IT contracting and fancy cars: what to do
Discussion
Pentoman said:
All,
I am looking at IT contracting and expect to have something lined up imminently. I am currently underpaid so the new role will be a lot better for me.
So, can you tell me why I should not do this?
You got a 24 month contract then? Nice one!I am looking at IT contracting and expect to have something lined up imminently. I am currently underpaid so the new role will be a lot better for me.
So, can you tell me why I should not do this?
Oh it's only 6 months you say? With a one week notice period (which they don't really need to pay). Of course the market is so good at the moment that contracts never get cancelled or not renewed for political/buget reasons, so I'm sure you'll be ok.
Oh hang on, you don't even have a contract yet?
How about get 6 months money under your belt (saved up in your company) then make your decision?
Tim330 said:
Not aware of your personal finances but most new contractors being sensible would build up a reserve fund with the extra earnings to cover being out of work for say 6 months before a buying a flash new motor.
Exactly.The OP does seem to have eyes bigger than his wallet and his priorities slightly skewed.
By all means reqard yourself with a flash car when you have achieved certauin income and profit targets - but to start contemplating such goodies even before you've started does smack of counting chickens before hatching syndrome.
Eric Mc said:
Tim330 said:
Not aware of your personal finances but most new contractors being sensible would build up a reserve fund with the extra earnings to cover being out of work for say 6 months before a buying a flash new motor.
Exactly.The OP does seem to have eyes bigger than his wallet and his priorities slightly skewed.
By all means reqard yourself with a flash car when you have achieved certauin income and profit targets - but to start contemplating such goodies even before you've started does smack of counting chickens before hatching syndrome.
OP - When you have enough to pay off a 24/36 month finance deal (plus possible running costs scenario) AND have 6-12 months survival money, then you go and sign up to a 730d, M3 or other. Otherwise, you bank it for the inevitable rainy day - You do know that contracting can be a bit flakey and that unless you have very marketable skills, pretty much every company would much rather get rid of you than any perm, don't you?
Thanks for the comments all.
I haven't wanted to post all of the details on the web of my work and financial situations, it didn't seem like a good idea. Therefore I was deliberately vague and I haven't given the true picture which I admit makes it difficult you to properly understand my position. Do drop me an email if you want more details and I can give a more accurate picture and I'd appreciate comments.
One thing I will remember is that I need to be very wary of cancelled contracts, noted. I do have the issues of buffer zone/safety reserve covered already; I've also got quite a few backout options available for the worst case scenario although it would be a bit unpleasant to stomach.
As to the question of tax - like the other poster said, I will avoid putting it through company. So no I don't believe I will be paying any more tax than anyone else with an m3 or similar.
I suppose my real question should have been: Should I be saving everything that I can possibly save, for reasons of a) an even better safety net and b) so I can enjoy the money later in life, or is it sensible to spend at least some of the income now in case I get hit by a bus. This question... I am thinking may be a question that only I can answer for my own situation, but I'm interested in other's comments.
I suppose one sensible idea to cover both bases would be to save up and invest in a car that depreciated much less than a new m3 would, such as an e46 CSL, e30 m3, a GT3 or something. But the downside is that something like that would need to be a bit of a garage queen. Whereas with a brand new m3, It's something I can really use and not worry about.
I haven't wanted to post all of the details on the web of my work and financial situations, it didn't seem like a good idea. Therefore I was deliberately vague and I haven't given the true picture which I admit makes it difficult you to properly understand my position. Do drop me an email if you want more details and I can give a more accurate picture and I'd appreciate comments.
One thing I will remember is that I need to be very wary of cancelled contracts, noted. I do have the issues of buffer zone/safety reserve covered already; I've also got quite a few backout options available for the worst case scenario although it would be a bit unpleasant to stomach.
As to the question of tax - like the other poster said, I will avoid putting it through company. So no I don't believe I will be paying any more tax than anyone else with an m3 or similar.
I suppose my real question should have been: Should I be saving everything that I can possibly save, for reasons of a) an even better safety net and b) so I can enjoy the money later in life, or is it sensible to spend at least some of the income now in case I get hit by a bus. This question... I am thinking may be a question that only I can answer for my own situation, but I'm interested in other's comments.
I suppose one sensible idea to cover both bases would be to save up and invest in a car that depreciated much less than a new m3 would, such as an e46 CSL, e30 m3, a GT3 or something. But the downside is that something like that would need to be a bit of a garage queen. Whereas with a brand new m3, It's something I can really use and not worry about.
smack said:
Buy a shed or something dull for driving to work. Turning up with something flasher than your boss (or the MD) will not help when it comes to your renewal.
LOL, this.I don't really give a toss about what others think. However, I am still very conscious of permie/employer attitudes towards contractors (irrespective if they're right or wrong). Thus rolling up in a spanking new mota isn't going to help your cause.
If you do go down this route then as smack has suggested, get a shed for the daily hack to work. I know a subbie that does this and turns up in a Ford Escort from about 1995. Yet the last time I bumped into him at the Waitrose car park he was in a spanking new Audi A4 convertible
Sly old devil but good on him.Oddly enough I was all into new cars when I was a permie but now I'm a contractor I'm not so bothered about them any more. I don't know why but maybe hating the tax man has something to do with it LOL. Thus I'm after something that will mean I pay him as little as possible i.e. an Aygo or similar
If you already have your safety net then as you say the decision on what you spend your money on is yours, sorry if I assumed the worst due to the underpaid comment.
It always surprises me how new (or even old hand) contractors go out and spend a load of money on a car as soon as their contract is signed. But then some people seem to like living from hand to mouth - I'm always concious of how easy it is for a contract to be cancelled or not renewed when you expect it to be, often for resons completely out of your or your immediate clients hands.
My view as a contractor is if you want a nice new flash car, save up and buy one. If you are on that much 'extra' over your permie take home it should not take too long. Or as others have said, if it's a lease, then the money should be in the bank to cover the tie-in. Only you know your finances and risks though.
It always surprises me how new (or even old hand) contractors go out and spend a load of money on a car as soon as their contract is signed. But then some people seem to like living from hand to mouth - I'm always concious of how easy it is for a contract to be cancelled or not renewed when you expect it to be, often for resons completely out of your or your immediate clients hands.
My view as a contractor is if you want a nice new flash car, save up and buy one. If you are on that much 'extra' over your permie take home it should not take too long. Or as others have said, if it's a lease, then the money should be in the bank to cover the tie-in. Only you know your finances and risks though.
Company car tax is not the only issue, if you buy it through the company you may be able to claim back some of the the VAT (depending on nature of your company and the use of the vehicle) and also you may be able to reduce the companies profit meaning you pay less corporation tax. If you have a good accountant it would be worth talking to them about the pros and cons in your situation.
I doubt that ANY aspect of the OP's company will enable the VAT to be reclaimed on any CAR purchased. Theb restrictions on reclaiming VAT on motor cars are so tight, very, very few businesses qualify.
HOWEVER, if he purchases a vehicle which is classed as a Commercial Vehicle, then VAT reclaiming becaomes a distinct possibility and, what's more, the taxable Benefit in Kind situation and Capital Allowances improve dramatically.
So, as has been suggested, a long and detailed discussion with your accountant should be on the cards.
HOWEVER, if he purchases a vehicle which is classed as a Commercial Vehicle, then VAT reclaiming becaomes a distinct possibility and, what's more, the taxable Benefit in Kind situation and Capital Allowances improve dramatically.
So, as has been suggested, a long and detailed discussion with your accountant should be on the cards.
smack said:
Buy a shed or something dull for driving to work. Turning up with something flasher than your boss (or the MD) will not help when it comes to your renewal.
Disagree. I used to contract and now recruit contractors. If one turns up in a shed I'd think they weren't very good. Decent motor normally means half decent at what they do (very rough of course, certainly not recruiting anyone based on their car!)Gassing Station | Jobs & Employment Matters | Top of Page | What's New | My Stuff