to go out and buy a car, tax it, insure it, run it for business etc etc...not quite a good deal is it!!!.....
Also need to take into account the security of your job. there have been horror stories of companies who have gone down this route, the employeers have signed themselves up to a 3 year 'options' type deal for a car and then the company has gone bust, leaving the ex employees on a personal contract lease they cant pay for........
If you had a company car and the company went under, you'd just have to give the car back....
just food for thought........
Last edited by Magnum PI; 09-03-2011 at 06:52 PM.
09-03-2011, 08:57 PM
#6
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you will only be able to claim:
40p for the 1st 10,000 business miles travelled and 25p per mile thereafter as 'allowable expenses' as you wil be using your own car for work.
But:
You will be incurring all the costs, servicing, depreciation etc etc.
If you are going to lease, I'd be looking at a deal that includes all the vehicle maintenance of the period of the lease. the monthly lease may be slightly more expensive, but it'll be worh it as you wont be paying for servicing etc.
IMHO having a company car is always a better option than a 'cash allowance' in your wages as an alternative and being told to get your own.
EDIT: to explain the above point:
company provides a car worth 'say' 20K and the car has a Co2 rating that put it in the 20% tax bracket, so the 'taxable benefit' to the employee is 20% of £20K = £4000.
The employee is a 20% taxpayer, so the tax payable on the benefit is £4000 x 20% = £800 per year in tax. So that employee has £20K worth of car on his/her drive for £800 per year!.
contrast that with the company giving the employee an extra £500 per month in their wages instead of a company car. the £500 is taxed via the pay packet at 20%, so again if the employee is a 20% taxpayer £500 x 20% = £100, so after tax, the employee has £400 net to go out and buy a car, tax it, insure it, run it for business etc etc...not quite a good deal is it!!!.....
Also need to take into account the security of your job. there have been horror stories of companies who have gone down this route, the employeers have signed themselves up to a 3 year 'options' type deal for a car and then the company has gone bust, leaving the ex employees on a personal contract lease they cant pay for........
If you had a company car and the company went under, you'd just have to give the car back....
just food for thought........
40p for the 1st 10,000 business miles travelled and 25p per mile thereafter as 'allowable expenses' as you wil be using your own car for work.
But:
You will be incurring all the costs, servicing, depreciation etc etc.
If you are going to lease, I'd be looking at a deal that includes all the vehicle maintenance of the period of the lease. the monthly lease may be slightly more expensive, but it'll be worh it as you wont be paying for servicing etc.
IMHO having a company car is always a better option than a 'cash allowance' in your wages as an alternative and being told to get your own.
EDIT: to explain the above point:
company provides a car worth 'say' 20K and the car has a Co2 rating that put it in the 20% tax bracket, so the 'taxable benefit' to the employee is 20% of £20K = £4000.
The employee is a 20% taxpayer, so the tax payable on the benefit is £4000 x 20% = £800 per year in tax. So that employee has £20K worth of car on his/her drive for £800 per year!.
contrast that with the company giving the employee an extra £500 per month in their wages instead of a company car. the £500 is taxed via the pay packet at 20%, so again if the employee is a 20% taxpayer £500 x 20% = £100, so after tax, the employee has £400 net to go out and buy a car, tax it, insure it, run it for business etc etc...not quite a good deal is it!!!.....
Also need to take into account the security of your job. there have been horror stories of companies who have gone down this route, the employeers have signed themselves up to a 3 year 'options' type deal for a car and then the company has gone bust, leaving the ex employees on a personal contract lease they cant pay for........
If you had a company car and the company went under, you'd just have to give the car back....
just food for thought........
Very informative post thank you! I am also in this situation soon!
09-03-2011, 10:35 PM
#7
PassionFord Post Whore!!
company provides a car worth 'say' 20K and the car has a Co2 rating that put it in the 20% tax bracket, so the 'taxable benefit' to the employee is 20% of £20K = £4000.
The employee is a 20% taxpayer, so the tax payable on the benefit is £4000 x 20% = £800 per year in tax. So that employee has £20K worth of car on his/her drive for £800 per year!.
contrast that with the company giving the employee an extra £500 per month in their wages instead of a company car. the £500 is taxed via the pay packet at 20%, so again if the employee is a 20% taxpayer £500 x 20% = £100, so after tax, the employee has £400 net to go out and buy a car, tax it, insure it, run it for business etc etc...not quite a good deal is it!!!.....
The employee is a 20% taxpayer, so the tax payable on the benefit is £4000 x 20% = £800 per year in tax. So that employee has £20K worth of car on his/her drive for £800 per year!.
contrast that with the company giving the employee an extra £500 per month in their wages instead of a company car. the £500 is taxed via the pay packet at 20%, so again if the employee is a 20% taxpayer £500 x 20% = £100, so after tax, the employee has £400 net to go out and buy a car, tax it, insure it, run it for business etc etc...not quite a good deal is it!!!.....
... the £500 figure you have used is entirely notional - the employer could offer significantly more or significantly less. Without knowing the amount it is impossible to say if he is better in or out of the scheme.
And if the driver is a higher rate tax-payer the figures change significantly again. And the car benefit or the car allowance could determine if the driver trips over into the higher rate band.
Also, you haven't mentioned the NI contribution that will be payable on the car allowance (which is why salary sacrifice would be a benefit), or added in the mileage payments he is to receive, or the value of the BiK tax that he will save by giving up the company car (a little less than £67pm on your example above).
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