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EV purchase Cost Comparison: business vs personally

  • 19-12-2021 5:01pm
    #1
    Registered Users Posts: 10 postgrad16


    Hello

    I have done some back-of-an-envelope calculations to see if it is still more cost efficient to buy an EV through your business rathter than personally, given the upcoming changes to BIK allowances.

    I would be grateful if you could advise if it looks correct.

    I have kept fuel/charging costs out of the equation as both options would involved primarily charging both at home and work so it balances out.

    I have assumed an effective income tax rate of 48%.

    I have assumed that if the business purchases it, all costs associated with the EV will be borne by the business. If you purchase it personally, I have assumed that you will increase your salary to cover all costs (except for BIK). I think this is the best way of comparing like with like.

    I understand that VAT isn't recoverable by the business for Cat A vehicles.

    I have assumed purchase price of €55k, which increases to €60k if bought through businessdue to loss of SEAI grant.

    These costs are over an assumed ownership period of 5 years. They assume 70% total depreciation over those 5 years.


    Option 1: Purchase through office (but pay BIK personally)


    BIK costs (Option 1)






    Option 2: Purchase EV personally and increase Gross Pay accordingly to cover costs



    So, in summary it looks like if you were to purchase through the business, it would cost the business about €54,100 over 5 years plus about €6700 in BIK.


    If I were to purchase the EV personally, you would need to increase your gross pay by €94,272 to cover the costs.


    Overall, even with the changes to BIK, it looks like it still makes sense to purchase it though your business, if you have that luxury.


    The above are rough figures, but I would be grateful for your thoughts, or if you think I have missed out on anything.



Comments

  • Registered Users Posts: 10 postgrad16


    OP here again.

    I forgot to allow for writing off the cost of the vehicle in business profits for Option 1.

    I understand that if a business purchases a passenger EV, the business can write €24k of the purchase cost, and all in the first year.

    For Option 1, there is therefore a further savings on corporation tax of €24,000 x 13.5% = €3240


    Hope that is correct?



  • Registered Users Posts: 21,864 ✭✭✭✭ mickdw


    Over 5 years It's 54k plus 25k bik if business buys

    Or 94k cost to you buying private.

    Surely you should calculate your increased wages needed to cover bik on the business purchase to get a like for like overall cost.



  • Registered Users Posts: 10 postgrad16


    Your right. So taking my second post above into account

    Option 1 Buying through business:

    Cost €54,000

    BIK: 25,000

    Income tax on BIK required: €24,000

    Less saving on corporation tax: -€3000

    Total cost Option 1: 100k approx

    That changes things a bit....



  • Registered Users Posts: 1,995 ✭✭✭ colm_c


    When bik was 0% it made total sense to buy via company.

    Now, not so much.



  • Registered Users Posts: 701 ✭✭✭ Buzwaldo


    You have allowed no BIK costs for 2022. The allowance currently is 50k so you will be paying BIK in 2022 on 10k.

    I think it would be worthwhile to do the calculations with the idea of buying the car from the business at the end of 2024 (or even 2023 or 2025). Get the benefit of reduced BIK when it’s worthwhile. Would depend on what valuation you could buy the car out of the business for.

    Also I’m assuming you won’t be doing many genuine ‘work related’ miles in the car. If you are, this reduces BIK.



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  • Registered Users Posts: 701 ✭✭✭ Buzwaldo


    Also, while you can write off only a percentage of the capital cost ( and in an accelerated fashion as you state) all of the running costs insurance service tax etc will be business costs and again reduce the corporation tax a bit.

    Plus, while the headline corporation tax rate is 12.5% (not 13.5), unless you are paying out dividends, there is an additional tax of about 7% I think, which brings effective rate to about 20% or so. I’m not 100% sure on this though - you should really get your accountant to do those sums to get the true pros and cons.



  • Registered Users Posts: 126 ✭✭ ruaneg


    I have similar plans to yourself. Im going to hold for 2 years, and then trade in for something with a lower OMP. Hoping that in 2 years time there are some decent options at the lower price ranges. Otherwise, ill sell to myself perhaps.


    Also, depreciation for cars (especially electric it seems) is lower than normal at the moment. No telling if that will hold true in the future, but Im hoping depreciation will stay low for the next couple of years at least.



  • Moderators, Sports Moderators Posts: 16,443 Mod ✭✭✭✭ slave1


    Although it's on both columns, your service costs are too high unless you're doing savage mileage and replacing tyres every year.



  • Registered Users Posts: 255 ✭✭ jordan191


    you can also claim back 20% of the vat on a new company bought EV as long as 60% of your mileage is for your business,

    i'd also think your car value after 5 years is too low, i recently sold a 2 year old EV (similar value) & only lost around 7.5% of purchase cost after 2 years & 50K


    also i think BIK rate for Evs will be 22.5% in 2023, rather than 30% so your BIK bill should be lower



  • Registered Users Posts: 214 ✭✭ SomeGuyCalledMi


    Maybe you need to factor in the tax on the wages you need to buy the car from the company after 5 years.

    Wonder can the company pay for the cost of installing a home charger?



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