Leasing vehicle query

M

Michael

Guest
I have been approved by BOI for taking out a 5 year lease on a vehicle worth 25k.

Naturally if my business isn't suceeding in 3 months I will want to pull out of the agreement.

I don't want to create anxiety with my manager by asking him, but what are the details/risks of of prematurely ending a lease like this?

From experience, does anyone know how the finances reconciled?
 

Brendan Burgess

Founder
Messages
40,231
Don't go for leasing. It's an inflexible and expensive 5 year deal. You cannot simply walk away from it if it no longer suits you.

Get a car loan instead. If things don't work out, or if you want to upgrade in 3 years, you simply sell your car and repay the loan without penalty.

Brendan
 
B

backinireland

Guest
Hello Brendan, I'm interested in this topic. Hubby setting up as sole trader and we have been advised it may be tax efficient in our case to lease a car. Is this correct? We could pay cash, it's just a question which is the best option.

Thanks

ps love the site, I'm finding it a great source of info, especially having been out of the country for a few years.
 

Brendan Burgess

Founder
Messages
40,231
I don't think that it can be tax efficient, especially if you have the cash to buy the car. Even if it was tax efficient, it makes no sense to incur an unnecessary expense just so as to get tax relief on it.

Your husband should simply buy the car and charge expenses to his business. If the business buys or leases the car, the amount of the expenses claimed for tax purposes are severely limited.

Brendan
 
D

DEECIDE

Guest
I'm self employed and had a vehicle on lease a few years ago. Didn't have the cash up front so took out 5 year lease followed up by a secondary lease for 3 years. I'm not an expert on this but from memory I think the reason for the secondary lease is that when you're making the payments you don't own the vehicle , the finance company does . If you make all payments in 5 years the vehicle then comes into your accounts at its value. For example vehicle is 25 k new and after 5 years value = 12 k , which comes into your accounts as asset/profit ??? If you take out a secondary lease for three years at about 150 ? euro per year ( specify this when setting up lease ) then the vehicle will come into your accounts at 8 years old and at a lower value 6 K ?? .Not sure about trading in or selling mid lease. I think there was a change in the last few budgets and my accountant told me Hire purchase was the way to go when I bought another vehicle last year. Talk to an accountant rather than your bank manager . NIB gave me a far better deal than BOI even though all my dealings were with BOI. Hope this explanation makes sense and feel free to correct it.
 
B

backinireland

Guest
Thanks for quick reply Brendan, will pass suggestion on...
 

Brendan Burgess

Founder
Messages
40,231
taffy asked in a separate post:

Does this apply to other capital items e.g. computer equipment?
The leasing costs of computer equipment are allowed in full for tax purposes. So too are the interest costs of any loan. (Repayments on a vehicle are restricted by a complex formula)

From a business point of view, it is far more simple and flexible to buy something rather than lease it. You can pay the loan off early if your cash flow allows. Therefore, if possible, you should get a term loan from your bank

Brendan
 
T

taffy

Guest
leasing etc.

thanks. straight forward and clear advice
 
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