Never leased, EV lease vs ICE outright purchase concerns?

[Tseugtam]

I am looking at a Porsche Mecan, what started as an EV has turned into a complete mind melt! So looking at figures for both over 4 years and this is what I have come up with, please could you help in anything I am missing, got wrong etc.

Porsche Mecan 4 ( has to be a 4) pretty much base - Lease through my limited company business.

OR

Porsche Mecan GTS - Approximately 2 -3 years old 60-65k - personal sale paid outright.

example car here: https://www.pistonheads.com/buy/listing/19668935

These are the approx figures I have come up with using AI:



So effectively. around the same cost over the 4 year period, expect the ICE Mecan will still have some money in ( unknown I know), but it will have some. So the option to keep it another couple of years, further increases that value even with a full OPC warranty.

What am I missing? Why are so many leased? Any input would be greatly appreciated.

I would like to put to one side which is the better car ICE vs EV to one side, this is purely a financial decision, and a car for the other half and me to drive occasionally.

Thanks for reading

Edited by Tseugtam on Saturday 28th February 18:40

[Quattr04.]

A big reason is people don t have 65k to outlay on a car, and they like the ease of a company car, and you re effectively saving 40% because you re not paying tax on the cash and then buying the car

You re not responsible for bills of the EV and you re comparing a new model of car with its new tech to a car that s already depreciating and is a out dated model

I wouldn t haven t thought you ll spend anywhere near £3600 on electric either, what miles are you doing?

The depreciation also isn t your problem it s included in the lease paid for buy the business which of course is money you re not then paying tax on when you take it out

Also, when you put a 6 year old Macan into Autotrader wit 60k miles (assuming you bought the one you linked and then did 10k a year in it) although there’s no GTS on there yet, all the other cars are maximum 35k with 60k on them
And 6 years old, so the value you’re basing your sums on could well be out.

Just buy the car you prefer. A EV makes tax sense and are awesome to live with and so nice to drive but in no means any fun, up to you if you think the petrol mecan can be fun

Edited by Quattr04. on Saturday 28th February 18:39

Edited by Quattr04. on Saturday 28th February 22:34

[sixor8]

Don't forget the lost earned interest by having the cash in savings instead of in the car.

[Rob 131 Sport]

You always need a car, so I would avoid the leasing trap as you’ll always be paying. I’d definitely go for the ICE option and own the vehicle.

[TheDrownedApe]

Yeah your fuel costs seem weird. £12,000 in super works out, very roughly, to about 50k miles. For the EV it will be £1250 ( all home charging) but best to add a few 100 for public needs. Still not £3000 though AND add cost of a charger.

Fuel cost £1.48L.
Macan GTS economy about 10.5L/100km

Therefore about £15 to drive 100km or 62 miles. Per mile 24p.

EV range is about 300 (95kwh and 3.2 economy). Home charging (your mileage suggests thus pattern) average overnight about 8p/kwh so a full charge will cost £7.60 or 2.5p per mile.

However its still a close run race; my choice....if home charging go with EV, if long days on the road go with ICE

Lastly, would your business benefit from "looking like" you care about the planet?

Maths done during a biological urgency so it may be wildly inaccurate - mea culpa

Edited by TheDrownedApe on Sunday 1st March 07:58

[Quattr04.]

Rob 131 Sport said:

You always need a car, so I would avoid the leasing trap as you ll always be paying. I d definitely go for the ICE option and own the vehicle.

That only works if you plan to keep a car for years and years, eventually you’ll need a new one

Part of the advantage of leasing is you don’t have the faff of big bills, wasting your life taking it to the garage or sitting on the hard shoulder, or organising a hire car

There’s a reason fleets replace vehicles every 4 years

[bennno]

You need to speak with your accountant before you do anything, some electric cars can offer a huge tax benefit to a business but it’s limited if leased.

[samoht]

You seem to be double-counting the value of the petrol car at the end of the lease.

The out of pocket cost is £82,405 for the purchased ICE car vs £41,980 for the leased EV.

In exchange for paying the extra £40k, you get a six-year old car at the end of term.

You won't get £40k if you sell the car then. In fact you'll probably struggle to sell it privately at all at that value, so you'll go to a dealer and if you're lucky get £30k in part exchange for buying a new car, or WBAC it for similar money. (Many of the 2019 Macan S on AT have been for sale for months).

So if you want to change your car every four years or less, in this case the EV lease option is clearly cheaper, as well as avoiding a big up front cost, and hassle / uncertainty of selling the car at the end.


If you plan to keep the car long-term the hassle factor is reversed, if you own it you need do nothing save perhaps keep extending the warranty, if you lease it you need to arrange a new lease to dovetail with returning the previous car.

On the other hand if you keep the ICE car for eight years you'll pay another £17k+ in running costs, maybe more as it ages. So £100k out of pocket with a ~£15k realisable value for the car at the end, vs two £42k four year leases in a row. Plus you'll be in a newer car with the lease option.


So in this case, due to the fact manufacturers have to sell EVs, and they tend to prefer doing so via cheap leases, the EV lease looks like the cheapest option purely financially.

[Pickle_Rick]

bennno said:

You need to speak with your accountant before you do anything, some electric cars can offer a huge tax benefit to a business but it s limited if leased.

Ackshuallly its the other way round. If the company is VAT registered, they can offset the entire monthly lease payment against vat, plus claim 50% of the VAT. This is in addition to being able to offset the monthly payment against Corp tax.

When purchasing, they can offset 100% against Corp tax, which is great. However when they sell the car, they then pay Corp tax at the prevailing rate. Which in future might be more expensive than the rate they pay now. They also cannot claim back vat unless it's purely for business use, if you buy a car rather than a van, hmrc will have a hard time believing there's no personal use at all. Lease also includes VED, whereas purchasing it doesnt. And then as mentioned above, you lose out in interest earned, which if 3% on £50k over 4 years, is £6000.

And compared to buying privately. You can install a charge point through the company, all servicing, mot if needed, maintenance, insurance and charging costs. Even the £30 at the car wash, stick it through the company.

Edited by Pickle_Rick on Sunday 1st March 09:41

[ITP]

Quattr04. said:

Rob 131 Sport said:

You always need a car, so I would avoid the leasing trap as you ll always be paying. I d definitely go for the ICE option and own the vehicle.

That only works if you plan to keep a car for years and years, eventually you ll need a new one

Part of the advantage of leasing is you don t have the faff of big bills, wasting your life taking it to the garage or sitting on the hard shoulder, or organising a hire car

There s a reason fleets replace vehicles every 4 years

The faff of big bills? With leasing you have the faff of a big bill every single month, guaranteed!

Also, lease cars also need to visit garages, they are cars after all, and can break down. Most cars, for many, many years now, rarely break down, unless they are not maintained. So thinking you’ll be on the phone to the AA every month if you drive a car older than 3/4 years in nonsense.

[Quattr04.]

ITP said:

The faff of big bills? With leasing you have the faff of a big bill every single month, guaranteed!

Also, lease cars also need to visit garages, they are cars after all, and can break down. Most cars, for many, many years now, rarely break down, unless they are not maintained. So thinking you ll be on the phone to the AA every month if you drive a car older than 3/4 years in nonsense.

It’s not your problem if a lease car breaks down, they collect it, you get a hire car you don’t pay for and you don’t have to find a dealer to fix it for you and then pay for it.

New cars go wrong, older cars go wrong too. Leasing is tax efficient especially when you have your own company, buying outright isn’t

[bennno]

Pickle_Rick said:

Ackshuallly its the other way round. If the company is VAT registered, they can offset the entire monthly lease payment against vat, plus claim 50% of the VAT. This is in addition to being able to offset the monthly payment against Corp tax.

When purchasing, they can offset 100% against Corp tax, which is great. However when they sell the car, they then pay Corp tax at the prevailing rate. Which in future might be more expensive than the rate they pay now. They also cannot claim back vat unless it's purely for business use, if you buy a car rather than a van, hmrc will have a hard time believing there's no personal use at all. Lease also includes VED, whereas purchasing it doesnt. And then as mentioned above, you lose out in interest earned, which if 3% on £50k over 4 years, is £6000.

And compared to buying privately. You can install a charge point through the company, all servicing, mot if needed, maintenance, insurance and charging costs. Even the £30 at the car wash, stick it through the company.

Edited by Pickle_Rick on Sunday 1st March 09:41

Not quite, lease can be offset against profits (generally 85%) plus just 50% of vat, but you would then get hit for BIK.

Buying an EV as a business means, 100% capital allowance can be put against profits, just pay some tax on disposal.

[Pickle_Rick]

bennno said:

Not quite, lease can be offset against profits (generally 85%) plus just 50% of vat, but you would then get hit for BIK.

Buying an EV as a business means, 100% capital allowance can be put against profits, just pay some tax on disposal.

No, you can offset 100% of the lease payment against Corp tax. And 'just 50%' of the VAT, is still 50% more than you can when purchasing or PCPing through company.

You would still get hit for BIK even if your purchased an EV through Ltd.

And tax on disposal, you could be saving against 19% Corp tax on purchase, and then hit with 25% ( or more if future govt decides) on disposal.

[bennno]

Pickle_Rick said:

No, you can offset 100% of the lease payment against Corp tax. And 'just 50%' of the VAT, is still 50% more than you can when purchasing or PCPing through company.

You would still get hit for BIK even if your purchased an EV through Ltd.

And tax on disposal, you could be saving against 19% Corp tax on purchase, and then hit with 25% ( or more if future govt decides) on disposal.

Guide says 100% only on cars under 50g/km, above that 85%.

If you buy then you can offset full purchase value against business profits, with carry forward, only when / if you sell would you pay tax on sale proceeds…..

Might be wrong but it’s all about as clear as mud, hence my original suggestion to run it past their accountant for specific guidance.

[samoht]

bennno said:

Guide says 100% only on cars under 50g/km, above that 85%.

The lease option here is a new Electric Macan, where 0 < 50 g/km.

[Rob 131 Sport]

bennno said:

Pickle_Rick said:

No, you can offset 100% of the lease payment against Corp tax. And 'just 50%' of the VAT, is still 50% more than you can when purchasing or PCPing through company.

You would still get hit for BIK even if your purchased an EV through Ltd.

And tax on disposal, you could be saving against 19% Corp tax on purchase, and then hit with 25% ( or more if future govt decides) on disposal.

Guide says 100% only on cars under 50g/km, above that 85%.

If you buy then you can offset full purchase value against business profits, with carry forward, only when / if you sell would you pay tax on sale proceeds ..

Might be wrong but it s all about as clear as mud, hence my original suggestion to run it past their accountant for specific guidance.

Have you considered what you would do if the legislation changed in relation to tax or there were challenges within the cash flow of your business. With outright purchase such concerns are minimal.