Why do companies always buy new cars?
Discussion
I wondered why companies buy new cars for their business.
Large companies who need fleets, people who need specific vehicles (like ambulances etc) or those doing stellar mileages I can understand.
But is there a reason why a small business will new cars instead of a 4 year old? Is there some tax incentive for the company?
Large companies who need fleets, people who need specific vehicles (like ambulances etc) or those doing stellar mileages I can understand.
But is there a reason why a small business will new cars instead of a 4 year old? Is there some tax incentive for the company?
I believe that the tax is still calculated on the new list price of the vehicle.
So you could save cash by buying second hand, but the tax will be the same as a new car of the same spec. And with a new car you get the warranty, agreed mileage etc etc so you "might as well" get a new car
The obvious exception is running a classic as a company car. If its old and worth less then £15k, then the BiK is very low indeed.
EG a 60s Mini Cooper. Value of, say £10k. Its tax is based on original list price and engine size. Its sub 1400cc, so 15% of the £666 list price- a mere £100. If you're a 40% tax earner, you'll pay 40% of the £100. (£40). The employer will pay 12.8% NI- just £12.80.
Evem an E-type, if worth less then £15k will give you a monthly tax bill of £21.33.
All running costs are claimable, and you can lend money to the company to buy the classic for you.
So you could save cash by buying second hand, but the tax will be the same as a new car of the same spec. And with a new car you get the warranty, agreed mileage etc etc so you "might as well" get a new car
The obvious exception is running a classic as a company car. If its old and worth less then £15k, then the BiK is very low indeed.
EG a 60s Mini Cooper. Value of, say £10k. Its tax is based on original list price and engine size. Its sub 1400cc, so 15% of the £666 list price- a mere £100. If you're a 40% tax earner, you'll pay 40% of the £100. (£40). The employer will pay 12.8% NI- just £12.80.
Evem an E-type, if worth less then £15k will give you a monthly tax bill of £21.33.
All running costs are claimable, and you can lend money to the company to buy the classic for you.
onesickpuppy said:
I don't know about a tax incentive for the company but if my company gave me a 4 year old car I'd tell them where to stick it because I'd be paying BIK tax on the full list price of the car when new.
That happened to my brother with one job he had. They carefully told him they would be buying him a car, but never said it was new. He had to go to the garage to pick it up and was absolutely gutted to be given a three year old car, especially, as you point out, bearing in mind there's no tax reduction.He left within 6mths.
Because new cars are cheaper than used ones. On a basic lease or fully maintained contract hire. Factoring in servicing, maintenance, wear & tear, consumables, pick up & collection for any work, replacement car etc. Not to mention peace of mind, image, reliability etc. Typically well under £200 a month all in for a bread & butter car, and there's stuff out there cheaper still. Why on earth would a company buy outright a used car, or finance a used one, and then maintain it?
Businesses like predictable expenses so leasing is the way to go. Everything is under warranty and there's no hassle sorting out purchasing, checking out the used car etc. They would have to employ a number of extra people to do this and manage the fleet, these costs itself could easily outweigh any savings.
A small company may do it as they don't have to much purchasing so a little extra time/effort (or they can leave the employee to sort it out, placing guidelines as to what they can buy, max age/mileage etc.), despite that minimal cost overhead, would bring savings. Even then, though, it's down to how that company work. They may want the lease from new option as it's less hassle. Time is money and all that.
A small company may do it as they don't have to much purchasing so a little extra time/effort (or they can leave the employee to sort it out, placing guidelines as to what they can buy, max age/mileage etc.), despite that minimal cost overhead, would bring savings. Even then, though, it's down to how that company work. They may want the lease from new option as it's less hassle. Time is money and all that.
Directors at a firm i used to work for always bought ex dem vehicles as it meant cheaper to buy in the first place but also when declearing for tax issues the base price of the cars were all they decleared which meant the X5 one of them drove for example had over 10k's worth of options fitted he didnt pay the extra tax for.
Not sure if this is actually what they should have been doing though??
Not sure if this is actually what they should have been doing though??
We are just buying a new company car. Cost of car new - £26k. Allowing for 15k per year, it will cost us £320 per month on leasing. So over 3 years it will cost £11,520. How much will the car be worth with 45k on the clock and 3 years old? Not much difference I think and cash flow is better.
Edited by skilly1 on Wednesday 20th July 15:01
neiljohnson said:
Directors at a firm i used to work for always bought ex dem vehicles as it meant cheaper to buy in the first place but also when declearing for tax issues the base price of the cars were all they decleared which meant the X5 one of them drove for example had over 10k's worth of options fitted he didnt pay the extra tax for.
Not sure if this is actually what they should have been doing though??
Unless the options were fitted after the car was registered, then no it's not.Not sure if this is actually what they should have been doing though??
It could be they only declared the base price - they'd be fine unless someone checked, and then they'd be in *loads* of trouble. I find business owners bulls
t a lot of how much they get away with then next thing they've got rid of the car as it was costing them a fortune in tax.Balmoral Green said:
Because new cars are cheaper than used ones. On a basic lease or fully maintained contract hire. Factoring in servicing, maintenance, wear & tear, consumables, pick up & collection for any work, replacement car etc. Not to mention peace of mind, image, reliability etc. Typically well under £200 a month all in for a bread & butter car, and there's stuff out there cheaper still. Why on earth would a company buy outright a used car, or finance a used one, and then maintain it?
completely agree, struggling to see the logic in OPs argument
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