Self Employed New Car or Used?

PhotogTom

Hi,
I'm feeling overwhelmed and need some advice.
After years of driving a company car - mostly a Passat - I'm going to leave and start my own company. So, I need to buy/lease a car.
I've got loads of questions - so any advice would be welcome!
A bit of background - I'll be dealing with business owners, lawyers and accountants so I don't think I should show up in a Punto or Yaris! I'll be driving all around the country and expect to put 50k or so kilometers per year on the clock.
Questions/points:
1) Buy new with lower tax band and fewer maintenance issues?
2) Buy used to keep acquisition costs down?
3) If used, what is the "sweet spot" between age, cost and maintenance issues?
4) What should I buy? I've been happy enough with the Passat.
5) I do enjoy my gadgets like sat nav, blue tooth, etc but if I get an older car I can always use my smart phone and a Bluetooth headset.
6) What type of financing/lease should I go for?
7) I've got €750 per month budgeted. Is that enough? I'd guess I'd be putting in about just about €300 in fuel (diesel) each month - does that sound about right for 50k kms per year?
8) If I go used, I thought I'd set aside €100 per month for maintenance. Is €1200 per year enough?
More questions than answers right now so as I say any and all advice would be much appreciated. Last point, I suppose is that I need to get the car on the road, so to speak, by the end of June.
Thanks

Eric Cartman

if your going to be self employed you can buy yourself a commercial vehicle and avail of commercial tax. Also if you get a vat number you can get the VAT back on diesel.

Id recommend a commercial estate / 4x4.

Foxhole Norman

I recommend a 2.0TDi Superb in Elegance Spec, comes with everything, heated front and back leather seats, Nav, Self Parking, parking sensors you name it. Should be well able to get a brand new one with that €750 a month budget.

For Forks Sake

Eric Cartman wrote: »

Id recommend a commercial estate / 4x4.

Thats your answer to everything on here

Eric Cartman

For Forks Sake wrote: »

Thats your answer to everything on here

I reccomend a lot of luxobarges too

Damien360

If you buy secondhand, cost your finance over 3 years. Calculate the car loan costs based on that. No point financing for longer than you plan to keep the car.

Are you including your diesel of €300 in the running costs of €750. Do not forget your insurance costs. If you have a home car already and are keeping it, then the acculumated no claims bonus does not transfer to the new work car. Insurance will be high for a few years.

Depending on the car, 50,000km per year will need to account for major service costs at some point in it's life and not just an oil change. Get to know a good indy. Are you including €100 maintaince costs in the €750 (which is low if you consider change of tyres once a year minimum and major servicing costs).

The loan will be the biggest headache. If it costs you €1000 per month, then you need to make that before paying yourself. Can you consider an ex-post office caddy van (low mileage and well looked after). You can always get something nicer when things are going well and yo know all your costs in buisness.

Finally, best of luck in your new business.

PhotogTom

Hi,
Thanks for the responses.

My reading of the Revenue.ie site says that a saloon or estate does not qualify for VAT reclaim. I'm assuming that it also won't qualify for commercial tax rates.

Having said that, is there any issue with a 4x4 qualifying for commercial rates if it isn't needed for actual business reasons? I won't be hauling anything around except myself! I can do without the rear seat, if needed though. And, I understand I'm not supposed to stop by the grocery shop, etc.

Seems to be some question over the €750 per month being enough. What would a major service and four tyres for a Skoda Superb and/or Passat run? I was figuring I'd be able to get into some sort of decent car, insurance, fuel and service costs for €750 - what do you think?

I appreciate the luck by the way. I'm sure I'll need it!

If you buy or lease a car you'll be paying BIK on it, with the mileage you mention that's not a huge issue as if there's lots of business miles the BIK is reasonable enough.

If you use your own privately owned car for business miles you can claim mileage as an expense, folks commonly use the rates from here...

http://www.revenue.ie/en/tax/it/leaflets/it51.html

Say 40k kms of the 50k kms are business miles, that's 6437 x €0.5907 + 33563 x €0.2846 which is €13354 ish.

Might be something to consider, you could finance a small car loan with that as well as covering your fuel and other running costs. Just an option to keep expenditure down when starting out with a business, mightn't suit you at all

lomb

What about an 08 or 09 avensis or passat? Pick one up 10-12k , sell after a year loosing 3k say and pocket the 750 a month which is 9k a year!
Its horses for courses I suppose, Im sure you could get a brand new car for that 750 but would it not be best to hold back your money for a rainy day fund especially if new start business.
Just re read your post and see you want fuel insurance etc for the 750, I think you def need to be looking at an 08 or 09 diesel tbh.

mickdw

750 to include 300 fuel, insurance which would be 50, tax 20, servicing 50 (600 per year min), tyres 50 (1 set at 600 per year,) leaving €280 max to finance the car. Not going to get much of a new car for that.

Pottler

What you do will be a factor - not much point reccomending a caddy if you are going to be a consultant. One of the smartest(and wealthies)consultants I ever worked with drove a 3 year old Commercial Landcruiser that he bought at 2.5 yrs old-"let someone else take the shine off it" was how he put it. He is strictly suit and tie but reckons the Jeep gives him an air of "down to earthiness":D It also lets him claim back the Vat and his diesel costs.

CiniO

Eric Cartman wrote: »

if your going to be self employed you can buy yourself a commercial vehicle and avail of commercial tax. Also if you get a vat number you can get the VAT back on diesel.

Id recommend a commercial estate / 4x4.

Can he get VAT back on vehicle price also?
If yes, does it makes any difference if it's new or used, or goods or passenger vehicle?

PhotogTom

I was pretty much figuring on a used car. But that's sort of the point of the original question — how does overall cost of new v used stack up?
Used has lower purchase cost but higher running, maintenance and tax costs than new.

R.O.R

Firstly, forget about leasing. A new start up, sole trader with no trading history - no one will touch you, and no one is doing personal leasing so that is out.

If you are buying new, through the company, you can reclaim 20% of the VAT paid as long as the car is used for 60% business. Might be worth factoring this in when weighing up new vs used, but used will probably come in cheaper.

A car based commercial would be a decent idea. Looks like a car, but you can reclaim all the VAT on the purchase. 4x4's are going to be expensive to run over 50,000km a year, and not sure if a Golf / Focus van would give off the right impression. If you can find one, a Passat Estate commercial might fit the bill. Only ones I've ever seen were 2009 and they are rare enough as I think it was only Belgard selling them.

For maintenance, on a brand new car in tax band A, we'd be budgetting between €1,600 and €1,900 (ex. VAT) a year for Mondeo / Passat. That's all servicing / maintenance / tyres / road tax but not fuel or insurance, at 50,000km per year over 3 years.

You'll be looking at financing the full amount, so take that in to consideration. I also wouldn't be planning on keeping whatever you go for for more than 200,000km - it's around that mileage that vehicles start to spend as long in the garage being repared as they do on the road, and when you are self employed, if you are sitting around in a garage (or at the side of the road) you aren't earning. I'd also be looking for something with fairly long service intervals so you spend less time in the garage and more time out earning. VAG cars have 30,000km long life intervals whereas Toyota have 15,000km, so for every day you lose for service in the VAG, you'd lose 2 for the Toyota. It's also more likely that the VAG will breakdown more frequently though............

PhotogTom

Hi, I appreciate the replies, etc. Financing is not a problem as I will have that in place before I start.
Are you sure about the car based commercial? My reading of the revenue.ie site does not support that idea and in fact, specifically rules it out. But, maybe I'm reading it wrong and pulling out the back seat turns it into a commercial? In which case I should be able to do that with any four door - no?
Can you support the 1600 to 1900 a bit more? On a new care, I would have thought 400 for tyres (probably going to last more than 25k anyway), no service as its under warranty, should only need two services at 200 each and tax would be 160. That would make 1200 more than enough I would have thought.
Has anyone done a comparison chart for a three year ownership comparing a 4 year old used car v new? I suppose that's what I really need to do to work it out.

Eric Cartman

CiniO wrote: »

Can he get VAT back on vehicle price also?
If yes, does it makes any difference if it's new or used, or goods or passenger vehicle?

If bought from somebody vat registered he can, makes no difference if its new or used, but it has to be a commercial vehicle.

R.O.R

PhotogTom wrote: »

Hi, I appreciate the replies, etc. Financing is not a problem as I will have that in place before I start.
Are you sure about the car based commercial? My reading of the revenue.ie site does not support that idea and in fact, specifically rules it out. But, maybe I'm reading it wrong and pulling out the back seat turns it into a commercial? In which case I should be able to do that with any four door - no?
Can you support the 1600 to 1900 a bit more? On a new care, I would have thought 400 for tyres (probably going to last more than 25k anyway), no service as its under warranty, should only need two services at 200 each and tax would be 160. That would make 1200 more than enough I would have thought.
Has anyone done a comparison chart for a three year ownership comparing a 4 year old used car v new? I suppose that's what I really need to do to work it out.

Not sure I understand the question about the commercial vehicles. If a vehicle is classed as a commercial then the VAT can be reclaimed on the purchase (or monthly lease costs), whether it's new or used. It's no longer possible to buy a new passenger car and convert it to commercial status, and if you buy a new passenger car then you have to pay the full VAT and VRT, even if you were to turn it in to a commercial afterwards.

You may get away with €1,200 in the first year of ownership for tyres/tax/servicing, but it's not going to cost just €3,600 over 3 years. At 50,000km per annum you will end up having to replace something out of the ordinary - most likely clutch and flywheel. Could be looking up to €1,500 for that alone (depending on vehicle). No point budgeting for the bare minimum then getting caught out when something goes wrong.

I don't see how 50k kms and on service cost for near one equates as its under warranty, there'll still be at least one and it may well not be free.

mickdw

RoverJames wrote: »

I don't see how 50k kms and on service cost for near one equates as its under warranty, there'll still be at least one and it may well not be free.

This post fried my brain

air

RoverJames wrote: »

If you buy or lease a car you'll be paying BIK on it, with the mileage you mention that's not a huge issue as if there's lots of business miles the BIK is reasonable enough.

If you use your own privately owned car for business miles you can claim mileage as an expense, folks commonly use the rates from here...

http://www.revenue.ie/en/tax/it/leaflets/it51.html

Say 40k kms of the 50k kms are business miles, that's 6437 x €0.5907 + 33563 x €0.2846 which is €13354 ish.

Might be something to consider, you could finance a small car loan with that as well as covering your fuel and other running costs. Just an option to keep expenditure down when starting out with a business, mightn't suit you at all

Just to note that you can't pay yourself civil service mileage rates if you're a sole trader, these rates only apply to employees.
These rates were cut significantly in 2009 and with recent fuel cost increases I don't believe it would be possible to even cover your costs at these rates if you're driving a new car.

Damien360

air wrote: »

Just to note that you can't pay yourself civil service mileage rates if you're a sole trader, these rates only apply to employees.
These rates were cut significantly in 2009 and with recent fuel cost increases I don't believe it would be possible to even cover your costs at these rates if you're driving a new car.

I was going to argue that but just googled it and it seems it changed in 2009. I know it's not revenue site but it seems it is on most accountancy service sites.

http://www.sgkaccountancyservices.ie/articles/74-limited-sole

RoverJames

RoverJames wrote: »

I don't see how 50k kms and on service cost for near one equates as its under warranty, there'll still be at least one and it may well not be free.

mickdw wrote: »

This post fried my brain

Two errors, was on mobile, sincere apologies.

I don't see how 50k kms and no service cost for year one equates as its under warranty, there'll still be at least one and it may well not be free

air

Damien360 wrote: »

air wrote: »

Just to note that you can't pay yourself civil service mileage rates if you're a sole trader, these rates only apply to employees.
These rates were cut significantly in 2009 and with recent fuel cost increases I don't believe it would be possible to even cover your costs at these rates if you're driving a new car.

I was going to argue that but just googled it and it seems it changed in 2009. I know it's not revenue site but it seems it is on most accountancy service sites.

http://www.sgkaccountancyservices.ie/articles/74-limited-sole

Not sure which part of my post you're referring to but that link just confirms what I said, you need to set up a Ltd company & become an employee of your company to claim unvouched civil service mileage rates. A disadvantage to that is that you need to pay employers prsi on your own salary.

air

air wrote: »

............
These rates were cut significantly in 2009 and with recent fuel cost increases I don't believe it would be possible to even cover your costs at these rates if you're driving a new car.

The rates I used in the calculations were the current rates.

The current rates at 40k kms business miles a year would cover the costs of a new family saloon comfortably I would think.

Damien360

air wrote: »

Not sure which part of my post you're referring to but that link just confirms what I said, .

I was actually agreeing with you but it came out all wrong