Contract hire, pcp, finance, which is best

[Steve Bullman]

What method do you use for purchasing new vehicles and why. Can't quite get my head round whats best

[Rich Rule]

Contact hire - you can claim the cost of the vehicle as a running cost of the business. Plus the deposit.

 

PCP/HP/Loan from Bank/finance - You essentially own the vehicle and get the full vehicle cost as a business cost. Plus a bit of the interest.

 

With the latter you own the vehicle, it is looked upon as an asset to your company but when you come to sell it you have to declare the sale price and that is added to your turnover that year.

 

The Contract hire can be good but if the vehicle gets dinged up or you go over the milage you will be raped. Plus you never really own the vehicle.

 

Depends what you want out of life really. I have always gone down the asset route as that is what my accountant advised.

[kevinjohnsonmbe]

Buy it = AIA and reduced income tax liability.

[AA Teccie (Paul)]

Buy it = AIA and reduced income tax liability.

 

Hi Kevin, hope you're well..."AIA"???

 

Cheers,

Paul

[Richard 1234]

AIA annual investment allowance.

I contract hire depends what you do after your payment term as much as anything.

 

 

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[kevinjohnsonmbe]

All well thanks Paul 👍🏻

 

AIA annual investment allowance

 

https://www.gov.uk/capital-allowances/annual-investment-allowance

 

Plant and machinery is 100% deductible (<£200k / pa) from profit prior to calculation of income tax liability.

 

Gotta love it!

[richy_B]

That's the best way but it hinges on you having the money to do so! I am a big fan of outright purchases (have done for my tractor, chippers, excavator) but cash flow is king. Contract hire or finance has its place.

 

Finding £1000 a month for 2 years can be a lot less stressful than spending £20k and finding your a uber tight for a couple of months.

[Richard 1234]

That's the best way but it hinges on you having the money to do so! I am a big fan of outright purchases (have done for my tractor, chippers, excavator) but cash flow is king. Contract hire or finance has its place.

 

Finding £1000 a month for 2 years can be a lot less stressful than spending £20k and finding your a uber tight for a couple of months.

 

 

That makes sense I think if you don't have cash to buy then contract hire etc is as good as anything as you can get some good deals on both the finance and the vehicle/equipment

 

 

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[richy_B]

That makes sense I think if you don't have cash to buy then contract hire etc is as good as anything as you can get some good deals on both the finance and the vehicle/equipment

 

 

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Yep. I have never looked into contract hire on machinery (arblease et al). Do you have an annual number of hours? Must be a hard business model for them. On a tractor you could have 1000 hours of amenity mowing or 1000 hours of heavy ploughing. Be interesting to know more.

[WesD]

What method do you use for purchasing new vehicles and why. Can't quite get my head round whats best

 

 

If you can't buy outright I'd say loan as you will more than likely have an unsecured debt for an asset you now own. Also if you have taken that loan you have crunched the numbers and should be able to afford it👍