Lease or loan for new equipment

[colin_mckellar]

I am wanting to buy a new piece of equipment for my store and am unsure which is the best way to finance it.

The equipment costs £6,000 and the lease deal on it from the dealer is £125 per month plus VAT, which I can claim back, so a cost of £7,500 over 5 years.

I've been looking at personal loans and the cost is under £112 per month giving a total cost of £6,700 over the 5 year term.

I'm not sure which is the most tax efficient way of funding this machinery and my accountant scratched his head as well when i asked him so that wasn't the most encouraging response.

 

[john1989]

Get your commercial hat on, not your tax one and you will make the right decision. Go for the cheapest option.

If your accountant scratches your head at this, there is something wrong. This is simple mathematics.

 

[Amir Shahzad]

If you can get personal finance to fund the purchase and it is cheaper for you then you should go for it. You can claim back the Vat if you a VAT register but depend what business you do, what sort of asset you buying, and also what Scheme you are using for VAT. So go for the cheaper option and get the invoice under business name.

 

[colin_mckellar]

I spoke to the branch manager at Santander about their offer at 5.1% apr. He said to go ahead and apply online as he was too busy to process it in branch.

I went online and put in all my details. I should point out that I have a perfect credit history and have a bank account with Santander that would more than cover the amount I was looking to borrow.

Once the details were in I got an email immediately telling me that I had been successful. What I hadn't reckoned on was the interest rate of 15.6%!!!

I phoned up and complained and was told that 5.1% was "representative"! When I asked how more than tripling the interest rate was representative the female ended the conversation.

 

[colin_mckellar]

Hi Kelly. I am based in East Ayrshire.