Tipper vehicle Leasing????

[Treeman123]

HI Guys

 

Just looking for some advice. I currently buy my vehicles brand new. I am just wondering if anyone out there leases them for 3 years and gets a new one? any pro/cons?

 

Thanks

 

[PeteB]

My accountant used to say, "if it lasted, then buy it! If you lease it, then watch out for the additional  costs...

[doobin]

The major con is usually that you take all the hit for the most expensive three years of depreciation, without being able to mitigate this by running it for longer. Other cons are that milage restrictions may be an issue if your workload suddenly changes, and it's also the nature of a work truck to take the odd bump and scrape. Which rather than being £100 off the sale price at the end of your ownership will be an inflated £800 penalty charge on top of all the money you already paid to lease the thing.

 

I wouldn't do it personally. From what I've seen, leasing is in a personal capacity the domain of youngsters eager to impress in a new entry level BMW or middle class 'keeping up with the Joneses' in their rented Range Rover. In a commercial capacity, it always seems to be people like county councils who lease, and it's not their money they're spending is it?

 

There are plenty of five years finance deals out there with 5 years warranty, which would give you affordable repayments and allow you to minimise the depreciation hit by timing your selling. That's the way I've always gone with machines, and if I was to need a new truck I'd probably do that too (and maybe run it for longer, I don't do many miles)

Edited October 17, 2020 by doobin

[dig-dug-dan]

54 minutes ago, doobin said:

The major con is usually that you take all the hit for the most expensive three years of depreciation, without being able to mitigate this by running it for longer. Other cons are that milage restrictions may be an issue if your workload suddenly changes, and it's also the nature of a work truck to take the odd bump and scrape. Which rather than being £100 off the sale price at the end of your ownership will be an inflated £800 penalty charge on top of all the money you already paid to lease the thing.

 

I wouldn't do it personally. From what I've seen, leasing is in a personal capacity the domain of youngsters eager to impress in a new entry level BMW or middle class 'keeping up with the Joneses' in their rented Range Rover. In a commercial capacity, it always seems to be people like county councils who lease, and it's not their money they're spending is it?

 

There are plenty of five years finance deals out there with 5 years warranty, which would give you affordable repayments and allow you to minimise the depreciation hit by timing your selling. That's the way I've always gone with machines, and if I was to need a new truck I'd probably do that too (and maybe run it for longer, I don't do many miles)

Have to disagree. I have leased vehicles for nearly 25 years now.

 

Each payment is 100% tax deductable. An hp payment is not, you can claim 20 % of the vehicles value, then 20% of what's left the next year and so on.

The interest you pay on hp is 100% tax deductable however.

 

I always lease  for three years, then buy it outright with a balloon payment, which I set at the beginning. They never inspect and knock any money off, but I think that's the type of lease I have. They tend to do that on a lease hire. I keep it a year longer, then sell it privately and start a new lease.

I get the warranty, and peace of mind that the truck will,not let me down.

I know people who insist on buying outright,  no finance. They never really get their money back

 

[Treeman123]

Thanks for you advice lads. Gives me something to think about. 

[doobin]

15 hours ago, dig-dug-dan said:

Have to disagree. I have leased vehicles for nearly 25 years now.

 

Each payment is 100% tax deductable. An hp payment is not, you can claim 20 % of the vehicles value, then 20% of what's left the next year and so on.

The interest you pay on hp is 100% tax deductable however.

 

I always lease  for three years, then buy it outright with a balloon payment, which I set at the beginning. They never inspect and knock any money off, but I think that's the type of lease I have. They tend to do that on a lease hire. I keep it a year longer, then sell it privately and start a new lease.

I get the warranty, and peace of mind that the truck will,not let me down.

I know people who insist on buying outright,  no finance. They never really get their money back

 

Could you provide the figures for this? Sounds interesting. Are you saying when you sell the truck you don’t have to pay tax on it?

[dig-dug-dan]

2 hours ago, doobin said:

Could you provide the figures for this? Sounds interesting. Are you saying when you sell the truck you don’t have to pay tax on it?

The lease purchase thing is somewhat of a loophole.

At the end of the lease, I pay the balloon payment, then I have to sell,it to a third party( I usually sell it to my leasing company that I use, they are not the finance company)! Then buy it back, but I have to pay 2% of the proceeds to the finance company. Then its legally mine.

As for paying tax on the sale, technically no as its then used as a deposit towards the new vehicle.

[doobin]

19 hours ago, dig-dug-dan said:

Have to disagree. I have leased vehicles for nearly 25 years now.

 

Each payment is 100% tax deductable. An hp payment is not, you can claim 20 % of the vehicles value, then 20% of what's left the next year and so on.

The interest you pay on hp is 100% tax deductable however.

 

I always lease  for three years, then buy it outright with a balloon payment, which I set at the beginning. They never inspect and knock any money off, but I think that's the type of lease I have. They tend to do that on a lease hire. I keep it a year longer, then sell it privately and start a new lease.

I get the warranty, and peace of mind that the truck will,not let me down.

I know people who insist on buying outright,  no finance. They never really get their money back

 

I think the bolded is wrong. I know when I buy new on finance I can choose whether to claim the whole lot in the first year (first year capital allowances), or to add it to my capital pool to then write down, as you say.

 

I guess the benefit of leasing would be to introduce a fixed tax deduction per month rather than having to take it all in the first year when it may not be needed.

[doobin]

OK, found some info.

 Looks like you are using a finance lease, so buying the whole truck. Same as HP but the tax implications work better for you. Fair play, and pretty much what I said as regards to the benefits of HP/5 years warranty.

 

My original post against leases was aimed at what I understood to be a lease- an operating lease.

Quote

Finance Leases

An alternative to Hire Purchase, a Finance lease typically has an initial period of fixed length at full cost, followed by a secondary period at very low cost. The business customer never legally owns the equipment, but they have most of the ‘risks and rewards’ associated with the asset, hence for accounting purposes they do ‘own’ it. They are responsible for maintenance, insurance etc of the asset. At the end of the initial period, if the customer does not want to continue using the equipment, they can arrange to sell it to a third party second hand, and obtain the bulk of the proceeds.

1. For accounting purposes, finance leased assets are treated in the same way as hire purchase.
2. Capital Allowances are not available, but depreciation is allowed (You will never see this ever again)
3. VAT charged by the finance company is payable on the initial installment and each subsequent rental.
4. For cars, most businesses will be able to recover 50% of the VAT.

 

Operating Lease

This is easy – just renting the equipment.

1. This option is popular – generally cheaper overall and often comes with a related maintenance contract (depending on the equipment)
2. Common where an established second-hand market exists (cars, construction and office equipment etc)
3. Lease period typically 2-3 years, always less than working life of asset.
4. Not listed on balance sheet – entire operating lease cost is shown on P&L.
5. No capital allowances
6. VAT added to each rental installment, so cost is spread throughout lease period.
7. If car, can reclaim 50% of VAT.
8. Any maintenance VAT may be reclaimed in full (if it can be identified separately).

 

[donnk]

if your not buying or HP then you are paying dear for the vehicle at the end of the day as the the finance company is milking you.