It’s important for employees of companies that provide company cars to follow some guidelines when it comes to acquiring and financing their vehicles. If you’re looking for a new company car, here are some tips on how to finance it.
Decide How You Want To Pay For It
There are four ways to pay for your new company car; make this decision before you head into the dealership so that you can get exactly what you want.
Lease – Leasing is a very popular way of buying company cars nowadays because it’s so flexible – all payments are pre-determined at the beginning of the lease, giving both parties security and peace of mind throughout its duration. You don’t own the vehicle when leasing, but it becomes yours at the end of a lease. This is a great option for those who don’t know their long-term plans as it can end at any time.
Purchase (also known as finance) – When you purchase, or finance, your company car, you pay for the vehicle upfront – there are no monthly payments involved. You own your company car after financing; this Lexus dealer recommends that you make sure that all loans are paid on time because failure to do so will impact your credit rating negatively by increasing borrowing costs and could even lead to repossession of the car until the debt has been cleared.
Cash Buyers – If you want to avoid paying interest in any way possible, then buying with cash will probably be your best bet, but it isn’t always an option.
Hire Purchase – This is a common way of financing company cars because you can still benefit from tax advantages and it’s repayable over a year. It also allows you to make monthly payments so that it works around your budget and gives you more flexibility in terms of when you pay the total amount due for the vehicle.
Work Out Your Budget
You need to do some research before you go into your dealership and find out exactly how much money you’ll be able to spend on your new company car, taking all aspects into account – not only the price itself but also taxes, finance costs, etc. Remember that if you fail to afford the amount needed for a repayment plan or hire purchase, you can opt for a personal loan to cover the costs until everything will pay off.
Don’t just choose the first dealership that you come across because they’re offering the best deal; in fact, it’s not unheard of for dealerships to purposefully make their offer appear more appealing than their competitors’ deals by changing figures such as deposit or monthly fees. Do your due diligence and shop around – find out what everyone else is offering before you make a decision. This way, you’ll have an accurate idea of whether or not the deal on the table from your preferred dealer is as good as they claim it to be.
Factor In Tax
You can either pay for your new company car in full or you can choose to make monthly payments – either way, the amount that you’ll have to pay is not just related to the price of your vehicle but also tax. When you purchase a new company car with finance, part of your monthly repayments goes toward paying off the cost of the vehicle and part of it goes toward paying any applicable taxes.
The amount paid for tax depends entirely upon whether or not you’re a standard rate (20%) taxpayer. If you are, then all vehicles worth more than £40,000 attract 20% VAT at purchase so it’s important to factor this into your costs. If you’re a higher-rate taxpayer (40%), then cars priced at over £40,000 attract 5% VAT and you can claim the difference back from HMRC.
Insurance Is A Must
Finally, don’t forget to buy appropriate insurance as soon as you have your new company car registered in your name because it’s obviously vital that it is covered against any risks. Most finance companies will include comprehensive insurance cover in their agreement when they’re lending you money for your vehicle. If not, then do some research into different companies and brands to find out who offers the best deals on comprehensive coverage.
If you’re looking to finance your new company car, then the best approach is usually a hire purchase that allows you to spread repayments over a year. You’ll save money on interest and won’t have to commit a high lump sum of cash at once, so it’s an ideal solution for those who are struggling financially or don’t want to spend all their savings on one big expense. Remember that cars come with different tax rates depending upon how much they cost in total (if you pay £20,000 for a vehicle then you only pay 20% VAT) so do some research into this aspect as well because it will affect your monthly payments. Finally, it’s important to buy appropriate insurance from the moment that your new company car comes into your possession because doing so can save you a lot of money in the long run.