Alphabet/BMW Lease car being taken back
Discussion
Wondering if anyone has been in the same position as us - and if there is another way around the situation....
My wife had a cracking, local, small business, which steadily grew over several years (15!). Hitting the VAT threshold last year, due to increased costs fueled by inflation mainly. Unfortunately this is a killer, for service based businesses, but there was no avoiding it. She was advised to either close several days a week (she has staff with mortgages - so couldn't do that) or sell the business (this was unsuccessful even at a massively reduced price) in order to stay under the limit! Crazy, when you think about it. I wonder how many small businesses have met the same fate.
She went hell for leather, to try and increase turnover substantially, in order to keep the business but it was not to be.
We saw the writing was on the wall, working 7 days, still not clearing the hurdle and it has had to go into liquidation. HMRC the only LTD company creditory, ironically.
Aside the politics, sadness and disgruntlement we feel towards economic 'growth plans' being requested by the 'new' government, we've had to make staff redundant, close a steady business and come away with a lot of debt, which was/is personally guaranteed. Just let us/help us trade and grow, is what I'd table. Alas, que sera.
The business has a lease car. A BMW that was personally guaranteed by my wife.
We let the lease company know of the impending liquidation and tabled an alternate 3rd party (who also had a limited company - traded over a decade - proof of solid accounts with cash in the bank) who could take on the lease.
We applied to 'novate' the car and it was rejected. "the company is not insolvent" was the reason. Technically true, as it wasn't wound up at that point - we just wanted to get a head start (+ prevent them failing to take a payment when the bank account closed). Fair enough then.
The business was then wound up by the liquidator a few weeks later and my wife filled out the novation request again. This was rejected again. The reason:
"the business is not in the same industry and does not have the same directors".
The company instantly replied, intending to collect the car + bill for £30k costs to end the lease (it still had 3 years to run). As it was garaunteed, that is my wife's debt.
Suffice to say, we are devastated. Coupled with the business closure, company debt, an unemployed wife, £30k impending cost and no car... it's hit fairly hard.
Emotions and family finances aside, I can't see how rejecting the novation makes much sense to the lease company.
We'll end up bankrupt, as neither of us can finance this value when we are already carrying the company closure debt, so recovering costs will be difficult. Yet we have provided an option/solution to continue with new owners, which should be an easier option for them as much as it would be for us also.
Unfortunately their official statement is:
"In this instance the request has not met our underwriting criteria. Whilst we appreciate that the current hirer is in liquidation, it does not appear that the proposed hirer is acquiring the business, trade or assets as part of the liquidation."
This is a true statement, the new hirer is just someone we know and not buying anything out. Not that we understood this (I can't find anywhere it says this in our paperwork and have requested theirs) but OK.
The final option before we are personally bankrupt is my wife sets up a new LTD company, buys the assets of the business (fixtures/fittings are negligible value but are for sale by the liquidator). Quite how we'd do it & even if a new novation request would be accepted is anyone's guess. It is all just a sorry state of affairs.
I appreciate, maybe a niche case.
But if anyone has been in this position, or anything remotely close, would appreciate any advice.
We had legal advice as part of the business, but as that has now ceased... contacting them was futile. "if only" we'd have spoken to them at the same time, we let the lease company know of the initial intention of liquidation.... however, they might have just said 'tough' as I'm sure, some replies on here may say.
Thanks in advance.
My wife had a cracking, local, small business, which steadily grew over several years (15!). Hitting the VAT threshold last year, due to increased costs fueled by inflation mainly. Unfortunately this is a killer, for service based businesses, but there was no avoiding it. She was advised to either close several days a week (she has staff with mortgages - so couldn't do that) or sell the business (this was unsuccessful even at a massively reduced price) in order to stay under the limit! Crazy, when you think about it. I wonder how many small businesses have met the same fate.
She went hell for leather, to try and increase turnover substantially, in order to keep the business but it was not to be.
We saw the writing was on the wall, working 7 days, still not clearing the hurdle and it has had to go into liquidation. HMRC the only LTD company creditory, ironically.
Aside the politics, sadness and disgruntlement we feel towards economic 'growth plans' being requested by the 'new' government, we've had to make staff redundant, close a steady business and come away with a lot of debt, which was/is personally guaranteed. Just let us/help us trade and grow, is what I'd table. Alas, que sera.
The business has a lease car. A BMW that was personally guaranteed by my wife.
We let the lease company know of the impending liquidation and tabled an alternate 3rd party (who also had a limited company - traded over a decade - proof of solid accounts with cash in the bank) who could take on the lease.
We applied to 'novate' the car and it was rejected. "the company is not insolvent" was the reason. Technically true, as it wasn't wound up at that point - we just wanted to get a head start (+ prevent them failing to take a payment when the bank account closed). Fair enough then.
The business was then wound up by the liquidator a few weeks later and my wife filled out the novation request again. This was rejected again. The reason:
"the business is not in the same industry and does not have the same directors".
The company instantly replied, intending to collect the car + bill for £30k costs to end the lease (it still had 3 years to run). As it was garaunteed, that is my wife's debt.
Suffice to say, we are devastated. Coupled with the business closure, company debt, an unemployed wife, £30k impending cost and no car... it's hit fairly hard.
Emotions and family finances aside, I can't see how rejecting the novation makes much sense to the lease company.
We'll end up bankrupt, as neither of us can finance this value when we are already carrying the company closure debt, so recovering costs will be difficult. Yet we have provided an option/solution to continue with new owners, which should be an easier option for them as much as it would be for us also.
Unfortunately their official statement is:
"In this instance the request has not met our underwriting criteria. Whilst we appreciate that the current hirer is in liquidation, it does not appear that the proposed hirer is acquiring the business, trade or assets as part of the liquidation."
This is a true statement, the new hirer is just someone we know and not buying anything out. Not that we understood this (I can't find anywhere it says this in our paperwork and have requested theirs) but OK.
The final option before we are personally bankrupt is my wife sets up a new LTD company, buys the assets of the business (fixtures/fittings are negligible value but are for sale by the liquidator). Quite how we'd do it & even if a new novation request would be accepted is anyone's guess. It is all just a sorry state of affairs.
I appreciate, maybe a niche case.
But if anyone has been in this position, or anything remotely close, would appreciate any advice.
We had legal advice as part of the business, but as that has now ceased... contacting them was futile. "if only" we'd have spoken to them at the same time, we let the lease company know of the initial intention of liquidation.... however, they might have just said 'tough' as I'm sure, some replies on here may say.
Thanks in advance.
Edited by captain_kplunk on Monday 3rd March 20:30
Edited by captain_kplunk on Monday 3rd March 20:31
I am sorry to hear about your situation it must be dreadful. A few things come to mind.
1) depending if you are more thank half way though the contract you maybe able to hand the car, look for a contract break clause.
2) can you simply sell the car?
3) buy or selling a company can be done for a £1. So that may be a route also.
4) the 30k figure would appear to be without deducting the value of the car.
Regards the options you offer the company, they most likely see it simpler to sell the car, rather than a complex transfer option, so don’t expect them to cooperate.
1) depending if you are more thank half way though the contract you maybe able to hand the car, look for a contract break clause.
2) can you simply sell the car?
3) buy or selling a company can be done for a £1. So that may be a route also.
4) the 30k figure would appear to be without deducting the value of the car.
Regards the options you offer the company, they most likely see it simpler to sell the car, rather than a complex transfer option, so don’t expect them to cooperate.
ashenfie said:
I am sorry to hear about your situation it must be dreadful. A few things come to mind.
1) depending if you are more thank half way though the contract you maybe able to hand the car, look for a contract break clause.
2) can you simply sell the car?
3) buy or selling a company can be done for a £1. So that may be a route also.
4) the 30k figure would appear to be without deducting the value of the car.
Regards the options you offer the company, they most likely see it simpler to sell the car, rather than a complex transfer option, so don’t expect them to cooperate.
Options 1+2 are not applicable as the car is leased.1) depending if you are more thank half way though the contract you maybe able to hand the car, look for a contract break clause.
2) can you simply sell the car?
3) buy or selling a company can be done for a £1. So that may be a route also.
4) the 30k figure would appear to be without deducting the value of the car.
Regards the options you offer the company, they most likely see it simpler to sell the car, rather than a complex transfer option, so don’t expect them to cooperate.
I'm missing something here.
Registering for VAT was known to be a likely business-killer (because adding 20% to your prices makes you uncompetitive and customers vote with their feet), yet you did it anyway, in preference to letting a member of staff go and running the business down a little to stay under the threshold?
...and now you're facing bankruptcy because the business loans were backed by personal guarantees?
Was it the VAT registration that killed it, or was it just no longer profitable and no-one wanted to admit it?
Registering for VAT was known to be a likely business-killer (because adding 20% to your prices makes you uncompetitive and customers vote with their feet), yet you did it anyway, in preference to letting a member of staff go and running the business down a little to stay under the threshold?
...and now you're facing bankruptcy because the business loans were backed by personal guarantees?
Was it the VAT registration that killed it, or was it just no longer profitable and no-one wanted to admit it?
I don’t have much to add, but I had a nightmare situation with Alphabet probably 15 years ago.
I basically returned a lease car under an early termination scheme. They accepted it, then 18 months later decided they shouldn’t have done and decided to pursue me for the money.
I offered to pay it in full if they gave me a car back, but they declined.
I ended up letting them take me to court. They ended up winning on a technicality but I told them to take a hike and they never registered a CCJ or pursued it.
Absolutely disgusting company. I’ve never touched a BMW since.
I basically returned a lease car under an early termination scheme. They accepted it, then 18 months later decided they shouldn’t have done and decided to pursue me for the money.
I offered to pay it in full if they gave me a car back, but they declined.
I ended up letting them take me to court. They ended up winning on a technicality but I told them to take a hike and they never registered a CCJ or pursued it.
Absolutely disgusting company. I’ve never touched a BMW since.
"I'm missing something here.
Registering for VAT was known to be a likely business-killer (because adding 20% to your prices makes you uncompetitive and customers vote with their feet), yet you did it anyway, in preference to letting a member of staff go and running the business down a little to stay under the threshold?
...and now you're facing bankruptcy because the business loans were backed by personal guarantees?
Was it the VAT registration that killed it, or was it just no longer profitable and no-one wanted to admit it?"
The situation isn't as cut and dry as you and the other chap are trying to portray. Granted, I couldn't post a full essay, as it detracts from the current hurdle and impending issue of the lease.
Yes VAT is a business killer - not always. In service industries it can be. Another chap mentioned flat rate VAT - the math's didn't add up for this either.
20% on prices ontop of hikes triggered by inflation, wouldn't be palatable. Whilst they did increase and trade was lost as a result anyway, there is history in the fact the business required bounce-back loans, in order to make it through covid also, which meant prices were already high.
It's not just me saying this - it was all taken on accountant advice and direction. Maybe that was the issue all along....
Again, it's not a cut and dry decision to 'let a staff member go'. They were practically a founding member, mortgage, kids, etc. We gave the option of staying on and trying to push it beyond, but it wasn't to be. It did give them time to find something else, I suppose. The only blessing.
The business loans were personally garaunteed yes, these were government bounce-backs + the cost of liquidation. We have no quarms of paying debts owed - que sera. When you add the lease car on top - then yes, bankruptcy is likely.
We followed 'their' advice on how to novate the car as it seemed pretty straightforward on their FAQ's and FACTS within their email replies. But alas, no. Some justifications that just aren't documented or made aware to us - is likely to plummet us further down a rabbit hole.
Appreciate the replies. There is no 'hidden' agenda,for what its worth. Just wondered if there were any rare cases of folk being in the same situation.
Registering for VAT was known to be a likely business-killer (because adding 20% to your prices makes you uncompetitive and customers vote with their feet), yet you did it anyway, in preference to letting a member of staff go and running the business down a little to stay under the threshold?
...and now you're facing bankruptcy because the business loans were backed by personal guarantees?
Was it the VAT registration that killed it, or was it just no longer profitable and no-one wanted to admit it?"
The situation isn't as cut and dry as you and the other chap are trying to portray. Granted, I couldn't post a full essay, as it detracts from the current hurdle and impending issue of the lease.
Yes VAT is a business killer - not always. In service industries it can be. Another chap mentioned flat rate VAT - the math's didn't add up for this either.
20% on prices ontop of hikes triggered by inflation, wouldn't be palatable. Whilst they did increase and trade was lost as a result anyway, there is history in the fact the business required bounce-back loans, in order to make it through covid also, which meant prices were already high.
It's not just me saying this - it was all taken on accountant advice and direction. Maybe that was the issue all along....
Again, it's not a cut and dry decision to 'let a staff member go'. They were practically a founding member, mortgage, kids, etc. We gave the option of staying on and trying to push it beyond, but it wasn't to be. It did give them time to find something else, I suppose. The only blessing.
The business loans were personally garaunteed yes, these were government bounce-backs + the cost of liquidation. We have no quarms of paying debts owed - que sera. When you add the lease car on top - then yes, bankruptcy is likely.
We followed 'their' advice on how to novate the car as it seemed pretty straightforward on their FAQ's and FACTS within their email replies. But alas, no. Some justifications that just aren't documented or made aware to us - is likely to plummet us further down a rabbit hole.
Appreciate the replies. There is no 'hidden' agenda,for what its worth. Just wondered if there were any rare cases of folk being in the same situation.
Edited by captain_kplunk on Monday 3rd March 23:16
I can’t offer any advice except I’m surprised that as a Ltd Co the lease had to be personally guaranteed. Is this normal?
Surely their underwriting looks at the business accounts, decides if the business is good for the lease, then charges the business a monthly based on perceived risk which includes possible early termination. Is that not the case? I’m genuinely surprised, but have no experience as a leasing punter.
Surely their underwriting looks at the business accounts, decides if the business is good for the lease, then charges the business a monthly based on perceived risk which includes possible early termination. Is that not the case? I’m genuinely surprised, but have no experience as a leasing punter.
Sorry to hear this op not a nice situation
Novation in most circumstances for lease companies is for moving from one group business to another, I.e Joe blogs hardware to Joe blogs timber, same holding overall company but different entities it’s rare they will allow a totally unrelated party to take over the lease
Someone above asked if the lender would have adjusted the rate to match the risk, with contract hire that isn’t how it works, the lender sets a rate and you either qualify for it or you don’t. Asking for a directors guarantee isn’t uncommon especially for a high end vehicle.
The puzzlement is the early termination fee of £30k. The early termination is generally 50% of outstanding rentals so if op owes £30k with 36 months remaining, on that basis the monthly payment was in the region of £1600 a month. That seems too high for a business just hitting the vat threshold to get underwritten.
Not to teach you to suck eggs but have you had an early termination figure from alphabet or have you assumed you’re liable for the full amount outstanding? A lot of people do this when early terminating
Novation in most circumstances for lease companies is for moving from one group business to another, I.e Joe blogs hardware to Joe blogs timber, same holding overall company but different entities it’s rare they will allow a totally unrelated party to take over the lease
Someone above asked if the lender would have adjusted the rate to match the risk, with contract hire that isn’t how it works, the lender sets a rate and you either qualify for it or you don’t. Asking for a directors guarantee isn’t uncommon especially for a high end vehicle.
The puzzlement is the early termination fee of £30k. The early termination is generally 50% of outstanding rentals so if op owes £30k with 36 months remaining, on that basis the monthly payment was in the region of £1600 a month. That seems too high for a business just hitting the vat threshold to get underwritten.
Not to teach you to suck eggs but have you had an early termination figure from alphabet or have you assumed you’re liable for the full amount outstanding? A lot of people do this when early terminating
mikef said:
The OPs story doesn’t add up, does it?
With flat rate VAT there wouldn’t have been much to pay and add on to prices
Otherwise could have reclaimed VAT on that business-essential BMW lease
My thoughts too. Under the VAT threshold yet employing multiple staff?With flat rate VAT there wouldn’t have been much to pay and add on to prices
Otherwise could have reclaimed VAT on that business-essential BMW lease
BMW costing at least £800/month.
Nothing adds up.
Edited by MustangGT on Tuesday 4th March 08:08
To be fair to the OP, he came back and gave us more of the story behind their business failure
It looks as though leasing company could see that they were lending on a high-value asset to a low-turnover company, with existing commitments and at least one major outstanding debt, but didn't care as they could chase the directors personally when it went south
It looks as though leasing company could see that they were lending on a high-value asset to a low-turnover company, with existing commitments and at least one major outstanding debt, but didn't care as they could chase the directors personally when it went south
£800 a months for a car and only turning over under 90k a year, with multiple staff and plus it's a service based business that blames inflation......do you mean minimum wage increases?
Didn't think service industries had that many fixed costs tbh.
Why not keep the car and the company afloat.....if you have personal assets and have personally guaranteed the business surely the VAT man will come for them as well ( I'm guessing the vat is due on earnings made)
Didn't think service industries had that many fixed costs tbh.
Why not keep the car and the company afloat.....if you have personal assets and have personally guaranteed the business surely the VAT man will come for them as well ( I'm guessing the vat is due on earnings made)
Slighthly different angle on it here as i've faced the same dilemma with one of my former directors cars after we ceased trading although nothing to do with VAT. If she's got a PG then is it not best just to pay from personal funds for the remainder of the lease or is that not possible? That's what i've done although I didn't dissolve the company.
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