getting my head around PCP

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Compactpete
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Re: getting my head around PCP

Post by Compactpete » Wed Jul 18, 2018 1:02 pm

Octavius wrote:
Wed Jul 18, 2018 12:41 pm
I don't think you can get tax breaks on PCP unless you are buying the car through the business.
I'm sure your accountant will be able to advise you better than most of us regarding this .
I buy my vans cash but my accountant offsets the VAT over time and not all in the same financial year. Don't ask me why or how he does it but it's financially beneficial to me.
Vat on a commercial vehicle is 100% claimable in your current vat period if you are vat registered, but depending on your business the remainder is written down over a period.

You can't offset any payments or rental on a car unless it is used 100% for business with not even 1 mile of private use, of course you can put it through your books but it is most likely chucked out the other end by your accountant or you risk huge problems from the inland revenue.
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Re: getting my head around PCP

Post by davidv111 » Wed Jul 18, 2018 1:20 pm

I don’t think buying a van in cash and doing some accountants trickery is really the subject of this thread and isn’t going to help the OP

On the subject of PCP it is quite a simple way of buying a car. And all you are doing is paying for its use for a period of time by way of paying the depreciation and interest monthly.

There are different schools of thought around small or large deposit. But if the interest rate is 1 or 2% the difference isn’t huge.

With the pcp you borrow the money against the car and pay it off in instalments till you reach the end of the agreeement and then give the car back or buy the remaining amount unpaid. And the interest

So buy a 30k car with a 2k deposit
Your charged interest on the full 28k you borrow
Your told that car will be worth 20k in 3 years time
So all you have to pay is the difference (28-20 = 8k) broken down into monthly payments plus the interest.

If the car is worth more than 20k well you can sell it then whatever is over the top use on a new car. That’s how they keep you on them
If the car is worth less than 20k well, just hand it back and you loose no more than you have paid.

It is a really good way of buying cars and flipping frequently. I have not owned a car for more than 2 years in the last 6. However you have to pay monthly every month

If your end result is to own the car outright and keep it for years and years. PCP may not be the way to go. But if your happy to pay monthly for a car you like then go for it

In terms of the end values. They are called gaureteed future values (gfv) and they will always be quoted to you on any finance paperwork
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Re: getting my head around PCP

Post by Tommo » Wed Jul 18, 2018 1:28 pm

If you want a good insight on the different types of finance, Seenthroughglass on YouTube did a fairly in depth video on the different types of financing and how they work. Video is about 50 mins long but gives you a good explanation.
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Re: getting my head around PCP

Post by Compactpete » Wed Jul 18, 2018 1:35 pm

davidv111 wrote:
Wed Jul 18, 2018 1:20 pm
I don’t think buying a van in cash and doing some accountants trickery is really the subject of this thread and isn’t going to help the OP

On the subject of PCP it is quite a simple way of buying a car. And all you are doing is paying for its use for a period of time by way of paying the depreciation and interest monthly.

There are different schools of thought around small or large deposit. But if the interest rate is 1 or 2% the difference isn’t huge.

With the pcp you borrow the money against the car and pay it off in instalments till you reach the end of the agreeement and then give the car back or buy the remaining amount unpaid. And the interest

So buy a 30k car with a 2k deposit
Your charged interest on the full 28k you borrow
Your told that car will be worth 20k in 3 years time
So all you have to pay is the difference (28-20 = 8k) broken down into monthly payments plus the interest.

If the car is worth more than 20k well you can sell it then whatever is over the top use on a new car. That’s how they keep you on them
If the car is worth less than 20k well, just hand it back and you loose no more than you have paid.

It is a really good way of buying cars and flipping frequently. I have not owned a car for more than 2 years in the last 6. However you have to pay monthly every month

If your end result is to own the car outright and keep it for years and years. PCP may not be the way to go. But if your happy to pay monthly for a car you like then go for it

In terms of the end values. They are called gaureteed future values (gfv) and they will always be quoted to you on any finance paperwork
The OP specifically asked about tax breaks on leasing or PCP'ing a vehicle, so the post made by both myself and Octavious is very much on topic and relevant. :wink:
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Re: getting my head around PCP

Post by davidv111 » Wed Jul 18, 2018 1:46 pm

Compactpete wrote:
Wed Jul 18, 2018 1:35 pm
davidv111 wrote:
Wed Jul 18, 2018 1:20 pm
I don’t think buying a van in cash and doing some accountants trickery is really the subject of this thread and isn’t going to help the OP

On the subject of PCP it is quite a simple way of buying a car. And all you are doing is paying for its use for a period of time by way of paying the depreciation and interest monthly.

There are different schools of thought around small or large deposit. But if the interest rate is 1 or 2% the difference isn’t huge.

With the pcp you borrow the money against the car and pay it off in instalments till you reach the end of the agreeement and then give the car back or buy the remaining amount unpaid. And the interest

So buy a 30k car with a 2k deposit
Your charged interest on the full 28k you borrow
Your told that car will be worth 20k in 3 years time
So all you have to pay is the difference (28-20 = 8k) broken down into monthly payments plus the interest.

If the car is worth more than 20k well you can sell it then whatever is over the top use on a new car. That’s how they keep you on them
If the car is worth less than 20k well, just hand it back and you loose no more than you have paid.

It is a really good way of buying cars and flipping frequently. I have not owned a car for more than 2 years in the last 6. However you have to pay monthly every month

If your end result is to own the car outright and keep it for years and years. PCP may not be the way to go. But if your happy to pay monthly for a car you like then go for it

In terms of the end values. They are called gaureteed future values (gfv) and they will always be quoted to you on any finance paperwork
The OP specifically asked about tax breaks on leasing or PCP'ing a vehicle, so the post made by both myself and Octavious is very much on topic and relevant. :wink:
Yeh your post made sense given it was about finance and the implications on VAT and tax. Talking about buying in cash does seem irrelevant
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Re: getting my head around PCP

Post by Octavius » Wed Jul 18, 2018 6:17 pm

David posted
“I don’t think buying a van in cash and doing some accountants trickery is really the subject of this thread and isn’t going to help the OP”

A van or car is still a vehicle.
It’s not trickery. It’s through the books, 100% legitimate and legal.
That’s why I said the Op’s accounted would offer the best advise regarding tax breaks.
You work in the financial sector David so I would have thought you may have access to this information. See if you can find any information regarding the tax and post it up.
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Re: getting my head around PCP

Post by Tricky401 » Wed Jul 18, 2018 7:12 pm

davidv111 wrote:
Wed Jul 18, 2018 1:20 pm

It is a really good way of buying cars and flipping frequently. I have not owned a car for more than 2 years in the last 6. However you have to pay monthly every month

In terms of the end values. They are called gaureteed future values (gfv) and they will always be quoted to you on any finance paperwork
Pretty sure it’s called optional final payment now incase the car isn’t worth it at the end.

Also I don’t agree it’s a good way of flipping frequently. Many on here are still in neg ex after 2/3 years so unless your rolling it into the next then your still paying for it.

Not trying to create a debate, just a word of warning to others as you make it sound easy to get out and into another car
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Re: getting my head around PCP

Post by davidv111 » Wed Jul 18, 2018 7:31 pm

Tricky401 wrote:
Wed Jul 18, 2018 7:12 pm
davidv111 wrote:
Wed Jul 18, 2018 1:20 pm

It is a really good way of buying cars and flipping frequently. I have not owned a car for more than 2 years in the last 6. However you have to pay monthly every month

In terms of the end values. They are called gaureteed future values (gfv) and they will always be quoted to you on any finance paperwork
Pretty sure it’s called optional final payment now incase the car isn’t worth it at the end.

Also I don’t agree it’s a good way of flipping frequently. Many on here are still in neg ex after 2/3 years so unless your rolling it into the next then your still paying for it.

Not trying to create a debate, just a word of warning to others as you make it sound easy to get out and into another car
With a little bit of maths you can do it quite painlessly
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M135i for 24 months and now in my 440 all through PCP and never had to pay any negative equity apart from £870 when I got out the 135 that I paid off in cash and didn’t roll over

So it can be done. But yes I agree get it wrong and it can be painful
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Re: getting my head around PCP

Post by Octavius » Wed Jul 18, 2018 7:51 pm

What deposits did you put down David as that has an impact.
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Re: getting my head around PCP

Post by SOL111 » Wed Jul 18, 2018 8:09 pm

That doesn't sound very painless lol.

Buying new, getting rid after a short time and breaking even (more or less) requires a fair amount of liquidity.

Unless you're getting some stonking deals :D

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Re: getting my head around PCP

Post by clarkeysntfc » Thu Jul 19, 2018 4:09 pm

Just to point out that PCP is not the same as leasing.

PCP = Personal Contract Purchase, and the clue's in the name. If you actually want to take ownership of the car it's very expensive. If you don't then lease it via a lease company.
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Re: getting my head around PCP

Post by Octavius » Thu Jul 19, 2018 6:46 pm

David. What deposits did you put down ?
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Re: getting my head around PCP

Post by ASB1960 » Thu Jul 19, 2018 8:52 pm

In terms of tax breaks:-

1. If the car is owned by a LTD you are not going to get a PCP.

2. If the car is owned by an individual who happens to be self employed then the tax situation is the same as any other vehicle i.e. either apportion costs and claim capital allowances or assuming eligible use amaps rates and pay personally. Dont forget that the interest on the loan even when uaing simplified expenses is usually chargeable (a bizarre quirk of using a private car which is financed in any way within the s/e business).
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Re: getting my head around PCP

Post by msej449 » Thu Jul 19, 2018 10:49 pm

I'd always recommend having a baseline option of buying outright through using a personal loan, or mortgage, offset, or even borrowing off parents. Then use this as a comparison for the other options that you have.

On my previous 3 Series it turned out that going for part-exchange and BMW Finance was better in a number of ways. This time 'round it worked out just buying cash up-front, using an offset mortgage, was better.

It all depends on your needs and circumstances at the time.

Second time 'round it turned out buying saved £4100 vs BMW financing over 3 years. I 'repaid' my offset 'loan' over about 20 months but different amounts each month, depending on my outgoins. Even given the mortgage interest charges, I still saved money.

I've loaned my children money to buy a car and got more interest than I'd get from the bank while they pay far less interest than with any form of finance, so we both won out. So worth exploring more than just one way of financing things ....

My only other points would be (a) borrowing almost always costs you more than paying cash up-front (all other things being equal) and (b) 36/48 months can be a very long time if your circumstances change early on in the contract. With my 3 Series a,bout 20 months into the contract, I changed jobs and wasn't doing the long motorway cruising any more - the car didn't suit my driving needs but I was saddled with it for another 16 months before being able to change. You do need to be sure that you can cope with something serious happening during the contract, e.g. losing your job and being unemployed for 6 months.
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