Dr James, 0s:

Car finance is something that we don't really know that much about as dentists, so it's really helpful to have someone like my next guest in the Dentists Who Invest podcast, Mr Ammar Farishta, going to be talking about car finance, the ins and outs of it, and also what's changed in 2025 so that we can get the car that we want. Let's talk about how we can get the car that we want, but also in 2025, because a few things have moved around recently and also with relevance to our previous conversation on the dentist invest podcast, right armour absolutely absolutely, really glad to be back for round two hell yeah, let's do it. So first things first. I know you and I were catching up off camera and we came up with a little quick hit list of things we wanted to cover today, and the first one was road tax changes and how those impact our leasing. Maybe a good place to start is just to recap what leasing is for dentists.

Ammar, 56s:

Absolutely so. As we discussed already in part one, there are a lot of advantages to leasing a brand new vehicle, so, whilst I'm not going to go into that, I will give people a reminder as to what leasing is and how it works. Okay, so with leasing, you're essentially putting down an initial deposit and with that initial deposit, or initial rental as it's sometimes known, the more you put down initially, the lower your monthly payments are going to be. You're then into a contract, whether that's two, three, four or five years, and you're making equal monthly installments and at the end of your contract, you're just simply giving the vehicle back to the funder. That's how it works. Easiest chips, very, very straightforward. So that's how it works from a financing perspective. Now, as far as the vehicle is concerned and I think this is where the road tax element is tied into this With a brand new lease, you're getting a brand new vehicle, so we're recording this in 2025. So you're getting a 2025 plate vehicle. You will also get manufacturer's warranty included as standard. If you do decide to go for a service pack which is always a good thing to have you do get your annual servicing, your MOT when it's due, tyres and glass all included as standard as well within your lease payments, so that's a really, really good way to do it. So all you need to worry about is insurance and fueling up or charging the vehicle, depending on what you go for. So that's essentially how leasing works in a nutshell. Now, when it comes to road tax, in order this and, as I mentioned at the beginning, road taxes included. Having said that, though, what I've noticed since our last conversation, james, is that there has been a lot of dentists who are interested in leasing electric vehicles. Now, there are obvious tax advantages to doing that, but, from a road tax perspective, the government have recently made changes to the way the road tax system works and, specifically, the way that it's going to impact on EVs or electric vehicles. So, from now onwards, electric vehicles are going to be taxed at £195 per year. That is going to be starting in year two. If you're getting a brand new vehicle so brand new vehicles in 2025, you start off with just paying £10 for the year, and then, from year two, it'll be £195 for every year after that. Now, that will be included within your lease payments, so you will see a very slight increase in terms of your lease payments compared to what would have been the case had you got your lease in, let's say, january or February of this year. So it would be marginally different, but it's nothing that's too dear in the pocket let's put it that way but it is something to be mindful of, that that does exist and that that will be included within your payments. So, yeah, something to be mindful of, I think, for us, as far as dentists are concerned.

Dr James, 4m 1s:

That's the government being the government right there, right, when they have the tax-free incentive, they always amp it up afterwards, right? Whatever that is, be that cars, be that whatever anything under the sun, but I guess it's, it's, it's how it works. It's not, no, it's not to be unexpected, uh. So yeah, interesting. Okay, fair enough, and in terms of things that we can do to navigate that, do we just have to take the hit? Basically?

Ammar, 4m 27s:

Yeah, in a nutshell, yes, and it's not as bad as having road tax on other vehicles. There is, of course, what's known as luxury tax, which is there as well, and it sounds like something out of Monopoly, doesn't it? Luxury tax, which is over a certain threshold. I believe that threshold is £40,000. If the value of that car is over £40,000, you pay a luxury tax. I believe they were going to be charging that luxury tax on EVs as well. That has now been reversed, so that's no longer the case anymore. So, luckily, luckily for those who are looking to go EV you're not going to be paying luxury tax for that. But if you do decide to go for something really nice a Porsche 911 or something along those lines then, yes, you would be charged a luxury tax and that's just something you're going to take on the nose. Unfortunately, it's just the way things are. You're absolutely right in the sense that you know that's just generally how government have done things. It's fascinating to see the history on this and I won't delve into it for too long. But what's really interesting is, if you look at this compared to five, maybe even 10 years ago, there were humongous incentives for people to go EV, whether that's free charging, no road tax, incentives to actually cash back, incentives when it comes to buying the vehicle itself or even charger installs as well. But slowly, slowly, they're taking away these little prizes, one by one, and I think the road tax is probably the final nail in the coffin. I would say I don't think there's much further they could do to strangle us, although I'm sure the government have got some very interesting ways of doing that.

Dr James, 6m 3s:

Yeah, let's not speak too soon shall we. They might be innovative and come up with something. But you know there's actually not to digress too much. There's a slight parallel in the world of finance, I feel, whenever it comes to this stuff and that is the lifetime allowance on pensions. I don't know, yeah, they've, they've. You know what they did? Right, they never had it Then in like 2012,. They brought it in. It was 2 million. Now you might think that it would go up with inflation. They actually brought it down over the years to like 1.2 million. Uh, now they've done away with it for the moment. But watch out, guys, is probably a big old honey trap, if you ask me, because then people will start topping up their pensions again until the government decide that they're going to bring it in again, basically, which I think they will personally. But listen, all just opinion. We don't know for sure. Don Don't listen to me necessarily. It's just an interesting observation Sole trader versus limited company with regards to your car finance. Dennis loved this conversation with regards to their tax position, so interested to know how the whole car finance dynamic plays into that as well and what's changed as well, actually, on that front.

Ammar, 7m 9s:

Yeah, really, really interesting. So what I found as anecdotal evidence, james, is when dentists would want to take advantage of the opportunities within leasing, the main hurdle that was there is that these are dentists who have recently set up as company directors and don't really have much to show in terms of history of trading. They're very, very new. So they're looking to have a whole bunch of different bolt-ons as far as their company is concerned when the company has just been brought into existence. And so the challenge was to try and get a funder that would be interested in actually providing lease finance or asset finance for vehicles for these company owners. And now, as very, very recently, I've managed to build a new partnership with a finance company that are willing to do that actually, which is absolutely fantastic, are willing to do that actually, which is absolutely fantastic. So now it's no longer a case where I'm telling dentists to say, hey, you need at least a year and you need to have a strong director's guarantee or a personal guarantee, and you've got to make sure your credit score is phenomenal in order for your finance to go through. That's no longer the case. You could have it for under a year's trading as well. That's absolutely fine and we could potentially get you the lease finance that you're after. So that is really really good news, and I'm just hoping that's going to open up the floodgates for dentists to apply for leasing agreements as and when they need to, so they can take advantage very, very quickly.

Dr James, 8m 45s:

You know, again, not to digress too much. There's a little bit of a parallel when it comes to mortgages in what you've just said, because a lot of the standard kind of copy paste advice from a mortgage broker is, hey, you need two years of accounts before we can talk about mortgages. But when you talk, that's not necessarily true. It's just knowing which lenders are out there can overcome that or have solutions to overcome that, right? Uh, so a lot of dentists, myself included, operate on the basis that that's a limitation that we just have to accept. But it's actually not true, you know, uh, it's just means that potentially the people that you can work with for a little bit more limited, but it's just knowing who they are Right. And the the thing that I always remember I asked, and I'd be the reason I'm telling this story is to pull it back to car finance in two seconds, right, but I remember saying I remember when a mortgage broker told me that one day and I was like surely there's a catch in terms of, like interest rates and stuff like that. And the answer is there is, but it's nominal, it's much less than you might expect. You might expect. How does that translate to the car finances, would the interest rate be a little bit higher. Is that correct? Or what are you finding in?

Ammar, 9m 58s:

your experience? Yeah, absolutely. So, look, of course, because this is going to be a unique proposition because there are not so many companies that are willing to do that and the risk is slightly higher. To mitigate for that risk, they're going to be putting safeguards in place. So, whether that it'd be the interest rate being a little bit higher on, for example, if you were to take out, let's say, a used vehicle and if you were to get a PCP because that's where interest would be charged then yes, you'd be looking at potentially a higher interest payment. You'd potentially be looking at, in a worst case scenario, you have a situation which is known as max advanced, so that's where they'd only be allowing to lend you a certain amount of ceiling and not allow it for any more. You'd have to put down a bigger deposit, which may be the case, but that's very, very rare. So, to answer your question, the reality is is that, yes, it would be a little bit more, but it would be a short term pain, because the other really interesting thing about this, james, if let's say so, I'm going to use the used car finances example here because I think it's more pertinent If, let's say, you were to go ahead on a PCP agreement right for a vehicle that's, let's say, two years old and your interest rate, let's say, is, for our given sake, 14.9%, right. And you know you're making your monthly payments. You know you've been generally good, you've not missed any payments on any other credit agreements that you may have. You know your credit worthiness is getting better and better and better. In six to nine months time we could always relook at that and say, hey, you know, actually the economic landscape has changed. Interest rates have come down a little bit. Your score is also improved. Looks like we could get you into an agreement for 9.9 instead, shall we refinance it? And you could get you into something way better. So the idea, james, is actually to be able to get dentists through the door. So if you imagine that door is shut, they just got to sort of jam your foot in initially, before it's then propped open. If you see to be able to enter into something which is a little bit better, does that?

Dr James, 11m 55s:

make sense. It completely makes sense. So it's a little bit of a bridge right to speed things up. And it doesn't mean just because the rate's higher doesn't mean that it's locked in, because the option is there to refinance, which is something that you'll know. You'll know how that's done. Basically, there's no kind of minimum period. I'm guessing that you have to be locked in, for you can just switch that as soon as things are more favorable. Is that correct?

Ammar, 12m 21s:

That is the case in terms of used car finance, correct. When it comes to leasing a vehicle, it is slightly more stringent. So, with leasing, the way that it works is that you are tied into a contract. So if it is going to be, let's say, two, three or four years, you're going to need to make sure you stick to that, because if you are going to exit early, the termination fees are high. Having said that, though, there's no real interest involved when it comes to leasing, right? So that's just something to be mindful of. So that's always quite useful to know. And so, as a result, people are just paying that equal monthly installment that doesn't change over the two, three, four years. It doesn't matter what happens to the shape of the economy or what happens to the value of the car. It could go up, down sideways, it doesn't matter, it stays the same. You don't have to worry about it, you just keep making your payments and you give the car back.

Dr James, 13m 6s:

It's dead easy. Fascinating, and is that solution you talked about just a second ago? Is that unique to specifically dentists?

Ammar, 13m 13s:

So yeah, so that, to be fair, that could be done for anyone. But I think you know, when it comes to dentists specifically, if you think about the fact that a lot of these companies are quite new in terms of their setup, then, yes, I think this solution is actually quite a useful one where we can get people initially through the door, perhaps, if they are going for a used vehicle and the interest rates are slightly higher and, yes, perhaps you know, just getting them through the door initially, or even on a lease. You know, the lease payments may be slightly higher because the funder has decided that the rate on that vehicle is slightly different. But again, that's just to be able to get them through the door initially. We could always go back and get a different vehicle once they are up for renewal. So, yeah, there's a lot of ways to do it, lots of flexibility.

Dr James, 13m 56s:

Interesting because I mean business opportunity, right? I mean, how many associate dental companies default, right, like it's not, you know, it's not the. Those companies don't have outgoings right, beyond what the dentist is taking out to pay themselves most of the time, right? So I mean in terms of a lender being willing to how many? You know dentists, by and large, you know, get paid pretty well and have a little bit more coming in, and they're I know, not all of them are this way, but they're generally very responsible with their money, right? So, yeah, the interest there could be a business opportunity there for some entrepreneurial car finance person at some stage to specifically offer solutions for dentists, saying as they're that much more of a low risk in terms of a niche and what have you something to think about? I don't know, I don't know. That's kind of what I was getting at. It's not. This company hasn't penned box themselves in specifically dentists. It can just be for anybody, can it at this point? Ah, okay, interesting. All right, let's talk about something that we mentioned off camera, factory orders, yes, and how that's changed around in 2025.

Ammar, 15m 3s:

Yes, yeah. So I think this is more around timing more than anything else. So, just as a reminder for our audience, so when it comes to brand new vehicles which are looking to lease, new vehicles come out twice a year, all right. So one will come out in March and the next one will come out in September, and so you'll have new number plates which are registered according to when that vehicle comes out. So, in 2025, the vehicle will read letter, letter and then the number 25 to show that it's been released in March 25. In September, it'll read 75. So a letter letter 75 will show that it's September. Now, a lot of people quite fancy having a brand new vehicle, right? That's just something that's really nice to have. When you're driving on the road with a shiny brand new vehicle, right, it looks pretty cool, doesn't it? And so you know there are some people who would really fancy saying you know, actually, 25 plates were three months ago. I actually want something that's going to be coming in September and I'd love to be it for it to be brand spanking new. And so if you are looking to do that, the time to do so is now. And the reason I say that is because factory orders take around 12 weeks for the manufacturers to create. So, literally, the car is being built to your specification in the factory. To say, right, Mr Dentist has ordered this, make this model, and he wants this type of brake calipers, he wants this type of interior, he wants this type of exterior, he wants this type of glass, for example, in the vehicle, these type of seats, and please go ahead and make it, and they will then make that specifically. For example, in the vehicle, these type of seats, and please go ahead and make it, and they will then make that specifically for them. Bring it into the UK, into port, have the vehicle registered and then delivered to your door. So that time takes around 12 to 16 weeks, and for that, in order to be able to get it in time for September, october, which is when the timing comes in for these 75 plates. The time to put in those factory orders is now. So if you want to do that, definitely a really, really good time to do so, because what you'll find, especially on some of these more popular vehicles, is that they do take time to come in. We're not looking at conditions which are extreme. So I think COVID was probably just an extreme example where sometimes you take a year for a vehicle to get made before it comes through because of microchip shortages, as many of you may remember. So that is just an exception, but now I think we're back to normal. So, when it comes to factory orders, generally speaking, 12 to 16 weeks, unless it's a really popular manufacturer. So, yeah, that's what I would say when it comes to factory orders Get your orders in now if you want something which is really specific to you and you want that car which is a signature for yourself.