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Cash Purchase V Finance Agreement*
A profitable business looked to purchase a piece of equipment.
The business explored the most cost effective and tax efficient method
of payment. The following comparison was calculated.
| Cash Purchase |
£6,500.00 |
|
3 Year Finance |
£6,500.00 |
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£6,500.00 finance (10%
Deposit then 36 x £201.35) |
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Interest lost from using
money from bank @ 5%
Year 1 - £325.00 / Year 2 - £341.25 / Year 3 - £358.31 |
|
Interest gained from money
in bank @ 5%
Year 1 - £325.00 / Year 2 - £341.24 / Year 3 - £358.31 |
| Total Interest Lost |
£1024.56 |
|
Total Interest
gained |
£1,024.56 |
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Writing down allowance @
25%
Year 1 - £650.00 / Year 2 - £487.50 / Year 3 - £356.63 |
|
Finance Agreement = 100%
Tax Deductible
(Total Repayments = £7,898.60) |
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Minus Tax Allowances at 40% |
£3,159.44 |
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| Total Tax Allowance |
£1,494.13 |
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Total Tax Allowance |
£3,159.44 |
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| Total Cost |
£6,500.00 |
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Total Repayments |
£7,898.60 |
| Minus Tax Allowances |
£1,494.13 |
|
Minus Tax Allowance |
£3,159.44 |
| Plus Lost Interest |
£1,024.56 |
|
Minus Interest Gained
on Capital |
£1,024.56 |
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| Total Cost of
Paying Cash |
£6,030.43 |
|
Total Cost on
Finance Agreement |
£3,714.60 |
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WINNER =
FINANCE AGREEMENT = SAVING: £2,315.83 |
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| To take advantage of our low
rates, call today for an instant quote on 01234
240155 |
Back to Finance Equipment
*This is an example only. Figures will differ dependent on
business situations and different factors.
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