Company car.....

[batmanreturns]

I'm going to need to need to purchase a company car for an employee in the coming months. As this is a first time experience i wanted to pick some brains, mainly around if there are any benefits of buying a second hand car rather than new ie is there less tax involved if i buy a car thats X years old as i understand the benefit in kind/tax is based on the list price of the car when new rather than the price i pay for it? Help!?
thanks

[Eric Mc]

Car Benefits in Kind are based on the list price of the car when new - so buying a second hand car does not offer any massive savings from a taxable Benefit in Kind point of view.

[Kermit power]

I'd always assumed all company cars were leased, if only to avoid having a rapidly depreciating asset on the books?

[zedx19]

Kermit power said:

I'd always assumed all company cars were leased, if only to avoid having a rapidly depreciating asset on the books?

At my previous job, my employer would buy 6 month old cars from a car supermarket, then sell the cars after 3-4 years. Employee would be given a budget and allowed to pick what they wanted. This way the employee gets their pick from hundreds of nearly new cars and the employer isn't tied in to any lease and gets a car that's already lost a chunk of it's depreciation.

[Eric Mc]

There are a number of tax implications surrounding company cars.

Employee Benefits in Kind

These are largely unaffected by whether the car is new, second hand, purchased or leased

Capital Allowances

These are only available on cars that are purchased or bought using a lending type finance.
If a car is being leased, there will be no Capital Allowances although relief will be obtained in other areas.

[RicksAlfas]

Kermit power said:

I'd always assumed all company cars were leased, if only to avoid having a rapidly depreciating asset on the books?

I've never found leasing costs to work as well as buying the car (using HP or cash if the company is flush). HP over three or four years, depreciate it at 25% a year, sell at four years old and you show a good profit in the books.

e.g. we had a VW Passat bought as an ex-demo for £18,000 (list was £23,000). Ran it for just over four years and 120,000 miles. Got £6,000 back for it. There is no way we could have leased that car for that.

Leasing works well in big companies where employees might be scattered all over the country and everything can be funnelled through one centralised department. I believe there are some VAT advantages to leasing too, but Eric will know more about that than I do. It also works for companies who might not be able to get good HP rates.

Back to the OP - buy an ex-demo car and it saves you (the company) some cash. It doesn't help the driver who will pay BIK on the original list price.

[strain]

We buy used to save on the depreciation, give the lads a choice generally unless were in a rush.

Last car we bought was nearly 3 years old with 25k on the clock, but it was the car he wanted

[fastbox]

Happy to help as I am in that field...i shall DM you

[CaptainSlow]

RicksAlfas said:

e.g. we had a VW Passat bought as an ex-demo for £18,000 (list was £23,000). Ran it for just over four years and 120,000 miles. Got £6,000 back for it. There is no way we could have leased that car for that.

You wouldn't be far off when removing interest costs from lease rates and you haven;t included them in your example...plus you don't take the RV risk with leasing.

[RM]

RicksAlfas said:

e.g. we had a VW Passat bought as an ex-demo for £18,000 (list was £23,000). Ran it for just over four years and 120,000 miles. Got £6,000 back for it. There is no way we could have leased that car for that.

So cost you £12K. It's your mileage that ups the lease cost. If you were under 8K miles a year, then there are some bizarrely cheap leases around, especially if you aren't too choosy on the car.

For a Passat, then https://www.contracthireandleasing.com/independent... shows £175+VAT a month on 9+47, so assuming you can claim half the VAT (with personal use, if purely business then it's cheaper again) gives a total cost over 4 years of under £11K, without tying up any capital. The cheapest Passat I found for 30K per year was £14K, but I didn't look very hard. Found a Kia Sportage for £12.3K for 120K miles over 4 years.

[Sheepshanks]

RM said:

The cheapest Passat I found for 30K per year was £14K, but I didn't look very hard.

That's a lot lower than I would have expected for 30K/yr.


My brother started a new job and was sent to the garage to collect his car. They pointed him towards a 3yr old one and he thought the salesman was pulling his leg. His relationship with the company never recovered and he left after 6 months.

Edited by Sheepshanks on Wednesday 6th December 17:42

[colin_p]

As an employee, I would be rather miffed at paying company car tax and getting a second hand car.

[KevinCamaroSS]

Why offer a car rather than an allowance? A lot of companies are doing away with cars and simply offering a monthly sum in lieu.

[Fast Bug]

I'd be miffed if I started a job with a company car and then given a used car to pay tax against!

KevinCamaroSS said:

Why offer a car rather than an allowance? A lot of companies are doing away with cars and simply offering a monthly sum in lieu.

I find more companies are coming away from grey fleets due to duty of care and the amount of ball ache getting drivers to submit licence and insurance for checks. However with a fleet of 1 I'd probably look at this route

[Gunk]

I have a limited company and we lease three cars. I always do 3 months +36 which means the cars are changed every three years. I have bought used before but once they start getting over 5 years old the bills do get bigger.

I do also offer a car allowance but all take the company car option instead. Leasing is so cheap now especially if you wait until the last minute and take a stock car. The only downside is that if you get rid of someone you’re stuck with a car for the remainder of the lease.

[Kermit power]

Gunk said:

The only downside is that if you get rid of someone you’re stuck with a car for the remainder of the lease.

When my father left IBM in the early 90s - one of around 2,000 voluntary redundancies in the UK, pretty much all of whom had company cars - Finance were delighted to discover that they had no early return clause in their lease agreements.

They were left with three options.

1. Return all the cars and pay off the leases in full (wouldn't that have been an earner for the lease company!).

2. Find somewhere to store 2,000+ cars whilst their leases expired.

3. Ask the soon-to-be ex-employees if they wouldn't mind keeping their company cars for the remainder of the lease.

My father had a Granada for over two years after he left, completely funded by the company, including any tax liabilities!

[Jag_NE]

RM said:

So cost you £12K. It's your mileage that ups the lease cost. If you were under 8K miles a year, then there are some bizarrely cheap leases around, especially if you aren't too choosy on the car.

For a Passat, then https://www.contracthireandleasing.com/independent... shows £175+VAT a month on 9+47, so assuming you can claim half the VAT (with personal use, if purely business then it's cheaper again) gives a total cost over 4 years of under £11K, without tying up any capital. The cheapest Passat I found for 30K per year was £14K, but I didn't look very hard. Found a Kia Sportage for £12.3K for 120K miles over 4 years.

if he did 8k a year instead of 30k he would have gotten a lot more back than 6k. how many people do 8k a year in a company car, most will do at least that before putting a single mile on it! the capital is committed with a lease by way of contract, you would need to be in some really deep st at the front end for that money to make a difference.