Car Lease, Hire Purchase or Straight Car Loan?

I need to purchase a 'new car' and wonder if anyone can offer advise on the most cost effective route to go down. I am self employed, so was thinking of a car lease? My company is only 2 years old and I am a sole trader.
Where should I look? Should I opt for diesel, so I can reclaim VAT? I will not be travelling the country, but will be doing lots of short journeys.
Any Advice?

Hi, my advice would be to purchase on a straight deal a 1.4 or 1.6 diesel. This would be more economical over shorter distances, look for a Corolla d4d or Opel.

If you get a diesel you can claim the VAT back up front. If you go for a lease you can claim the VAT back off the monthly payments.

Hire Purchase - you are only sole trader 2 years, most banks want you to be 3 years and a homeowner.

If you purchase straight you can claim VAT back upfront, off service costs and can write off a fair amount off the depreciation.

Put it down as company vehicle and i think you can write off about 20% a year.

Hopefully this helps, go to a garage that has a Business Manager and he/she can explain this further and advise on the best option for you.

Above relates to commercial vehicles such as vans, I'm unaware that anyone can reclaim vat on a new car ?

Thanks for the reply Thrifty. I would need at least 1.6, but it would not be a commercial vehicle. Will that make a difference?

Also, is it worth going for a diesel over a pertrol?

Magicpony said:

Thanks for the reply Thrifty. I would need at least 1.6, but it would not be a commercial vehicle. Will that make a difference?

Also, is it worth going for a diesel over a pertrol?

Click to expand...

You can claim VAT back on a commercial vehicle only. (so i believe)

I think you need to draw the distinction between a lease/HP and a loan
Under a lease you will never own the asset, merely rent it, any VAT charged will be allowable provided the vehicle is used for a taxable purpose. The advantage here is that you can get a brand new one hassle free at the end of the lease. A tax deduction will be available for the lease rentals paid

Under HP, this is merely a lease then an outright purchase, once your last payment is made, no VAT is charged on the rentals as this is treated under VAT law as an exempt transaction i.e. just a loan.
Again the HP rentals will be deductible for tax purposes.
The problem here is at the end of the HP agreement you own a vehicle maybe 4-5 years old, which you have to go to the bother of getting rid of yourself

Lastly, a loan to acquire, any interest will be deductible for tax purposes and you may claim the VAT back provided its a commercial vehicle and is used for taxable/vatable purpose

using all that its up to you.