to lease or to buy

[williaa68]

Can I please consult the PH brains trust to help me decide whether to lease or buy a new EV?

I am trying to do the maths on leasing or buying a new kia nero EV via my company, in which i currently have some surplus capital. Cost for a nero 3 EV is approx £33.5k+vat. Lease for 3 years at 8k per year is approx £350 a month plus vat, so approx 13,500 over three years including fees.

If i buy outright i get 100% capital allowances on the 33.5k.

If i lease I can deduct the cost of the lease and 50% of the VAT. BIK is negligible.

So after three years if I buy i have paid, net of capital allowances (33.5k@24% assuming purchase is next tax year) £32k. Say the car is worth 60% of new at three years, the residual value is £24k, so cost of ownership (not allowing for time value of money on purchase price) is approx £8k.

Leasing net cost is £13.5*76% + the non-deductible vat of £1350 so approx £11,500.

So buying looks like the better deal?

Thoughts very much welcome and appreciated.

thanks in advance.

[raspy]

It depends what you can do with the capital you are planning to buy the car with.

If you can deploy it so that you get superior returns compared to any tax savings from buying outright, then just lease the car. That's what I have done.

[Discombobulate]

I would buy unless you have a good use / investment for the cash. At current inflation (albeit set to fall rapidly) you would need (depending on your tax status) a return of around 15% pa gross just to stand still. Add this to your own calculations and it seems cash is king.

[williaa68]

thank very much both

[OutInTheShed]

The man maths above have one big unknown in them and that's the car's value after 3 years.

While residual vales of EVs are high today, who knows what they will be in 3 years or any other point in the future?
Bearing in mind you will be selling, not buying.
The extra cost of leasing maybe gives you certainty, and that may be fair value?

OTOH, buying outright gives you greater flexibility, you can sell at any time or keep it longer.

[Fastlane]

I have just been through this and chose PCP as it is treated as an operating lease in your accounts, keeps the capital in the business should I need it, and gives me the option to pay it off and/or sell it on if required.

Just a thought.

[Mabbs9]

I don't have the extra consideration of buying through a business but for the first time I've used a lease deal for a car. I just don't want to be left with something of little value if there's a step change in tech.

[Europa Jon]

Buy outright - residuals will still be good in 3 years' time. Your depreciation will be far less than if you rented it.