Carpenter wants a van - best way to finance?

Blue_Monkey

My DH is a carpenter who after working for various firms wants to set up on his own. He is after a van and whilst we have joint savings, we need these for our house so need to figure out the best way of financing a van.

Is hire purchase a good idea? Where do we look for these?

Would a loan be better? Does he do this as a personal loan or does it need to be a soletrader/business loan?

He is set up as a sole trader but would it be better to be a limited company? I'm not sure either of us get the difference really.

Finally - if there is somewhere he can go to to learn about this stuff, it would be great, so if you can point me in the right direction I'd be eversograteful!

paddyrg

Almost certainly better off as sole trader, and buying a secondhand van for cash. No point having savings if you also have debt, the spread on the rates mean you're losing out, especially with fairly high rates typical of vehicle finance.

If you want to pay unnecessary interest, minimise it by borrowing from a peer lender like Zopa, ratesetter or funding circle. People seem prepared to lend at scarily low rates as the bank savings rates are poor.

paulsad

Just make sure you get a good warranty, I bought a high mileage but tidy (I thought) van and after 6 months the diesel fuel pump went ... cost £1000 to replace and fit.

lazer

Blue_Monkey wrote: »

My DH is a carpenter who after working for various firms wants to set up on his own. He is after a van and whilst we have joint savings, we need these for our house so need to figure out the best way of financing a van.

Is hire purchase a good idea? Where do we look for these?

Would a loan be better? Does he do this as a personal loan or does it need to be a soletrader/business loan?

He is set up as a sole trader but would it be better to be a limited company? I'm not sure either of us get the difference really.

Finally - if there is somewhere he can go to to learn about this stuff, it would be great, so if you can point me in the right direction I'd be eversograteful!

Depending on the cost if the van - it might be better to buy it personally and claim the mileage through the business.

Work out how much the van will cost and see if claiming 45p a mile (up to 10,000 miles,a nd 25p a mile thereafter) could work out more beneficial for the business than claiming the full cost of the van - including actual cost of fuel, PSV, insurance, repairs, parts etc

HMRC themeselves actually have some very useful webinars about self employment etc - so maybe start there to learn

Pennywise

I'd strongly suggest that you get an accountant on board sooner rather than later. Not just for the tax side of things, but they'll also help you understand the differences pros & cons between sole trader and limited company.

One particular area where a decent accountant could be worth their weight in gold would be if you are somewhere near being eligible for working tax credits (or new universal credit). As newly self employed, the profits will be low in the first year which could well trigger working tax credits. Buying a van as a sole trader could reduce those low profits even further (100% first year allowance) so he'd not just get 20% tax relief and 9% NI relief on the purchase costs, but he may also get working tax credits. Given the right circumstances, working tax credits may also be available for the second year based on the first year's income.

I've seen cases where the tax and NIC saving, together with the increased working tax credits have actually paid for the cost of the van. BUT, it does depend on the detail of each case and the rules and thresholds are getting tighter, so don't raise your hopes. Something to research though as you'd be annoyed if you later find out that you've missed an opportunity like that.

colino

ideally, as its going to be a workhorse, a leased van, leased to a limited company would be the ideal way to go. In general you buy things that you are going to keep and that appreciate, you lease/rent things that you are going to use up and wear out.

motorguy

colino wrote: »

ideally, as its going to be a workhorse, a leased van, leased to a limited company would be the ideal way to go. In general you buy things that you are going to keep and that appreciate, you lease/rent things that you are going to use up and wear out.

I know you're talking about the "ideal", but you're not going to get a lease deal for a new limited company.

Whilst i agree with your latter comment in principle, the last thing a new business needs is burdened down with a large debt, particularly when it hasnt made a penny yet.

motorguy

I would strongly recommend buying a cheap van for cash. You can easily get a decent transit for £1,000.

Heres two smaller vans i've had in the past just to show what can be bought for peanuts (transits dont make much more)

Sold this one for £500...



Sold this one for £700



Very respectable vans for not a fortune.

Jonboy_1984

A plumber mate swears by the Mazda E2200 type vans - usually cheap and reliable, and unlike transits never struggles to get onto peoples driveways in the local villages...

cavework

colino wrote: »

ideally, as its going to be a workhorse, a leased van, leased to a limited company would be the ideal way to go. In general you buy things that you are going to keep and that appreciate, you lease/rent things that you are going to use up and wear out.

But the lease will be for an agreed length of time with a lot of proviso's, I have seen people fall foul of this before
If this does not work out the full term of the lease will still need to be paid. Also if the van is bought , it is included as an asset to the business..
Do it as a business loan as the interest can be offset.
I really think you need to talk to an accountant .. TBH a good accountant is worth their weight in gold and can make the difference between success and failure for a new business.
Good luck

Blue_Monkey

Ok thank you all. We do have an accountant and DH has been self-employed for about 5 years but generally just working as normal yet invoicing his boss. He now wants to branch out on his own completely.

I earn £50kpa so not sure if he still qualifies for WTC if my income is at that level??