Leasing a car through business? Worth it?

[Deleted User]

Need a new car which will primarily be used for travelling for our small business.

At the moment, we use a personal car and pay ourselves 40p per mile as allowed.

Is leasing a decent option? Would it be worthwhile from a tax point of view?

For instance, if the business paid the lease every month, how much could I then pay myself for mileage?

Also, I'm guessing I couldnt get away with saying the car is only for business use, so it would be use for personal use too.

Does that then make it a company car and attract a benefit in kind?

Bottom line - is it worth it to it this way or better to just get it personally and get the 40p per mile?

[Deleted User]

OK. Is this right?

Found a mini for £188 a month. So if I get this as a company car for wife. She does the driving around to clients - prob about 4000 miles pa.

It'd cost her £390 a year in tax for this (according to hmrc site) since shes on lower tax rate anyway. Cost of lease would be £2256 per year which comes out of business profits so I wouldnt pay tax on. Is this 20% of £2256 = £451 ?

Right so far?

Of course, I could only charge 11p a mile not 40p to myself now so loose a bit there. Still seems pretty good to me.

Am I missing something?

paulwf

Does your financial plan allow that expense? The lease, tax, MOT, insurance, servicing, fuel and parking is likely to come in over £3K.

For that kind of mileage wouldn't you be better off buying a second hand car, two years lease equals a £4.5K car. I've seen it before, business owners want a shiny new car and the monthly payments look so low, but when you add it up a couple of years into the lease you're throwing away £2K a year.

The car will probably be your largest expense so that is the one you need to keep low, and as your business is also new it may be best not to get tied into any contracts.

fengirl_2

Are you a limited company or a sole trader?

[Deleted User]

paulwf wrote: »

Does your financial plan allow that expense? The lease, tax, MOT, insurance, servicing, fuel and parking is likely to come in over £3K.

For that kind of mileage wouldn't you be better off buying a second hand car, two years lease equals a £4.5K car. I've seen it before, business owners want a shiny new car and the monthly payments look so low, but when you add it up a couple of years into the lease you're throwing away £2K a year.

The car will probably be your largest expense so that is the one you need to keep low, and as your business is also new it may be best not to get tied into any contracts.

Yeh. Maybe. But working on the assumption we need a new car anyway to use. (current one is falling to bits).

If I got a loan to buy a car, I'd loose a few quid on depreciation anyway.

[Deleted User]

fengirl wrote: »

Are you a limited company or a sole trader?

partnership.

paulwf

[quote=[Deleted User];32709473]Yeh. Maybe. But working on the assumption we need a new car anyway to use. (current one is falling to bits).

If I got a loan to buy a car, I'd loose a few quid on depreciation anyway.[/QUOTE]

For a moment forget that you have a business. Would you lease a car at over £2K a year just for personal use? As you say you'd need to take out a loan for a car anyway that suggests you should keep costs to the minimum. Loaning/leasing as little as possible when starting up to protect cashflow would be my advice. Sorry to sound like a grumpy old bean counter

[Deleted User]

paulwf wrote: »

For a moment forget that you have a business. Would you lease a car at over £2K a year just for personal use? As you say you'd need to take out a loan for a car anyway that suggests you should keep costs to the minimum. Loaning/leasing as little as possible when starting up to protect cashflow would be my advice. Sorry to sound like a grumpy old bean counter

Hmmm. I see what you're saying.

Way I'm looking at is:-

1. We need a new car. The current one is not reliable, and is going to either cost us lost business (due to breakdown), or cost us a lot in maintenance (last mot cost over £800). Also, we advertise on the car and it doesnt look good on a scruffy looking car.

2. A new car would save on fuel costs (small diesel engine 72mpg as opposed to sporty 1.2 petrol), car tax (new one £20 pa, old one £130 or so).

3. How much would a loan for a new car cost? Possibly up to £200 pa. (Also, we cant get a loan at the moment but thats another issue !!!).

4. Depreciation on a car can be a lot. £2000 a year is probably about the amount for a newish car. (I bought a Hyundai Coupe from new once for £16000, and sold it for about £3000 3 years later - admitedly 90000 miles).

fguk

I personally lease my cars, and keep them away from my business overheads, so no claiming a proportion of the VAT etc etc, I just claim mileage. It makes tax simpler and accountancy fees less, might not be right for your situation, but works for us.

I like cars, and I like new cars, that is the way I was brought up (rightly or wrongly!). So I would have a new one if I could, and its just a case of working out the cheapest way of owning the car that you want.

I lease cars now because I dont want to have my cash tied up in a depreciating asset.

My personal recommendation is this lady

www.lingscars.com

I have had 3 cars off her now, every transaction faultless, and every one cheaper than dealer costs for equivilant (because most dont know how to lease a car to a private individual!).

The site might seem a bit mad (and its owner), but the results speak for themselves.

She was even on Dragons Den, and turned down a Dragons money. Think she might of just done it for publicity!

[Deleted User]

fguk wrote: »

I personally lease my cars, and keep them away from my business overheads, so no claiming a proportion of the VAT etc etc, I just claim mileage. It makes tax simpler and accountancy fees less, might not be right for your situation, but works for us.

I like cars, and I like new cars, that is the way I was brought up (rightly or wrongly!). So I would have a new one if I could, and its just a case of working out the cheapest way of owning the car that you want.

I lease cars now because I dont want to have my cash tied up in a depreciating asset.

My personal recommendation is this lady

www.lingscars.com

I have had 3 cars off her now, every transaction faultless, and every one cheaper than dealer costs for equivilant (because most dont know how to lease a car to a private individual!).

The site might seem a bit mad (and its owner), but the results speak for themselves.

She was even on Dragons Den, and turned down a Dragons money. Think she might of just done it for publicity!

Yeh. After the hassle I've had with the current car I'm thinking a nice one on lease would be better with no maintenance hassle.

Actually, what happens if the lease car breaks down and needs to go into the garage for, say, a week. I know it'd be under manufacturer warranty but would the lease company be obliged to provide a replacement for this time?

fguk

Well in the case of a brand new car, even though it was not supplied by the local dealer, as new cars have warranties, you would get a courtesy car from them.

I also have on my insurance, hire car cover, just in case. Its only a few quid a year, and it gives me peace of mind that I can get places under almost any circumstances.