Many people spend a significant amount of money on their car payments each month. However, by changing the way you buy a car, you can reduce this expense by almost 50 percent. In this video transcript, I’ll explain how it works and how you can get a new electric car for almost half the price.
There are two different ways to buy a car, and I’ll walk you through how the numbers work differently for both options and which one will save you the most money. We will also discuss other factors to consider when purchasing a new electric car.
This video is part of a series focused on personal finance and building wealth. For demonstration purposes, I’ll be using the Tesla Model 3 as an example with additional features, bringing the total value of the car to £50,000.
Buying the Car Outright
The first way to buy a Tesla, or any car, is by purchasing it outright under your personal name. In this scenario, you use your salary to buy the car after paying taxes on your income. For example, if you earn £75,000 as an employee, you would pay taxes on that amount, leaving you with just over £52,000 to purchase the £50,000 Tesla Model 3.
Buying Through a Company Structure
The second option involves buying the Tesla within a company structure, which is beneficial for new electric cars due to substantial tax savings. By purchasing the car within your company, you can write off the full price of the car against your profits for the year, resulting in significantly lower taxes compared to buying the car personally.
Benefit in Kind
When buying an electric car within a company, the benefit in kind rate is much lower, as the government aims to incentivize the purchase of clean cars. For a Tesla, the benefit in kind rate is currently only two percent of the car’s value, resulting in minimal personal tax on this benefit.
With the tax savings from buying an electric car within a company, you essentially get the Tesla for nearly half the price, providing a great opportunity to invest the saved money in assets that will compound over time, such as stocks and shares.
Other Considerations
Electric cars also offer savings in other areas, including lower maintenance costs, no congestion charge, no road tax, and lower charging costs compared to fuel. Additionally, insurance for electric cars is 100% tax deductible, further contributing to overall savings.
While buying a new car is not always advocated due to tax savings, it can be a viable option, especially considering the high prices of used cars. Lease and finance options are also available for those considering buying an electric car.
By utilizing all the tax advantages that come with purchasing a new electric car, the overall savings can be substantial, making it a compelling option for many individuals.
Thank you for watching and remember to share this content to spread awareness of financial education. For more content on car financing options, check out my other video on buying a finance or leasing a new car.
How can I reduce my car payment by almost 50 percent?
You can reduce your car payment by almost 50 percent by changing the way in which you buy a car. The video explains two different ways to buy a car and how the numbers work differently for both. It also discusses the tax advantages of buying a new electric car within a company structure.
What are the two different ways to buy a car?
The two different ways to buy a car are buying it outright under your personal name or buying it within a company structure.
How do the tax savings differ between buying a car under a personal name and within a company structure?
When buying a car within a company structure, the tax savings are significant due to tax deductions and lower benefit in kind rates for new electric cars. This results in almost 50 percent savings on the car’s cost compared to buying it under a personal name.
What are the other factors to consider when buying a new electric car?
Other factors to consider when buying a new electric car include lower maintenance costs, tax advantages on charging, insurance, and the overall savings from tax deductions. The video also suggests considering lease and finance options, as well as provides a referral link for purchasing a Tesla.