Dan Posted July 8, 2007 Share Posted July 8, 2007 Ok, first a bit of background, because it will make the question easier to understand : I'm a car dealer, I've been in the trade over 20 years and set up my own dealership about 8 years ago. 12 months ago I bought an ex-Nissan dealership and run it as an Independent Nissan Specialists. Now then, I got involved in this business simply because I love cars, and ever since I went self employed I haven't had a car to call my own - queue violins I've had some very nice cars along the way, but they have always been for sale and someone always comes along and buys them Now this is the problem : I really would like my own car, something to keep for a year or two, something to experience the "ownership" thing again but I'm very ambitious and I want my business to continue to grow so I don't want to take a chunk of money out of the pot to buy myself a car. If I draw say £50k out of the business thats a dozen bread and butter cars that would be missing off my forecourt, which would obviously hurt my business. ( My cars are bought and paid for by me, I haven't borrowed anything, I've just re-invested my profits for growth ). In short, I'm in a cash business, I need my cash to buy stock, so any cash I take away from the business is going to have an effect on the business. SO, finally, to the question : I've been reliably informed that as a self employed person a car could be leased through the business and offset against my Tax. I have to visit Auctions all over the country looking for stock, so I have to have a car, right ? So, do I go for it and sign on the dotted line, or do I continue to drive stock until my business needs no further growth and then I can just pay cash for something tasty ? I know for a fact if I had £50k sat in something I would constantly be thinking about selling it and buying something else. It's just the way my head works, dunno why. Whereas if I had say a grand a month to pay on a lease for 3 years I would know that was my car for 3 years and just enjoy the car. P.S. There are PROBABLY only two cars I would look at, a Merc SL500 and a Porsche 911 Carrera S, although when it comes down to it I would consider every option Thanks for reading, thanks for your opinions, and apologies for the long post !!! Quote Link to comment Share on other sites More sharing options...
Sarnie Posted July 8, 2007 Share Posted July 8, 2007 Do it. I'd say pay for it ourtight but if your just gonna worry about the depreciation then don't bother. As your aware, all cars will lose money so either accept the depreciation or lease it. Personally I don't like lease contracts and want to 'own' the car and not lease it. You only live once mate. Quote Link to comment Share on other sites More sharing options...
Dan Posted July 8, 2007 Author Share Posted July 8, 2007 Do it. I'd say pay for it ourtight but if your just gonna worry about the depreciation then don't bother. As your aware, all cars will lose money so either accept the depreciation or lease it. Personally I don't like lease contracts and want to 'own' the car and not lease it. You only live once mate. Your such a bad influence Paying for it outright is the problem mate. I fancy a 911 Carrera S, with options its practically 70k. Every time I looked at it I would just see £70k sat there and start wondering how much money I could earn with that in stock instead of in a toy. You have to bear in mind you don't hold any stock in your line of work, you don't go out and buy 50 mortgages and then try and sell them whereas in my business stock is everything and its the "opportunity cost" of having that cash in a toy instead of stock. On lease I wouldn't have any capital tied up in the car... Having said that I would much prefer to just pay for it and own it and have no monthly payments. I never had anything on HP before except my house of course, so I may well end up just waiting until the business can afford the cash without being affected. Quote Link to comment Share on other sites More sharing options...
martinmac Posted July 8, 2007 Share Posted July 8, 2007 Dont like leasing for the same reason, its dead money. Can fully appreciate your point about using money to buy which could be used for stock. It would wind you up constantly. Suppose the best way ( to me ) would be to get a good deal on the car you want which would mean you could be reassured that its worth more than you paid for it. No point in makng it if you cant enjoy it Dont you sell finance Quote Link to comment Share on other sites More sharing options...
Sarnie Posted July 8, 2007 Share Posted July 8, 2007 Put half down and finance the other half? Quote Link to comment Share on other sites More sharing options...
Digsy Posted July 8, 2007 Share Posted July 8, 2007 Dan, make sure you will be happy to keep 1 car for 3 years. Whenever I've had a car on finance I'm always itching to get rid long before the deal is up. I suspect you may be the same. Quote Link to comment Share on other sites More sharing options...
Stew Posted July 8, 2007 Share Posted July 8, 2007 I don't agree that leasing is dead money. You can 'own' a lease car for 12 months and then get something else without tying up money. How much does a new car depreciate in a year? How much does it cost to lease? If the car has to be New Dan then Leasing could be the right way to go. Get a 12 month lease and see how you like it. You could always purchase the leased car after that year at a discounted rate and either sell it for profit or keep running it if you are happy with it! Quote Link to comment Share on other sites More sharing options...
WoREoD Posted July 8, 2007 Share Posted July 8, 2007 I leased my last car (a Saab) and was going to lease the Z but the leasing company let me down the day before delivery (another story). I'm self-employed with variable monthly income and the big advantage is the predictable monthly outgoing with no worries about extra-ordinary expenditure (as well as marginal tax benefits). If you decide to lease, get quotes from several companies and understand what is and isn't included. You can still buy it at the end of the lease - or you can just walk away. JK Quote Link to comment Share on other sites More sharing options...
WoREoD Posted July 8, 2007 Share Posted July 8, 2007 p.s. Having said all that, I'm glad the lease for the Z fell through - I just *love* this car! Quote Link to comment Share on other sites More sharing options...
martinmac Posted July 8, 2007 Share Posted July 8, 2007 OK so compromise, wait till next year and get the new GTR and you will want to keep it. Quote Link to comment Share on other sites More sharing options...
Chris`I Posted July 8, 2007 Share Posted July 8, 2007 I would normally say buy it outright, as I prefer to own my stuff. My old man once told me that you should work to live and not live to work, and if your comapany wont suffer too much then you should get it. However in this case, as you are unsure and as it is a big commitment in terms of taking a loss for the business I would say why not lease for a year, and if you like it then get one outright by buying that one from them or getting a new one. That way you arent too tied in to it if you need the money for the business. Quote Link to comment Share on other sites More sharing options...
rickya Posted July 8, 2007 Share Posted July 8, 2007 Put down half & personal loan on other half Quote Link to comment Share on other sites More sharing options...
Sarnie Posted July 8, 2007 Share Posted July 8, 2007 Put down half & personal loan on other half Thats what i said Quote Link to comment Share on other sites More sharing options...
Lincolnbaggie Posted July 9, 2007 Share Posted July 9, 2007 Sorry to be boring, but have you checked with your accountant on the tax benefits etc. Presumably you would put the car through the company books whatever route you decide, and as far as I understand leasing could be more beneficial on the tax front......... Quote Link to comment Share on other sites More sharing options...
sl114 Posted July 9, 2007 Share Posted July 9, 2007 Personally i would never lease a car, i like the idea of owning a car outright rather than renting it. However if your plan is to buy it at the end of the lease and it works out money wise for you, then go for it. Quote Link to comment Share on other sites More sharing options...
rickya Posted July 9, 2007 Share Posted July 9, 2007 You can put car expenses through your business accounts e.g servicing; petrol & best tax saving of all is depreciation every year. Financing the car should be done in the most financially efficent way i.e as in to not pay interest at all or much interest. In that respect paying outright is best, no interest to be paid out. But if this large capital sum could be used elsewhere to earn more than what you would lose if paying out interest on i.e. a loan to finance the car, then it would be better to get a loan. E.g. monthly repayments 6% & use the large capital to invest e.g a property, -increase in property value 10% = very approx 4% better off, (or in your case investing in other cars stock) Quote Link to comment Share on other sites More sharing options...
Lincolnbaggie Posted July 9, 2007 Share Posted July 9, 2007 As far as I understand it, only part of an owned car's value can be set against tax each year (counts towards your capital allowance and only 25% is allowed and then only part of that 25% depending on private mileage covered as well), whereas all of the leasing costs can be offset including the VAT. Petrol etc can be offset, but only that proportion used for business mileage. I'm open to correction if I've got it completely wrong.......... Best advice is to ask your accountant. Quote Link to comment Share on other sites More sharing options...
rickya Posted July 9, 2007 Share Posted July 9, 2007 In business accounts, depreciation of a car is calculated as depresciation of a fixed asset, which is done on a reducing value basis. More in the first few years For expenses Dan being in the motor trade can say e.g. almost all or 90% is for business useage. ps I was an accountant!!! Quote Link to comment Share on other sites More sharing options...
Dan Posted July 9, 2007 Author Share Posted July 9, 2007 Thanks for the opinions. As far as I understood it I could lease the car through the business and offset the entire cost against my Tax because effectively the lease is a business expense and comes off my GP, and I would also claim back the VAT. It's no different to my salesmans company car which could also be on a lease but isn't at the moment. I either spend a grand on a lease, or I pay Tax on that grand, so in effect a grand a month is only really £600 a month because I would pay £400 tax on that money if it wasn't spent. Confused ? Yeah, I'm good at that HP or a personal loan would not go through the business, I would be paying that myself and therefore it would carry no Tax benefits. As for tying up capital, it's a very open question how much 60 or 70 grand would earn me in stock, but lets assume I would buy a dozen Micras and each one would earn me over a grand. If any single one of them sold within a month thats the lease paid. Follow me ? In reality I sell half a dozen Micras most months, so 60 grands worth of Micras would be earning me probably £7000 a month which just doesn't compare to the cost of the lease, which is exactly why I don't want to tie up my cash. Now for the news. I went to Mercedes and sat in a new SL 500. I was disappointed. The quality of materials used bears no comparison to that used in the old SL, which was one of my favourite cars. I then sat down with their business manager who proceeded to quote me £1350 with no maintenence and £1530 fully maintained. I had seen it on line at £1050 with maintenence ! During the discussion it became apparent that mileage might be a problem for me. I worked out that I do about 35,000 miles a year visiting auctions etc. which makes a huge difference to the lease figure. Their business manager, in his inifinite wisdom, suggested I run around the auctions in a cheap diesel and save the SL for weekends. Mate, if I'm buying a £70k car my chubby ass will never be out of it They were polite and courteous and insisted on calling me Sir even when I asked them not to, but they failed to sell me the car and they lost my confidence when they suggested I use a cheap diesel I then accidentally fell into the nearby BMW showroom and when I saw a 650 Coupe close up my jaw hit the floor. I've seen loads of them on the road but never really stopped to look at one, if you know what I mean. The car is gorgeous, the proportions and the shape are fantastic. I sat inside and it was quality. And then I spotted the Convertible I had just walked straight past. I spent a good few minutes looking over the Convertible and then asked to get a quote for a lease. The business manager wasn't in so a salesman took my card and promised someone would call me today. They haven't so that particular dealership won't be getting my order. If that salesman worked for me he would be up for a disciplinary tommorow. This is a customer service business and salesman that don't phone customers back are in the wrong job. I haven't been to Porsche yet, but I will before I make any decisions.... Quote Link to comment Share on other sites More sharing options...
rickya Posted July 9, 2007 Share Posted July 9, 2007 BMW are terrible at customer service ps I was a mngmnt accountant & did'nt specialise in tax, but from what I can remember there is a clause about expensive cars & how much of the lease payment is deductible from business profits. You would get the best info from a tax adviser/specialist. Goodluck Quote Link to comment Share on other sites More sharing options...
Sarnie Posted July 9, 2007 Share Posted July 9, 2007 The business manager wasn't in so a salesman took my card and promised someone would call me today. They haven't so that particular dealership won't be getting my order. If that salesman worked for me he would be up for a disciplinary tommorow. This is a customer service business and salesman that don't phone customers back are in the wrong job. BMW did that to me. I was in there to ask about a Turquoise 320d Convertible I'd seen. Told me to wait on the leather seats and a sale guy would come over. He came over after five mins and told me he would be right back. Forty five mins later I was still sitting there. I was seething. I wanted the car but refused to go back. Two weeks later I bought my Kuro 350z Quote Link to comment Share on other sites More sharing options...
GC350z Posted July 9, 2007 Share Posted July 9, 2007 Dealers are funny places. While at my Nissan dealership getting the car serviced I asked to speak to someone about the 07 model. Salesman practicaly ran over to me. I told him I wanted to trade in my 04 Z for the new 07 which by the way still isn't available here. We talked for while. I told him what I wanted and gave him the details of my car. Said he'd call me that day with prices and info. That was weeks ago and still nothing. I'm still planning on a 07 Z and will be buying from that dealership but will specifically ask for a different salesman. I know what you mean about the 6 Dan. When you stop to look it is a beautiful machine. If I ever have to get a car with more than two seats I'll be looking closely at the 6 or whatever follows it. Guy Quote Link to comment Share on other sites More sharing options...
Stew Posted July 10, 2007 Share Posted July 10, 2007 I was in there to ask about a Turquoise 320d Convertible I'd seen. A turquoise diesel convertible 3 series? What the hell would you want a turquoise diesel 3 series convertible for? Quote Link to comment Share on other sites More sharing options...
MAB Posted July 10, 2007 Share Posted July 10, 2007 I was in there to ask about a Turquoise 320d Convertible I'd seen. A turquoise diesel convertible 3 series? What the hell would you want a turquoise diesel 3 series convertible for? Quote Link to comment Share on other sites More sharing options...
Sarnie Posted July 10, 2007 Share Posted July 10, 2007 I was in there to ask about a Turquoise 320d Convertible I'd seen. A turquoise diesel convertible 3 series? What the hell would you want a turquoise diesel 3 series convertible for? Because I was driving a renault megan at the time Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.