Car Leasing v Buying

missmel

Hoping someone can help settle my worries.

I work for a small company and our auditor is really against leasing a car, but he won't give specific reasons. I've scoured the HMRC website and used the search facility on here plus tried the web, but I can't see why it is such a bad deal.

I'm I right in my facts:
You can claim the VAT on the lease for all the maintenance and 1/2 the car payment
You can claim 20% Capital Allowances per year on the lease payment less any personal use
You need to deduct 15% of the lease payment if the car is over 160g/km on co2 emissions.

If you buy a car no VAT can be claimed
20% capital allowances on cars over 160g/km
10% on cars above 160g/km

Is there are other reason to avoid leasing?

any help much appreciated!

Bluewednesday

If you are dealing with a lease hire you can't claim capital allowances.

If you are dealing with a lease purchase you can't claim the lease payments - just the interest

If you are a limited company having a car in the business will cause a car benefit which may not be beneficial

missmel

thanks for that.

I assume your last point is the BIK that director will pay?

I think its lease hire that is being looked at in the company name, everything is just enquiry at the mo as I think the director whats to wait until spring to change vehicle.

Bluewednesday

Yes director will pay BIK and company will pay Class 1a on the benefit

If it's lease hire you won't get capital allowances but can claim the payments against tax

PGM

I'm surprised more companies aren't buying second hand cars. If you get something a few years old for half the price, you can't lose?!

deanshepherd

Not much of a perq getting a 2nd hand car from your employer and being taxed the same as if they gave you a new one.

PGM

deanshepherd wrote: »

Not much of a perq getting a 2nd hand car from your employer and being taxed the same as if they gave you a new one.

Very true.

I was thinking more from the company point of view in the current economic climate. I got a Focus last week, 3 years old low miles for a third the new price!

Monsoon

Somewhat off topic, given that a new car does a huge proportion of its depreciation as soon as you drive it off the forecourt, I don't understand why people buy new cars. If I was spending that kind of money, I'd get something 18 months old.

wildgoose1uk

Off topic.... but it is nearly Christmas!

Most people I know do not buy new cars. I try to buy cars undert three years old (although in the case of the 330 convertible it may have been 5 years!!). That way I pay a fraction of the list price and pay very little extras for all the extra the orginal owner had fitted (like satnav, tv, electric mirrors, leather interior etc).

Having said that a few people we know buy new cars, one friend recently replaced his approaching 10 year old car which he had had from new with another new one of the same (although updated!) model. In that case I see the point. Another periodically gets a new car just because he can.

I have never owned a brand new car..... but I did once buy a brand new motorbike. It is a great feeling to be the first owner .... at least it is until the year clicks over onto the next new reg plate and then the fun goes out of it somewhat.

Besides, what would I get for what I paid for my cars? For what we paid for our 2.5 year old 4x4 with 35k on the clock we could probably have bought a Fiesta..... maybe stretched to a Focus entry level. For what we paid for my Beemer with 36k on the clock we could have bought a Focus or maybe a Mondeo with entry level trim.

PGM

Still off topic;

As well as the budget stretching a lot further, I find owning an older car less stressful. With something new I end up in an OCD panic about parking the thing....

Paul C

"Somewhat off topic, given that a new car does a huge proportion of its depreciation as soon as you drive it off the forecourt, I don't understand why people buy new cars. If I was spending that kind of money, I'd get something 18 months old. "

I agree but I also think it depends what deal you can haggle at the time. I think too many people pay near list price which is over the odds. I got lucky last time and managed to haggle £2.5k off a new car as 2 local dealerships really disliked each other.

deanshepherd

I bought a new car on HP when I was 19 and landed my very first trainee accountant job. The car cost more than my annual salary and it was probably the worst financial decision I have ever made - a very valuable lesson learned though!

Bluewednesday

Maybe I am tight but I can't bear that depreciation!

We tend to buy cars about 3 years old and then run them into the ground. Last purchase was a VW Passat which had 80k on the clock, ex company car so at least had been serviced properly and mostly motorway miles. That lasted us 8 years and still managed to get 1200 when we sold it to purchase another 3 year old car with 82k on the clock.

I have to say that we buy such high mileage vehicles as our annual mileage is about 10k a year so by the time we sell it's normal mileage!!!

I think you have to pick what cars you buy using this strategy, the Passat was great, hardly any trouble (only ever had normal wear and tear and a couple of suspension bits) and was a much better drive in the snow than the current car!!

What was scary was that even 8 years later the highest cost for us every month was the depreciation.!!

Sorry for moving this off topic missmel but hope you had already got enough information to make a decision.

PGM

High miles bargains have always been good, but I do like low miles cars and with current economy many of them are bargains also.

I was surprised to get the focus last week, £5k, 23K miles and just 3 years old!