Leasing

[chriscls]

No idea, waiting to hear which dealer will supply mine. I would be surprised if it's a local dealer, and if it is then I suspect it will be a coinkydink.

What you get Bobby?

 

[Bobby Dazzler]

What you get Bobby?

Audi A6 Avant 3.0 BiTDi [313] Quattro S-line Black Edition

Or some other similarly ridiculous name

 

[Dieselman]

Full maintenance (including tyres) seemed to be fixed price (£20 per month) on the cars I enquired about, none were Masers but similar engine and value.

£20 per month. That seems very cheap.

 

[Bobby Dazzler]

£20 per month. That seems very cheap.

I thought so too, but over two years I'm not sure how much will actually need to be spent, probably one minor service and one set of tyres, but a good deal nonetheless.

 

[k187]

Can anyone shed some light where leasing is concerned?
I am employed as an employee for my own business.
Could I lease a car? The rates seem really good to me?
The car would only do low miles, maybe 5k a year if that, and mainly personal use with maybe a small amount of commuting?
Is this possible?

I have my own vat registered business. I know I can claim vat and such like(I have an accountant).
I pay corporation tax on my business, the wage I draw is negligible.
I'm just after the basic pointers.

I don't understand leasing. Never been in a situation where it was viable before.
My own car is personal, my wife has a car. I'm saving cash to buy a Bentley gtc but I'm thinking about leasing a RR evoque for the Mrs(as a business car)?

You should probably start your own thread as this diverts from the main topic of the OP. That said I can reiterate my original answer in more detail which may also help the OP.

I assume from the above you're in a very similar situation as me, EXCEPT:

- You draw minimum salary from your own business remaining in the basic tax rate. (Which I do)
- You take dividends upto about 32k less what you take in your wages so get them tax free. i.e. wages + dividedends = 32k (Which i don't, i take wages - dividends = 150k)

IF you do a business lease it is essentially seen as a 'pay rise'. Let's say you have a 40k car, the government calculates a BIK rate (benefit in kind), based on the emissions the car has. This is usually around 10 to 15%. So Car value X BIK rate is the effective 'pay rise'.

You then multiply that BIK rate by your tax band and have to pay this level of additional tax.

Essentially the more the car is worth, and the higher the tax band you are currently in the more BIK you pay. A good explanation is here:

Your complete guide to BIK Tax | Parkers

In your situation your 'effective salary' will go up, which means the dividend you can get tax free at the end of the year will also go down by the same amount.

If you're a basic tax payer, it's probably not worth leasing. You're not paying tax on the dividend anyway, and any saving will just be offset by the lower dividend you can get tax free.

If you're a higher rate tax payer then the equation is different. Because you would have to take car value/0.6 from the company to buy the car outright - or basically car value + 40% tax.

Other considerations are IF the car is being used for business then your business can claim back 50% of the VAT (half of it).

There's a calculation you need to do to figure out if your total loss (considering you actually own the company) is less with a business lease vs you taking the money out at 40% tax and buying the car.

If the company doesn't belong to you, then it's a different calculation In that case you need to figure out if you personally feel the car has the same worth as a BIK% pay rise to you.

Check out the site i posted above. Put in the figures for the car you want over the period you want to lease (let's say 3 years). Figure out the depreciation over that same period. Now compare (Business lease TOTAL PAID + BIK tax paid) vs (Take all the money out including TAX to pay from your company to buy outright). Because with a lease over 3 years you're only funding about 45% of the car it works out ALOT cheaper than buying outright on higher tax bands.

You can do more complex calculations using PCP too, where you'd draw a higher salary to part fund the car outside of the business.

And above all do speak to your acountant too.

 

[chriscls]

I understand the BIK tax is only paid of business/personal use,but not for business only use?

 

[k187]

I understand the BIK tax is only paid of business/personal use,but not for business only use?

True but it's very very hard to prove its 100% business use. Only cars or vans equipped for business use like say a van with drainage equipment bolted to it, or driving school cars go unquestioned.

In reality if the car is parked at your home, and/or only you use it and don't have a second car, it's pretty obvious it's a benefit in kind. Even if you were a salesman who drove around its a benefit in kind because you could technically still do your job on a bus.

The whole bik stuff came about exactly for the scenario where self employed people would subsidise the car through the company, or companies would use it as a cheap pay rise.

This is precisely why pool cars are not usually allowed to be parked at your home for extended periods.

 

[bpsorrel]

Yea I am giving this some serious though. Do the cars come from a local dealership though or within the lender's own network?

My car came from a dealer in Reading that the lease company have an arrangement with. The deal I got was extraordinary as the car was specced up and sitting in the showroom. The dealer wanted to move it on so gave the lease company a very good deal on it. MB Finance who administered the lease were surprised at how low it was and initially thought it was a business deal and added VAT to the rate!

As far as I know, most lease companies (who are middle men really) have favoured dealers and finance companies they use.

Edit: while I remember, when I took the SLK in for it's first service at MB MK, the service manager told me that MB have loosened their return policy slightly to allow a little more "realistic wear and tear". We'll see in June.....

Edit 2: Found out something interesting while chatting to a trade colleague of mine the other day. (yes, I still work even though I'm in Russia!) - My 2013 SLK has depreciated around £12K in it's first year.... and I've spent only £3K leasing it..

Guess who's ordering the next lease car for june '15?

 

[k187]

My 2013 SLK has depreciated around £12K in it's first year.... and I've spent only £3K leasing it..

Guess who's ordering the next lease car for june '15?

Hmm that doesn't sound right to me. In these cases someone somewhere has to take the hit, it's not possible to magic back that 9k. So something is too good to be true here.

Either you've done too many miles, that estimate is wrong, or you have no guaranteed value at the end of the lease and when you sell the car to finance the remainder you'll have to fund the difference. I would double check all your paperwork if I were you.

Just think about it, why would any company give you a lease like that and lose that much money on the car? Try to answer that question before anything else.

 

[bpsorrel]

Nope, nothing wrong here and I resent the implication that I'm too dumb to know what I signed for.

No future value, it's a straight lease (long term rental if you prefer). Payments £250 a month for 24 months. It's on a 10,000 mile a year term, but I've only done 3K so far.

MB will have a nice piece of low mileage stock to sell at a premium in June 15.

Maybe you don't understand the motor trade that well. Moving metal is what it's about with new cars. Future service and parts profit. Market share etc. Leasing at good rates enables companies like MB to have good quality future stock to sell used and to keep the factories churning out cars.

Try not to sound too clever - it sometimes backfires on you.

 

[k187]

Nope, nothing wrong here and I resent the implication that I'm too dumb to know what I signed for.

No future value, it's a straight lease (long term rental if you prefer). Payments £250 a month for 24 months. It's on a 10,000 mile a year term, but I've only done 3K so far.

MB will have a nice piece of low mileage stock to sell at a premium in June 15.

Maybe you don't understand the motor trade that well. Moving metal is what it's about with new cars. Future service and parts profit. Market share etc. Leasing at good rates enables companies like MB to have good quality future stock to sell used and to keep the factories churning out cars.

Try not to sound too clever - it sometimes backfires on you.

Sorry it still doesn't equate to me. Yes everything you say is true about parts, service etc, but the bottom line still does matter and a lot more than 9k. Yes they have a low mileage car at the end but that's relative. The mileage limit is factored into your lease amount. If the end value of the car is MUCH less than what you paid to lease it then some basic maths is wrong. Something does not add up, which means some information is missing or wrong.

You are saying that that difference is because they can make it back in service and parts etc, and that's where I disagree - It's not that they won't try, it's that it's too much to make back. In any case businesses don't work that way. Manufacture, sales, parts, service are separated out, if not as separate companies, then as separate financial entities with separate budgets and bottom lines. It's impossible to ever know if they made the money back, which makes it impossible to make the decision to do that level of discount again. Also how do they know all the parts and service will come back to them?

I'm not accusing you of being dumb, not am I trying to sound clever, and neither do I purport to know the motor trade inside out, or even any better than you. What I do do though is run 3 of my own businesses and have spoken to my accountant and a number of car companies, lease companies etc and done my research before I leased my own car. That's not me blowing my own trumpet, that's me explaining where my info comes from.

In any case I'm not interested in arguing or even who is right - it doesn't matter that much to me. This is clearly one of those things where you have your opinion (based on what you think is solid information and experience) and I have mine (based on what I think is solid information and experience). Let's just leave it there.

 

[Bobby Dazzler]

The depreciation will be estimated relative to the new price of the vehicle, and the leasing will have been calculated based upon the price the dealer was prepared to sell it for, and their estimate on what it will be worth at the end. The impact of accepting a lower price for the car (when new) and the risk that the future value will be less than estimated, will lie with the supplying dealer and the finance company.

Things like volume discounts, manufacturer incentives, and sales bonuses are like layers in a cake, and create the leeway to engineer the better deals. In short, the good deals come when an organisation wants shot of stock or output, and the best deals come when there are several organisations who have a similar driver, as the potential for reduced leased cost comes from each layer of the cake, ie manufacturer offers a big incentive and dealer is pushing hard to maximise sales bonus.

 

[bpsorrel]

Exactly right.

 

[stevehg]

As per Bobby Dazzler's post, bpsorrel has used list price for depreciation amount. No discount off list has been factored in with the comparison. In addition, they don't seem to have paid any initial payment, which is very unusual. If they have, this would need to be taken into account too.

 

[k187]

Sure, that can explain the 9k difference. There's the missing information right there.

 

[bpsorrel]

Sure, that can explain the 9k difference. There's the missing information right there.

As I mentioned previously, the car was in stock and the dealer needed to shift it for their month end target. The deal was at least £100 a month cheaper than their usual rate.

 

[chrisbin]

Interesting thread!

We've done a few of these agreements and I'm currently shopping around for our next one! I can also quote for lease/contract hire if anyone wants!

Most things seem to have been covered pretty well along the way! One point I'd make is do your sums on mileage as the excess mileage charge is sometimes more competitive than moving up to the next pricing level.

Our current E class coupe was sourced when there were some great incentives around to move stock. Since it is coming to the end of its 2 year contract I enquired about extending for another 12months and the monthly price for that extra 12months jumped by 50%!!!

So we wont be doing that!!!

 

[bpsorrel]

Agreed! If I wanted to extend my SLK (I don't, but if I did..) for another year, it goes up £90 per month! LOL!

 

[bpsorrel]

Just to go back a bit to my original point about the depreciation (which made me feel good at the time lol!) I realise the calculation was made based on list price (plus options), but the idea was still that I will have paid by the end of the term, considerably less than the depreciation, even after discount, had I bought the car, from new, with cash. I rarely keep a car more than 2 years, so for me it made sense and still does.

The next lease car will be a more "everyday" car (GLA) and I'll buy the "toy" instead. A reversal of the current situation

 

[chriscls]

Regarding this BIK tax, approx. 2.5k on a Ghibli. Can this be claimed from a VAT claim on the lease, therefore rendering this saving largely non beneficial?