Car Finance For Powerful Directors
Discussion
Title of my other thread... It had the word "addict" in there 
Still can't get my head around if it's better to buy something outright or lease / pcp. Paying cash would be nice from low stress perspective. Something 2 years old (lower depreciation). But the other side of the argument is using the money elsewhere (S&S funds etc) also makes some logical sense
Promise this will be my last thread on car finance - i do have issues.
If i do buy something cash, i can almost certainly guarantee that within 6 months i'll be thinking... hmm, finance a sportscar... man maths...
Still can't get my head around if it's better to buy something outright or lease / pcp. Paying cash would be nice from low stress perspective. Something 2 years old (lower depreciation). But the other side of the argument is using the money elsewhere (S&S funds etc) also makes some logical sense
Promise this will be my last thread on car finance - i do have issues.
If i do buy something cash, i can almost certainly guarantee that within 6 months i'll be thinking... hmm, finance a sportscar... man maths...
Edited by trowelhead on Wednesday 30th January 15:49
trowelhead said:
What's the best way to finance a car for powerful director types?
Serious suggestion - consider buying an EV via your company. - Cash (but drawing a lump sum means a huge 32.5% additional dividend tax due)
- PCP
- Lease (If it appreciates, buy it. If it depreciates, lease it) - and then sticking the equivalent cash into investments?
If the car emits less than 50g CO2/km you can claim 100% write down in the first year. This effectively means the car is purchased from untaxed income (i.e. before even corporation tax is applied).
When the company sells the car, you will have to add back in the sale price to your turnover. But, due to the tax saving, it effectively means the government pay around half the deprecation.
You will though have to pay company car BIK. But from April next year, EV car tax goes down to 2%.
So, let's consider an example of a Porsche Taycan. Assuming it costs £100k. From next April, a higher rate tax payer would have to pay around £67 / month in BIK car tax. And your company buys the car for £100k from pre-tax income (which is equivalent to over £200k if you add together corporation tax and the higher rate dividend).
EddieSteadyGo said:
trowelhead said:
What's the best way to finance a car for powerful director types?
Serious suggestion - consider buying an EV via your company. - Cash (but drawing a lump sum means a huge 32.5% additional dividend tax due)
- PCP
- Lease (If it appreciates, buy it. If it depreciates, lease it) - and then sticking the equivalent cash into investments?
If the car emits less than 50g CO2/km you can claim 100% write down in the first year. This effectively means the car is purchased from untaxed income (i.e. before even corporation tax is applied).
When the company sells the car, you will have to add back in the sale price to your turnover. But, due to the tax saving, it effectively means the government pay around half the deprecation.
You will though have to pay company car BIK. But from April next year, EV car tax goes down to 2%.
So, let's consider an example of a Porsche Taycan. Assuming it costs £100k. From next April, a higher rate tax payer would have to pay around £67 / month in BIK car tax. And your company buys the car for £100k from pre-tax income (which is equivalent to over £200k if you add together corporation tax and the higher rate dividend).
Does it have to be full EV or hybrid?
Porsche Taycan... I like your thinking.
trowelhead said:
Fantastic idea. Would that also apply to a lease? (written off profits?)
Does it have to be full EV or hybrid?
Porsche Taycan... I like your thinking.
There are quite a few good hybrids which fall into the below 50g/km category. However, it is the change to the BIK for EVs which is coming into place next April next year which is the game changer. 2% BIK tax is brilliant as it makes the BIK costs almost negligible.Does it have to be full EV or hybrid?
Porsche Taycan... I like your thinking.
As to how much of a company lease cost would be an allowable expense for a low emissions car, I'm not sure, as I haven't ever done it that way.
Surely this is a simple maths question.
Find the car you like. Look at cost to lease. Compare with cost to PCP/finance. Then compare both those costs with the tax hit from withdrawing dividends. This last cost will be higher than first two but you will own the asset when you come to sell, so detract the value of said car in 2 years or however long you plan to keep it.
Post up the car details and some finance figures etc and we will work it out for you. Not very difficult this.
PS - I’ve never had finance. Always withdrawn dividends or saved up from my salary and bought outright. It’s always been cheapest option.
Find the car you like. Look at cost to lease. Compare with cost to PCP/finance. Then compare both those costs with the tax hit from withdrawing dividends. This last cost will be higher than first two but you will own the asset when you come to sell, so detract the value of said car in 2 years or however long you plan to keep it.
Post up the car details and some finance figures etc and we will work it out for you. Not very difficult this.
PS - I’ve never had finance. Always withdrawn dividends or saved up from my salary and bought outright. It’s always been cheapest option.
Shnozz said:
I agree with Eddie. Unless its an EV, it does not work buying within the business.
Just take some cash out, swallow the tax, buy something(s) not depreciating and leave the rest in there to accrue. You t
t 
Thanks mate Just take some cash out, swallow the tax, buy something(s) not depreciating and leave the rest in there to accrue. You t
t I think I will!
I’ll report back on the other thread when sorted
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