Company Cars v Private Car Ownership.

[Top Hat]

Company Cars v Private Car Ownership.

Its time to replace one of our cars (maybe even both of them)

Is it best, to buy personally or through the company as a company car?

And why?

We do no business mileage.

Thanks

[Jayne]

We bought our cars private as they weren't used for the business, but we bought our van through the business because you can put Vans against Tax (you can get away with Estate cars too).

Alpha will fill in brainy details.

Jayne :D

[gordonthegofor]

Do the sums
e.g. cost of buying+fuel+road tax+mantince+insurance and anything else you can think of
then work out how much tax you would pay on the wages to pay for it and how much you will pay on the benifet charge

generly I think a Employee who has no other finical interest in the company is better with the beniofet

but when you have a finical interest e.g. get a share of profits you are better owing privately

But do the sums we are all difrent

[Alpha]

Its a long answer and requires some detail.

Will try and give you a decent answer in a spare moment (It is the worst month for asking accountants questions you know)

[bwglaw]

Our Finance Director advised me against getting a company car because they are becoming less attractive from a tax point of view.

If you get a company car you pay up to 28% company car tax calculated on the manufacturer's list price, which proves to be very expensive. You would have to keep a log of all journeys.

I was then advised to get a private car by any means i.e. HP, cash etc and claim the mileage from the company to cover the cost of running the car!

I am sure Alpha can reply later with his decent reply ;)

[Alpha]

Ok the answer is likely to be no however it depends on your marginal rate of tax, what car and what type of fuel, whther you buy the car on finance, the posibility of leasing etc.

If we take a Ford Focus 1.4 for example

Cost

Retail price £12000 benefit in kind for its CO2 (18% of £12k =£2160) therefore cost to you at 22% is £475 pa

Class 1A Ni payable would be at 12.8% of £2160 = £276 which is offset against profits so net cost is £175

Offset the saving

Capital Allowance in yr1 is £3000 at 19% = 570
yr2 is £2250 at 19% = 428
yr3 is £1688 at 19% = 321 therfore average is £440

howver as a company car you would be able to put through car tax, insurance and maintenance against tax. To break even this figure would have to be £210/19% = £1105 pa so the costs will possibly come to more than this.

So overall in this scenario you may be marginally better of as a company car.

If the car was run on LPG you would be even better off!

However if your marginal rate of tax was 40% then the cost outlined above would be £864 which even with all the other costs (tax, maint etc) would not be beneficial(breakeven in this case would have to be (864-440)/.19 = £2232)

As a company car you would not be able to reclaim vat on the purchase.

Go much higher than this eg a mondeo (at say £15000 and a benefit % of 23%)and the answer is likely to be a definate no as the capital allowances claimable would be restricted to the lower of £3000 or 25% of the written down value.


So as you can see it all depends on specific cases.

[bwglaw]

Thats why he said no for the Merc!...at about £25k manufacturer list price - still haven't decided yet for when I return. It is likely to be leased at about £350/month.

Do you think I should get it privately Alpha?

[Alpha]

Do you think I should get it privately Alpha?

unless you do a helluva private mileage and pay corp tax at 30% I would say get it privately :)

[bwglaw]

Thanks Alpha - yes, a fair amount of private mileage but pay no CT (try not to ;))

[Top Hat]

Thanks.

Looks like we'll be buying privately, now I need to set a budget!

[stphnstevey]

Ok the answer is likely to be no however it depends on your marginal rate of tax, what car and what type of fuel, whther you buy the car on finance, the posibility of leasing etc.

If we take a Ford Focus 1.4 for example

Cost

Retail price £12000 benefit in kind for its CO2 (18% of £12k =£2160) therefore cost to you at 22% is £475 pa

Class 1A Ni payable would be at 12.8% of £2160 = £276 which is offset against profits so net cost is £175

Offset the saving

Capital Allowance in yr1 is £3000 at 19% = 570
yr2 is £2250 at 19% = 428
yr3 is £1688 at 19% = 321 therfore average is £440

howver as a company car you would be able to put through car tax, insurance and maintenance against tax. To break even this figure would have to be £210/19% = £1105 pa so the costs will possibly come to more than this.

So overall in this scenario you may be marginally better of as a company car.

If the car was run on LPG you would be even better off!

However if your marginal rate of tax was 40% then the cost outlined above would be £864 which even with all the other costs (tax, maint etc) would not be beneficial(breakeven in this case would have to be (864-440)/.19 = £2232)

As a company car you would not be able to reclaim vat on the purchase.

Go much higher than this eg a mondeo (at say £15000 and a benefit % of 23%)and the answer is likely to be a definate no as the capital allowances claimable would be restricted to the lower of £3000 or 25% of the written down value.


So as you can see it all depends on specific cases.

Great example!

Just wondered how this would look if it was a company van instead of company car?

[stphnstevey]

Will have to guess this one myself then

[barney1]

If you are looking to buy a van and are a sole trader I would advise a Finance Lease as it is a leasing scheme, you pay a deposit (typically three months in advance), monthly payments spread over a fixed time period (most do 2-3 years) - and then at the end of the term you can buy it by paying a final payment, sell it - or part exchange it.

benefits to you are....

(i) VAT, as a non vat reg business - the vat element is 'dead money' to you - as you can't recover it. On a purchase type finance scheme (HP etc) you have to put down all of the vat upfront - which means generally a 10% deposit plus full vat (on an average van £2k). So in month one you have a large sum of money to put down.

(ii) On a leasing scheme (finance lease or contract hire) - the vat is payable on each monthly payment (i.e £250 + vat each month).

(iii) Business user leasing schemes have larger discount structures available (equals cheaper payments for you) - this is because they are aimed at the business community - and this is where manufacturers meet their volume targets (and as such are very cut throat markets).

(iv) Finance Lease does not have a mileage banding each year (as contract hire does) - as this is your first step into the murky world of finance you might find being tied to a mileage a little restrictive.

(v) Finance Lease is easier than Contract Hire to get out of if you need to (bigger van, expanding delivery route etc) - with contract hire you are liable for half the outstanding rentals if you wish to early terminate. Finance Lease operates the same as HP - you get a settlement figure and either sell the vehicle or part exchange it (to release the capital).

A normal cost would be 3 x monthly rentals in advance followed by 36 months of payments depending on the deposit.


I hope this helps a little - please feel free to reply if you have any queries.

Regards

Jamie