Car on personal finance question

honglong1976

Hi, I am new to this forum. Thats for reading!

I know someone who has financed a car at £30,000 for a friend. So the car is in their name, but there friend has the car and drives it and pays the money each month into their account by direct debit.

That same friend is also wanting the same person to finance another car for them (£30,000 again) and again, pay the direct debits. The strange thing is, they can actually afford to buy both cars cash. That person also has a business.

Is there any reason, why someone would do this if they have the money to pay for the cars outright? or is there a financial reason for doing this?

I appreciate any replies!

Thanks

bengalknights

ive only ever heard of people trying to launder money or hiding money from taxman use this method

honglong1976

The money laundering option makes sense, I never thought of that.

What would be the benefit of doing this to hide the money from the tax man? Would the personal savings still be taxable?

Sorry to ask, but I am no accountant.

I did ask why and I was told the money is to be used to finance investments and that money makes money, but if the money is spent in one go, thats money that can't be used for invesments.

Makes sense? or boloney?

bengalknights

if you have undeclared cash and want to spend it without getting noticed by taxman then generally a "loan route" is a easy way as all you have to say is the property is not yours/is borrowed and the onus is on taxman to prove otherwise

Emmzi

clean money seldom makes money at a rate greater than the interest rate on a 30k car loan

your friend is a lot more trusting than me, i wouldn't touch it

bouncydog1

Your friend is being rather foolish I'm afraid. If the person who is providing the funds is doing this to evade tax, then when he gets found out your friend is likely going to have to prove they did not know what was going on. Similarly if the person is using your friends account to launder the money your friend is likely to be implicated and might face a prison sentence depending under which part of the law he is prosecuted.

Even if it is all above board in my view your friend is still taking a risk because if the first person suddenly loses the access to the cash he has, your friend is going to be stuck with the loan. In addition if your friend wants to take a loan or other credit for any reason his salary to loan ratio is already going to be eroded by the £30k.

He should tell the individual that he needs to borrow money for himself and this is being hampered by the exisiting loan arrangement and ask the person to arrange for funds to pay it off IMO.

bengalknights

as both Emmzi and Bouncyd!!! states these kind of things should be avoided at all costs expecially as SOCA are clamping on money launderers and HMRC on tax avoiders