# Leasing a car on a personal lease vs withdrawing LTD funds to buy it for cash?

Every book, radio show or podcast for people wanting to become/stay wealthy would advise against leasing a car. I agree a car itself is an expensive toy and lease even adds to this equation, but...

If I have a choice of buying a car, for which I would need to withdrawal my limited company funds and hitting higher tax bracket of 32.5%, or, leasing it via personal car hire, wouldn't it make more sense to lease it?

Let's say the car costs £25k - it means I would have to pay £8125 in tax which totals to £33,125.00 or - pay an initial payment of £1,800.00 + let's say 24 * £300 which totals to £9,000.00

I am assuming that for the yearly lease cost, I would have to pay the higher bracket tax because the funds would be withdrawn from my LTD company account which is £2,925.00 thus the total cost of the lease is £11,925.00.

Now, if it was a purchase of the car for cash, in 2 years the car would lose value, I think it's safe to say it would lose £5,000.00 over 2 year period. So I could sell it for £20,000.00.

From the above calculations, it seems that if I was planning to drive the car for two years, it's cheaper to lease it than buy it for cash under these circumstances.

Summary:

Note: Higher tax bracket on dividends over £32,000.00 a year is 32.5% - I am assuming I have already reached the limit of £32k

Lease:

• initial cost: -£1,800.00
• initial tax: -£585
• ongoing cost: -£300/month
• ongoing tax: -£97.5/month
• lost value of car: £0
• total: -£11,925.00

Cash:

• initial cost: -£25,000.00
• initial tax: -£8,125.00
• ongoing cost: £0
• ongoing tax: £0
• lost value of car: -£5000 (over 2 years)
• car sold: +£20,000.00
• total: -£18,125.00

I am not taking under consideration car insurance, fuel nor repair costs as these are irrelevant for the purpose of this question.

Am I missing something or the financial advisory books just focusing on people working as employees?

• Your arithmetic is wrong. The cost of the second option, in the terms that you’re expressing it, is £13,125 — £8,125 in tax and a £5,000 loss on the sale. Commented Sep 29, 2018 at 15:25
• But I am also "losing" on the higher tax bracket whereas it could be withdrawn more tax efficiently over an extended period of time for example. Commented Sep 29, 2018 at 15:27