Company Vehicle Finance - What are some of the pros and cons?

[v2Media]

My old magna is on it's way out and I need to look into replacing it with a company car. The magna was a depreciating asset in my previous, sole proprietor business, which ceased trading last financial year.

I've received contradicting advice from multiple sources and was wondering what financial solutions SBF members are using and if you'd recommend that solution.

On the top my list of finance options is a goods & chattel mortgage. Only because this option hasn't been contradicted yet.

[YVB]

My Company has a chattel mortgage on the last car I bought (this year) and have no issues, GST is also claimable in one instalment but of course the private mileage attracts FBT. I have an excellent contact that has looked after my clients, family and personal financing for over 10 years and he'd be able to give you the pros and cons of each option. Sydney based but he has financed a Brisbane client to $1.5 million previously so can operate up there too.

[v2Media]

I quite dislike listening to accounts' double-speak. It never ceases to amaze me how accountants contradict each other. I've already spoken to 2 accountants and would rather not add a third to the mix. The thrust of my post was for members' experiences; what has worked, what hasn't.

[Chris Bates]

That's why you go see a real accountant who's got pretty eyes, not the stuffed shirts! Have a yarn with Janna (www.fletchertaxaccountants.com.au)! Or Farid (www.atpaccounting.com.au), I guess he's got pretty eyes too.

[YVB]

I'm not sure where you've got the impression I was offering an accountant as a source of information in this instance - the contact I am referring to is purely financing of all sorts of assets and has helped me as recently as this year do exactly what you're asking about?

In short that's my experience and it worked.

[v2Media]

I have an excellent contact that has looked after my clients, family and personal financing for over 10 years and he'd be able to give you the pros and cons of each option.

I assumed your contact was an accountant.

[JakeThomas]

Hi Mark,

I haven't personally dealt with this before, so can't offer personalized advice.

However, I can back up what Chris said about Farid and Janna - I've recieved advice from both of them before and as far as accountants go, they are really in a league of their own.

I'll send them an email letting them know to jump into this thread.

- Jake

[Farid Zaki]

Hi Mark,

There are two main issues in your question, Firstly should you buy the car under the company name, claim gst and expenses on the company return and pay Fringe Benefits Tax on the private use of the car OR buy it under your personal name and claim the expenses as work related expenses against the salary you will be drawing from the company. Secondly which finance option to use.

It depends on three factors, your business percentage usage, your income and tax payable bracket and also on whether you would like to own the car at the end of the term.

So you buy it under the company if your income & tax bracket is high and your business percentage use is high.


In reference to finance their are a lot of names used for different product, the most common are:

- Commercial Hire Purchase or Chattel Mortgage, you claim GST upfront on purchase of the car, and claim depreciation & interest as expenses, it has no residual which means it will be paid off at the end of the term.

- Lease (long term rental), you claim GST on the monthly repayments and lease payments as deductions, it has a residual value, which needs to be paid as a lumpsum at the end of term to own the car.

So if you want to own the car at the end of the term without having a big lumpsum to pay and you can afford the monthly payment choose CHP / Chattel mortgage.

Hope that helps.

And for Jake & Chris, thank your for your kind words, I really appreciate it.

[FletcherTax]

Great summary by Farid above.

I would strongly suggest you understand the implications of all of the options summarised above, especially if you go via the Company route.

Happy car hunting!

Janna

[FletcherTax]

Sorry one last thing to clarify

The advisers that would be most suited to answer this query would be an accountant (as they look at types of finance options plus affect on your particular tax situation) or a professional specialising in purely obtaining you finance and finance options (whether mv, equipment or property). In practice, the advice does get a bit blurred by some.