Kings Lodge, London Road,
West Kingsdown Nr. Brands Hatch,
Kent TN15 6AR

Phone: 01474 853 856 Fax: 01474 852 456
Email: steve@a4cc.co.uk

I've got the car but how do I finance it?

Speak to one of our team of specialist accountants and advisors on 01474 853856


It's a fact of life that most of us will use finance to buy our car but which form is the best? Most people have heard that there are some advantages to leasing a car but is this right?


Along with the question of whether a car should be owned by their company, these are the most commonly asked questions in respect of motor vehicles. Although the reasons may be complicated the answers are actually more straightforward than you might think.


Car or van?

First of all, consider whether you are buying a car or van. If it's a van tax issues have very little bearing and you should go for the source of finance that is cheapest. The easiest way to determine what is cheapest is to look at APR. APR stands for Annual Percentage Rate and can be calculated on all finance agreements. Be careful that the interest rate you are being quoted is actually the APR. There are lots of different ways of calculating interest rates and you need to ensure that you are comparing like with like. There is only one way of calculating APR.


Do you lease or own?

Whilst there are numerous different types of legal agreement they all fall into one of two categories involving leasing or owning. For tax and accounting purposes all forms of ownership are treated the same. Just to confuse you, hire purchase and lease purchase count as ownership and contract hire is the only true form of leasing. If you are unsure ask the salesman how VAT will be charged; if it's on the purchase price of the vehicle this means that you will own it for tax purposes. If VAT is charged on each payment, this is a lease.


For cars there are some basic rules. The VAT treatment favours lease hire but the tax treatment on cars with an original list price of over £12,000 favours ownership. If the list price is over £17,000 the tax disadvantages start to outweigh the VAT advantages.


But don't let the tax tail wag the business dog. Whilst ownership may be more tax efficient, at the end of the contract you will own the car. The price for owning the car has to be paid somewhere and your monthly payments will be higher as a result. If cash is tight this might be a bad thing.


If in doubt, ring us on (01474) 853856. We are happy to advise on car purchase issues.


*Please be aware that the figures and information we have used are correct at the time of writing. We will endeavour to update the information as regularly as possible.