Leasing a classic car

In news:cv2ljg$9oj$ snipped-for-privacy@newsg3.svr.pol.co.uk, Geoff Mackenzie decided to enlighten our sheltered souls with a rant as follows

As someone who's currently looking into starting a classic car hire business - and looking for an E roadster,

I'll see what I can find out while I'm on my travels.

If I were in your position, I'd tell him to sort out all the details, and to make sure that it's looked after by someone who *knows* E types.

Seems fairly clear to me - he pays for all the servicing and maintenance costs etc, and gives it back to you in the same (or better) condition that it's in now. That's what I'd do anyway; I wouldn't be looking to make any money out of it.

Geoff Mackenzie ( snipped-for-privacy@acsysindia.freeserve.co.uk) gurgled happily, sounding much like they were saying :

Ooooh - tough luck, Geoff. GWS. My next door neighbour had a minor one in the autumn, and is already back behind the wheel.

They're not directly comparable - Look at the disparity between day rental prices of his BMW and lease prices.

OK. Roughly how many miles is he likely to be covering in this time? What would it cost for PROFESSIONAL, COMPETENT maintenance for that many miles? Add *everything* you can think of. Don't forget tyres. Don't forget

Now add a bit more on for contingency. No, a bit more. You're probably still short, but you're getting there.

Now work that out per month.

Bummer. Hope it's not too long.

Ian

Unfortunately, this could be a way to lose a friend. The car's bound to gain the odd stone chip, etc, and even with careful maintenance a year or two of use will show. The only way to be certain it returns in similar condition is to ensure it's as close to perfect as possible before it goes. Then absolutely every fault would need correcting before it is returned.

But a few hundred quid profit would make it a lot easier to overlook some stitching on the seats that's started to pull apart or a streak of rust that hasn't been dealt with, for example.

How about selling it to him with a clause that you can have first option to buy it back at market rates?

In article , Geoff Mackenzie writes

Geoff, I cant help with your query, but I'm sorry you won't be driving for a while.

I hope you still intend to be active in this group to give us the benefit of your experience, wisdom and sagacity.

Peter

Because his friend wants to *lease* it for business purposes. It's more tax efficient, and cash flow friendly. He could always sell it to a lease agent third party but the added complications would be prohibitive - even if he could find an agent that'd want to take on an old car.

Me too.

Have you two a mutual acquaintance who you both agree could act as an independent arbiter of condition before and after? Take lots of photos as well, of course.

Yes, there is bound to be some wear and tear and replaceable items will get nearer their replacement date so you really need a certain cash flow. How about asking your friend what he is prepared to pay? Practice sucking your teeth first, but you may well be pleasantly surprised.

Ron Robinson

Getting down to basics, if you price the use of your car at deterrent levels (like £500 a day), you are not going to achieve your aim of having it used. You trust your friend not to drive your car like an idiot, so you are looking at wear and tear servicing rather than fixing things that have been abused. Your friend finds his current outlay of £800 a month acceptable (or he would have found a cheaper car/leasing company) You might be able to add your friend to your current insurance as a named additional driver, or get him to use the same company you do for the same cover, with him covering the cost whichever way you do it.

The remaining gap you have to bridge is any maintenance costs, which his current leasing company pays.

So you have two options - either you do the maintenance yourself (if you are fit enough), or arrange for a specific garage that you trust to do it for you. And if you pitch the lease costs per month in the right ball park, you should be able to bank the lease money and draw on it for maintenance. In your position ("I'm useless at finance"), I would open another bank/building society account just for the car account. Then you would know that if it has a credit balance, you are charging enough.

I have no idea what the maintenance costs of an E are likely to be, but I would suggest that unless you are dreadfully unlucky with things going wrong, you ought to be able to cover the outlay with an income of less than his current £800 a month. But ask for a lease price review point after 12 months, so if your arithmetic is a bit out, you can correct it mid-way through the two years.

The only other thing I would suggest is a get-out agreement, where if the E gets a problem that can't be repaired, or would take a long time to fix, he can't expect you to find him another E for the remainder of the lease time.

Hope that helps a bit.

Jim

The message from "Geoff Mackenzie" contains these words:

Sorry to hear of your heart trouble Geoff and hope that it is now under control and you do get your licence back in 2 years.

I am a bit unclear of the details but as someone else has already pointed out leasing is popular for business use because of the tax advantages that go with it. However ISTM that the £800 pm is so high because the deal is in fact a disguised sale and the purchase price has to be taken into account. Unless you are actually disposing of your E I don't think leasing would be an appropriate route for you to take. (I thought the car was actually your daughters property anyway).

If you rent it out you need to make sure the insurance is cast iron whatever the circumstances and the maintenance is first rate as well. Look on it as an investment, albeit a bit risky. In addition to the cost of insurance and maintenance you want an appropriate return on the capital, say 10 - 15%. Assuming the car is worth £30K IMO a reasonable rent would be £4-5000 pa. I see no reason why the rent (or a reasonable proportion of it) would not be an allowable business expense and as it is less than £800 pm your friend would actually be better off.

Roger ( snipped-for-privacy@nospam.zetnet.co.uk) gurgled happily, sounding much like they were saying :

Minor OT point, but a stroke's nothing to do with the heart...

FWIW, about 3 years ago a mate of mine had a stroke and lost his entire central field of vision. All he could see was the edges. He got his license back 6 months later. The brain is a remarkable organ - it finds new pathways to route the info, like Arnie did in the climax to Terminator 2.

Best of luck Geoff - you *will* be back at the wheel of that E very very soon.