My car Finally on order

[simon1]

You need to understand the workings of Business contract hire, the tax savings versus the outgoings plus the VAT advantages. It's not throwing money away if you do the sums right and is probably the fastest-growing method by which people atttain vehicles. It's only useful to businesses that are VAT registered, not to employees or the unemployed.

There are advantages to all forms of car purchase or lease, but each one also has its drawbacks and each person's financial position makes one method better than another.

[LNT]

Originally Posted by simon1

You need to understand the workings of Business contract hire, the tax savings versus the outgoings plus the VAT advantages. It's not throwing money away if you do the sums right and is probably the fastest-growing method by which people atttain vehicles. It's only useful to businesses that are VAT registered, not to employees or the unemployed.

There are advantages to all forms of car purchase or lease, but each one also has its drawbacks and each person's financial position makes one method better than another.

So you're not buying it out of your own pocket? Because that's where I was obviously wrong. If you'd have said that in the first place I'd have understood it was a tax avoidance measure.

[simon1]

Yes it does come out of my own pocket, since someone has to pay for it. It's simply that being self-employed (or in other cases being a large company) the outlay of a CH is at worst the same as that for purchasing the car but with all the servicing and tyres, tax etc included in the price. The fact that you don't own it is a bonus when you do high mileage. Have you ever tried selling a car with high mileage? If you do the sums right, you can end up better off than owning it with tax advantages thrown in (not tax avoidance!).

[TTDegs]

Originally Posted by LNT

I've surely read this wrong because that reads as though you're happy to walk away with nothing having paid 3 years worth of payments? That doesn't make sense. In that instance you might as well lease a car, or even go on a long term pure hire scenario in which case you get a brand new car every 3 months.

But like I say, I must have read it wrong, but I haven't seen the actual maths, so that's possibly why.

contract hire, leasing and PCP plans all work in similar ways, but all boil down to the fact that you pay a small(ish) amount each month, and then after X years you simply give it back.


They work on the idea that:
New car cost = 20K
Value after 3 years = 10K
Repay the 10K loss in value over 3 years = very roughly £300 per month

The alternative to this is to take out a loan for 20K up front, and pay that off over 3 years (at circa £600 per month).
After 3 years, you fully own the car, which is now worth 10K, but you have had to pay twice as much per month to do so.

Which is why contract / lease / PCP can work very well for some people

You also tend to get other stuff included (at a price), such as tyre replacement and ALL servicing costs


My (company) car scheme works like this - we get 'given' a set amount per month, which we can add to, and they supply a car for 2 years (2 years just becuase our company cars so a lot of mileage so they picked that length).
During my 'ownership', the only thing I have to pay for is personal fuel.
All punctures, oil, brake pads etc etc etc are covered in the lease scheme.

We probably pay a slight overhead for this (otherwise the lease cos wouldn't be in existance!), but it's a convenience factor - budgeted monthly outgoings that don't change irrespective of it I got 4 flat tyres in one week.




And yes, back to the point a bit (sorry, me wanderring again! ), yes, often lease cos will be approached by a car manufacturer with a 'good deal'.
This means more cars on the road for the manufacturer, and they offer them to the lease co at a knock down cost, which the lease co can then pass on to the customer.
So Honda might have batched up (say) 500 silver Civics in XYZ spec and said 'who wants these at £1000 off?'
or some such

[simon1]

I wish I'd said that!! Thanks TT, I think you've summed it up very well.

[LNT]

Yes, the key word in all of this was "Business" !

I take the point about being self employed and so, in the end, it is your pocket, but for the man in the street, it's not comparing like with like, which is where I misunderstood, as that point wasn't made clear at the start.

As a none business man I've done a couple of PCP's with Merc's and wouldn't again. The list time I was offered one was on a new Merc SLK.
Cost new: £29,000
Deposit (my SLK worth £15000) £13,000
Per month over 60 months, £199 total £11940
Cost to keep car after 5 years £13,000
Total to pay to keep the car after 5 years: £37,940.

So having paid £13,000 balloon payment, I'd have a car worth £12,000 at most. And that after having been offered £2000 below book for mine in the first place!

The second word was off.....!

Enjoy the Civic Simon!