Best Way to Finance a £30-40k car?

Jamie_Carter

arcon5 wrote: »

In most circumstances leasing is a mugs game. Some try to jusify it based on tax benefits but that rarely justifys it, especially since a business will write down the remaining value - disposal income when sold anyway as a capital allowance.

Actually, with a limited company, contract leasing is often the best way to go. I have heard this from a number of accountants, but I'm not exactly sure what the advantages are.

Prothet_of_Doom

arcon5 wrote: »

In most circumstances leasing is a mugs game. .

Although there is a belief that so few people buy expensive cars with cash, that the Cash price is inflated by the manufacturer, so that the odd one or two people who've saved up, end up paying vastly too much. It also makes the lease price seem really good.

Oh look I'm getting a £50K car for £400 a month. That's less than the depreciation would be, what a bargain.

Maybe you are renting a car that cost them £25K to build, and when you give it back to them they'll get £20K in auction for it, or stick it in their used car section for £28K.

arcon5

Jamie_Carter wrote: »

Actually, with a limited company, contract leasing is often the best way to go. I have heard this from a number of accountants, but I'm not exactly sure what the advantages are.

Because the lease payments can be put through as an expense without dealin with it by way of a capital purchase and subject to statutory write down rules until it reaches the end of its useful life. Thus, short term CT benefits. But if you look at the figures based on HP and leasing then HP often wins since you are left with an asset which you can realise.

No different with renting a how really, its a mugs game, yet most of us (me included) can't afford to make that first step.

Jamie_Carter

arcon5 wrote: »

Because the lease payments can be put through as an expense without dealin with it by way of a capital purchase and subject to statutory write down rules until it reaches the end of its useful life. Thus, short term CT benefits. But if you look at the figures based on HP and leasing then HP often wins since you are left with an asset which you can realise.

No different with renting a how really, its a mugs game, yet most of us (me included) can't afford to make that first step.

And assets increase your corporation tax (if limited). So I suppose it depends on if your limited or not.

motorguy

Prothet_of_Doom wrote: »

Although there is a belief that so few people buy expensive cars with cash, that the Cash price is inflated by the manufacturer, so that the odd one or two people who've saved up, end up paying vastly too much. It also makes the lease price seem really good.

Oh look I'm getting a £50K car for £400 a month. That's less than the depreciation would be, what a bargain.

Maybe you are renting a car that cost them £25K to build, and when you give it back to them they'll get £20K in auction for it, or stick it in their used car section for £28K.

Its funny because most alleged "cash buyers" argue they're getting the better deal because they're buying cash, but there are many sound examples of where thats not the case.

However you've managed to turn that around by saying the only way that people *think* they're getting a good deal on a lease is because manufacturers inflate the list price to make it look that way?

So basically if cash buyer cant be 'right' by cash being the cheaper option - which it often isnt, then you're making sure that lease buyers are 'wrong' too because its really the manufacturers inflating the price to make it look good?

motorguy

Tiptop2000 wrote: »

Help. I have always been frugal and spent between £10-15k on a car.
However, we now need a bigger car so either a 4x4 or and estate and my wife and I would like to splash out a bit.

As such I am looking at the best way to finance a car, without ever having gone near finance in my life for a car.

I have a 1-series BMW that will sell for about £10k and I have savings of £15k which I could use. I wanted to know what other options are available and what people recommend. I have a small business with a steady amount of money coming in each month so am not worried about spending £300-500per month on the car if needed.

Any help or advice would be amazing. Feel a bit stupid to be asking.

My personal advice would be - dont.

You've a cash reserve there of £25K. If you were to take that, add it to say monthly payments of £400 a month for three years and then look at what you've left, you'll most likely have lost your £25K cash.

Typically a £50K 4x4 will be worth £25K at three years old, plus they tend to have monstrous running costs. I bought an x5 3.0d new in 07 - it took £500 a month of diesel and roughly £1500 a year on tyres (2 rears + 4 fronts @ £250 each).

If you must, i'd go for a near new X3 or Q5 for your £25K.

OR look at leasing one but put down the minimum deposit.

That way you'll either have your cash in the bank OR no monthly payments. To attempt to do both is going to take you into a league of car known for huge depreciation / huge running costs.

Strider590

motorguy wrote: »

Its funny because most alleged "cash buyers" argue they're getting the better deal because they're buying cash, but there are many sound examples of where thats not the case.

It's funny, cash used to be king...... Until they fine tuned the finance and lease hire packages and realised they could make more money AND get people hooked on buying new cars every 3 years.

Jamie_Carter

I'll give you an example of what I did previously. I contract leased a £28k vehicle on a 3 year full service contract. I paid £1100 deposit, and then paid £580 per month. After the three years I bought the vehicle of the lease company for £8k, and then sold it 2 years later for £6.5K. If I had bought it on finance I would have ended up paying considerably more. And would have had to pay for all servicing, repairs, and replacement of wear and tear items myself.

Strider590

Jamie_Carter wrote: »

I'll give you an example of what I did previously. I contract leased a £28k vehicle on a 3 year full service contract. I paid £1100 deposit, and then paid £580 per month. After the three years I bought the vehicle of the lease company for £8k, and then sold it 2 years later for £6.5K. If I had bought it on finance I would have ended up paying considerably more. And would have had to pay for all servicing, repairs, and replacement of wear and tear items myself.

See, you managed to save up the 8k, but what they rely on is people being so skint that the only option is to take another vehicle and keep paying the monthly payments. Most people live beyond their means, so with the odd exception, they're trapping people into these deals over and over again for decades.

Friend of mine has done exactly this, but there is no way he'll ever save enough for the final payment at the end.

Jamie_Carter

Strider590 wrote: »

See, you managed to save up the 8k, but what they rely on is people being so skint that the only option is to take another vehicle and keep paying the monthly payments. Most people live beyond their means, so with the odd exception, they're trapping people into these deals over and over again for decades.

Friend of mine has done exactly this, but there is no way he'll ever save enough for the final payment at the end.

It was a commercial vehicle, and still had plenty of useful life left in it. If it had been a car, then I would have probably given it back, and then just started another new lease on another new vehicle. This would still have been cheaper than buying a car on finance, and paying all my own running costs.