Vehicle loans - what's your experience?

[dumbskate]

 Shale said:

Good business accountants cost what little profit she has left over for the year Appreciate that not all small businesses = big bucks.

I help support new and growing businesses with decision like this all the time and your mum is heading in the worng direction with her business.

I know its not the original question but take it from someone who owns his own business, buys his cars through it and has also watched his own mum loose her lively hood through this kind of half baked "business" move please listen up.

First off your mum has a business that doesn't make much money right? Buying a 20k car wont change that. What it will do is give the business something called negative leverage. All that really means is your mum will be shooting her business in the foot before it even gets started.

She has a car right now and I understand the want to get a nice looking car and believe me the first time I had my business written on the side of a car it was a very proud day. Anyone on here can tell you that $7k can buy her a very nice late '99-00 Legacy without any debt what so ever.

On the G.S.T, F.B.T and Accountant front she needs professional advice. Possible part of the reason she has not is they would be telling her the same thing I am. A business survives by earning money not debt. Any reputable accounting firm will take her on as a client and she will not pay anything until the end of the first filing year. Even then the cost to file annual returns for small business is only about $800 which happens to be how much interest your mum would pay on a $10K per year if she was repaying the loan at $400 per month.

If she hasn't already, Your mum needs to register her company, sign up to GST and Possible FBT (Fringe Benefit Tax for the company owned car). You don't need GST when your are making money. GST is your friend when your spending money and that is now. This would include the $1,000 of GST she would be able to claim back from buying her $7k car.

If she has any problems finding a good accountant contact Bruce Rankine of Bullot and Rankine Accountants http://www.b-r.co.nz/

[ODB]

F n A!!

[Shale]

 dumbskate']

[quote name='Shale said:

Good business accountants cost what little profit she has left over for the year Appreciate that not all small businesses = big bucks.

/quote]

I help support new and growing businesses with decision like this all the time and your mum is heading in the worng direction with her business.

I know its not the original question but take it from someone who owns his own business, buys his cars through it and has also watched his own mum loose her lively hood through this kind of half baked "business" move please listen up.

First off your mum has a business that doesn't make much money right? Buying a 20k car wont change that. What it will do is give the business something called negative leverage. All that really means is your mum will be shooting her business in the foot before it even gets started.

She has a car right now and I understand the want to get a nice looking car and believe me the first time I had my business written on the side of a car it was a very proud day. Anyone on here can tell you that $7k can buy her a very nice late '99-00 Legacy without any debt what so ever.

On the G.S.T, F.B.T and Accountant front she needs professional advice. Possible part of the reason she has not is they would be telling her the same thing I am. A business survives by earning money not debt. Any reputable accounting firm will take her on as a client and she will not pay anything until the end of the first filing year. Even then the cost to file annual returns for small business is only about $800 which happens to be how much interest your mum would pay on a $10K per year if she was repaying the loan at $400 per month.

If she hasn't already, Your mum needs to register her company, sign up to GST and Possible FBT (Fringe Benefit Tax for the company owned car). You don't need GST when your are making money. GST is your friend when your spending money and that is now. This would include the $1,000 of GST she would be able to claim back from buying her $7k car.

If she has any problems finding a good accountant contact Bruce Rankine of Bullot and Rankine Accountants http://www.b-r.co.nz/

This is good advice. She's sort of tried going down this route before but managed to hit & miss with the accountant - refused to let her claim anything and cost her QUITE a lot of money so she's a little cautious when it comes down to it Good you actually posted up a suggestion as to a better one though - the previous one charged her over twice as much and it was not worth the tears.

I have a feeling the car will come AFTER the pilates starts - the amount of cash that tends to generate would help pay off a car within a year. And the other car she wants to get - 'the runabout' - is a blue SRX hatch, and those go for a mere $7k. At any rate the Honda has to go. It uses as much fuel as my turbo Legacy, goes less than half the pace, and is about to cost a HUGE amount of money because everything is worn out and needs replacing.

I'm definitely going to send that link to her though, she DOES need a good accountant. Where dad's lets him claim all manner of absurdities, mum's previous one...yeah. Didn't even let her TOUCH the car, despite travelling SPECIFICALLY for the business...and that's just the beginning.

[dumbskate]

Glad I could help.

But as I have said above don't borrow for anything that will not directly increase the income of the business. Trust me many poeple have ignored this rule and have lost it all. If things don't go as well as forecast (and they almost never do) that $200 per week it would take to pay the loan off in one year could come in really handy actually keeping the business afloat.

Have your mum call my accountant and also get her to look into the actual numbers involved in borrowing 10K using the calculator below. I based my numbers for her on borrowing 10k at 13% but she get an unsecured loan in this economic climate the interest rate could be a lot higher a much bigger liability.

http://www.sorted.org.nz/calculators/get-out-of-debt/