Contract Hire...a good idea or not?
Discussion
I've been toying with the idea of contract hiring my next car....
I like the idea of having a brand new car (something which I have nto had before) and the car I am looking at is the BMW 730d M Sport which can be leased for around £580 pm + VAT on a 6+23 profile.....
Now, I would welcome your thoughts and experiences of CH...
I will be putting it through my business and will therfore have to pay company car tax etc, and I am not entirely clear as to the tax implications etc...
Also, did anyone regret going down the CH route?..
I currently own my own Porsche 997, which i will sell, so I could just use that money to buy a car, so that is also an option, although I would be restricted to buying a car with a max value of £25k.....
Ta!
I like the idea of having a brand new car (something which I have nto had before) and the car I am looking at is the BMW 730d M Sport which can be leased for around £580 pm + VAT on a 6+23 profile.....
Now, I would welcome your thoughts and experiences of CH...
I will be putting it through my business and will therfore have to pay company car tax etc, and I am not entirely clear as to the tax implications etc...
Also, did anyone regret going down the CH route?..
I currently own my own Porsche 997, which i will sell, so I could just use that money to buy a car, so that is also an option, although I would be restricted to buying a car with a max value of £25k.....
Ta!
turboman786 said:
I've been toying with the idea of contract hiring my next car....
I like the idea of having a brand new car (something which I have nto had before) and the car I am looking at is the BMW 730d M Sport which can be leased for around £580 pm + VAT on a 6+23 profile.....
Now, I would welcome your thoughts and experiences of CH...
I will be putting it through my business and will therfore have to pay company car tax etc, and I am not entirely clear as to the tax implications etc...
Also, did anyone regret going down the CH route?..
I currently own my own Porsche 997, which i will sell, so I could just use that money to buy a car, so that is also an option, although I would be restricted to buying a car with a max value of £25k.....
Ta!
I would seriously doubt this would make financial sense putting it through the company as the BIK on it will be huge! It might be cheaper giving yourself a payrise and taking it on private CH. I'm sure Eric Mc will be along shortly with some better advice...I like the idea of having a brand new car (something which I have nto had before) and the car I am looking at is the BMW 730d M Sport which can be leased for around £580 pm + VAT on a 6+23 profile.....
Now, I would welcome your thoughts and experiences of CH...
I will be putting it through my business and will therfore have to pay company car tax etc, and I am not entirely clear as to the tax implications etc...
Also, did anyone regret going down the CH route?..
I currently own my own Porsche 997, which i will sell, so I could just use that money to buy a car, so that is also an option, although I would be restricted to buying a car with a max value of £25k.....
Ta!
wow, inclusive of VAT that's £4176 deposit based on the 6+23, money that after 2 years when you hand the car back is gone forever.
I'm not sure of tax implications of contract hire but why take these contracts when the car is never yours, the large deposits seem like throwing money away, can a similar deal not be had on PCP/HP, then you have the option of buying or trading the car against another.
I'm not sure of tax implications of contract hire but why take these contracts when the car is never yours, the large deposits seem like throwing money away, can a similar deal not be had on PCP/HP, then you have the option of buying or trading the car against another.
I think your personal tax liability on this vehicle would be approx £550/month, assuming 27% BIK tax and that you are a 40% tax payer.
Your company can claim back half of the VAT unless it is a "pool" car in which case it is 100% - also, you wouldn't pay any BIK tax in that case but the Revenue aren't daft.
If I were you, I'd look at sticking down the £25k and get prices on PCP deals from the dealer.
Your company can claim back half of the VAT unless it is a "pool" car in which case it is 100% - also, you wouldn't pay any BIK tax in that case but the Revenue aren't daft.
If I were you, I'd look at sticking down the £25k and get prices on PCP deals from the dealer.
I've only ever contract hired once as it was a manufacturer backed scheme and seemed a good rate, but we got stung for a few hundred quid when they came to pick the car back up - driver couldn't find the spare key, couple of wheel scuffs, stonechips etc. I thought the car was in pretty good nick for 70,000+ miles, but the humourless guy collecting it seemed to be expecting a brand new car.
It might be old fashioned, but I still prefer to HP our company cars. At least then you have something to call yours and it gives you more flexibility whether you want to swap early or hang on a bit longer. I can understand for enormous fleets that contract hire must be attractive but for me it always seems an expensive way of running a car. To the OP, I would go and get some HP figures and see what it looks like. Also, as mentioned, check your BIK implications before signing on the dotted line!
It might be old fashioned, but I still prefer to HP our company cars. At least then you have something to call yours and it gives you more flexibility whether you want to swap early or hang on a bit longer. I can understand for enormous fleets that contract hire must be attractive but for me it always seems an expensive way of running a car. To the OP, I would go and get some HP figures and see what it looks like. Also, as mentioned, check your BIK implications before signing on the dotted line!
59 plate 730ds are going through the main dealers from £33k.
With a £5k deposit, that would work out at roughly £560 per month over five years.
After two years you'd owe £18k, which would be more or less what the car would be worth then.
So the contract hire is roughly equivalent to buying at 18 months old and then selling on at two years. Of course if you want to keep for longer, the used car would eventually get ahead of the depreciaiton curve.
Edit: the above ignores any personal taxation issues (which would mean that if you are going through your own company personal finance is probably cheaper) and the issue of returning the car in mint condition at the end of the contract.
With a £5k deposit, that would work out at roughly £560 per month over five years.
After two years you'd owe £18k, which would be more or less what the car would be worth then.
So the contract hire is roughly equivalent to buying at 18 months old and then selling on at two years. Of course if you want to keep for longer, the used car would eventually get ahead of the depreciaiton curve.
Edit: the above ignores any personal taxation issues (which would mean that if you are going through your own company personal finance is probably cheaper) and the issue of returning the car in mint condition at the end of the contract.
Edited by DavidHM on Wednesday 30th March 11:06
I find contract hire/pcp suits me just fine. I change my car regularly and the fact that you dont have anything left to show for it at the end of the agreement is offset by having significantly lower monthly repayments than HP.
Its all down to personal circumstances and HP/PCP is no worse than any other form of credit if you get the right deal.
Andy
Its all down to personal circumstances and HP/PCP is no worse than any other form of credit if you get the right deal.
Andy
I would look at it with some trepidation unless it's either a car you really really want or is an offer that is subsidised by the manufacturer and therefore at a lower rate than you could get in the market.
How about leasing it personally and claiming the mileage back? I would have thought this outweighs the BIK you will need to pay on a car of this size (and emissions)
How about leasing it personally and claiming the mileage back? I would have thought this outweighs the BIK you will need to pay on a car of this size (and emissions)
Thanks for the replies so far....
So am I right in thinking that the monthly leasing cost can be offset against corporation tax....but then I will have to pay BIK tax on it?
I am a higher rate tax payer, with a crap accountant who cant explain things to me in comprehensible English....
Could someone kindly break it down for me as Im a bit thick when it comes to taxation etc.....
So am I right in thinking that the monthly leasing cost can be offset against corporation tax....but then I will have to pay BIK tax on it?
I am a higher rate tax payer, with a crap accountant who cant explain things to me in comprehensible English....
Could someone kindly break it down for me as Im a bit thick when it comes to taxation etc.....
turboman786 said:
Thanks for the replies so far....
So am I right in thinking that the monthly leasing cost can be offset against corporation tax....but then I will have to pay BIK tax on it?
I am a higher rate tax payer, with a crap accountant who cant explain things to me in comprehensible English....
Could someone kindly break it down for me as Im a bit thick when it comes to taxation etc.....
I think you are correct in your assumptions, but I'm getting out of my depth here - someone will be along to confirm in plain English I imagine.So am I right in thinking that the monthly leasing cost can be offset against corporation tax....but then I will have to pay BIK tax on it?
I am a higher rate tax payer, with a crap accountant who cant explain things to me in comprehensible English....
Could someone kindly break it down for me as Im a bit thick when it comes to taxation etc.....
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