New car - contract hire

EddScott · 5 Aug 2010 at 17:36

A work colleague has been looking at getting a new car through contract hire.

He doesn't mind that he won't own it at the end.

Doesn't want any deposit first and no "balloon payment" rubbish at the end.

Just hire/keep for 24/36 months and hand back at the end.

As the car is new I assume free servicing will be included and theres no MOTs to pay. So apart from tax/fuel/insurance the monthly payment is "all in"

Assuming he's aware of its drawbacks - money spent with no actual ownership being the big one - is it such a bad idea?

A VW Scriocco would be £230 a month for 24 months and it seems you just give it back at the end???

[TW]Fox · 5 Aug 2010 at 17:55

A VW Scirocco costs a lot more than £230 a month, and requires a deposit at the beginning.

Just run a quote, Scirroco has a £1175 deposit, £276 a month, and a £150 processing fee.

Total cost over 24 months is £7673.

This does not include maintenance, so he is responsible for new tyres at £150ish each, and all servicing costs.

This is only 10k miles, with 10p a mile on top of that. So if he does 15k a year for 2 years he will also have to pay £1000 in excess mileage penalty.

sanaxe1 · 5 Aug 2010 at 17:57

Seems you can get one providing your a business user.

Vehicle Specification
Volkswagen Scirocco Cpe 3Dr 2.0 TDit GT 3Dr Dsl

Special Offer Details
VW Scirocco GT 2.0 Tdi (140ps) Coupe. (24 month Contract x 10,000 per annum).

Business User Price
from
£232.54/month

But that only gets you 10,000 miles a year. If thats all he will need then its fine but he will get charged per mile after that.

[TW]Fox · 5 Aug 2010 at 17:58

sanaxe1 said:
Will he be a business user?

The guy is a work colleague rather than a business owner, therefore he must pay VAT on his lease. My figures are what he will pay, not yours.

sanaxe1 · 5 Aug 2010 at 18:00

[TW]Fox;17096006 said:
The guy is a work colleague rather than a business owner, therefore he must pay VAT on his lease. My figures are what he will pay, not yours.

Ah didn't see your ninja edit.

EddScott · 6 Aug 2010 at 10:36

[TW]Fox;17096006 said:
The guy is a work colleague rather than a business owner, therefore he must pay VAT on his lease. My figures are what he will pay, not yours.

Actually, he would be classed as a business owner being a Ltd company so can get the car on business rates. I did find the scirocco for £190+VAT.

Anyway, he won't be looking at the scirocco because he needs 4 doors for the kids. It was just an example.

I'm not sure of the way it works but I guess the Ltd company can use the payments as business expense?

Sone · 6 Aug 2010 at 10:44

even business leases are 3+36 (or 3+24etc), never seen a lease without a big first payment.

[TW]Fox · 6 Aug 2010 at 10:47

EddScott said:
Actually, he would be classed as a business owner being a Ltd company so can get the car on business rates. I did find the scirocco for £190+VAT.

Anyway, he won't be looking at the scirocco because he needs 4 doors for the kids. It was just an example.

I'm not sure of the way it works but I guess the Ltd company can use the payments as business expense?

Then he will pay company car tax on it on top of the lease if its a vehicle leased through the business.

Ring Peace · 6 Aug 2010 at 10:47

If the business owns the car then he will have a benefit in kind, he will be paying company car tax.

Contract hire doesn't usually cost very much more than buying/selling vehicles, the major benefit for companies is that they don't have to become a second hand car dealer.

Personally if you don't mind paying a monthly fee forever then you can constantly have a new to three year old car forever, include maintenance in it and you pretty much have trouble free motoring.

Ring Peace · 6 Aug 2010 at 10:52

Sone said:
even business leases are 3+36 (or 3+24etc), never seen a lease without a big first payment.

Ours are 3+33, the last three months are unpaid, but it all costs the same in the end.

Beware that some leasing companies that have cheap prices will do all they can at the end of the contract to extract more money from you, such as the condition of the car when returned, also excess mileage fees can mount up quickly.

Ev0 · 6 Aug 2010 at 11:31

Pretty much every lease will have some sort of extra payment upfront, usually a +3 but have seen leases with +6 and then lower subsequent monthly payments.

EddScott · 6 Aug 2010 at 13:58

Ring Peace said:
Personally if you don't mind paying a monthly fee forever then you can constantly have a new to three year old car forever, include maintenance in it and you pretty much have trouble free motoring.

This is what he is after.

Personally I thought he should just get a loan similar in monthly cost. Keep the car for 3 years, sell car, have cash you wouldn't have had on hire, get loan buy new car. He doesn't want the hassle of selling a car and if he claims the car loan through the business the sale of the car comes into the business which he pays tax on.

jamief · 6 Aug 2010 at 16:30

[TW]Fox;17095975 said:
A VW Scirocco costs a lot more than £230 a month, and requires a deposit at the beginning.

Just run a quote, Scirroco has a £1175 deposit, £276 a month, and a £150 processing fee.

Total cost over 24 months is £7673.

This does not include maintenance, so he is responsible for new tyres at £150ish each, and all servicing costs.

This is only 10k miles, with 10p a mile on top of that. So if he does 15k a year for 2 years he will also have to pay £1000 in excess mileage penalty.

Thats about the cheapest you'll get one. Often the "processing fee" can be waived, but you won't waive the deposit.

Mileage can probably be put down to ~6p per mile if you try. Or, if you're going to go over, speak to them beforehand and you'll get a big discount if you renegotiate your mileage during the term.