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How I Bought a Brand New Tesla Half Price - YouTube
Channel: Ali Abdaal
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so i recently bit the bullet and did the
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standard youtuber thing of getting a
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brand new tesla model 3 and so
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in this video i want to explain to you
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and more importantly to my mum who's
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watching
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why this wasn't just a massive flex and
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why i think it was actually a pretty
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reasonable financial decision
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so i bought the car in july 2020 and i
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ordered it online which was a very nice
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experience the base price of the
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standard edition is forty thousand four
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hundred and ninety pounds but i went for
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the long range model
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which was forty six thousand nine
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hundred ninety pounds and then add in
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the white premium interior and the blue
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paint for the exterior that was a
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thousand pounds
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each so adding an extra two thousand
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pounds brought up the cost to forty
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eight thousand nine hundred and ninety
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which when you take the insurance into
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account which is about a thousand pounds
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leads us to a total cost of the car of
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around fifty thousand pounds but this
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50k isn't what the car actually costed
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me it actually cost less than half of
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that and let's break down why so when
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you have a business you've got this
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concept of writing off business expenses
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which is a term you might have heard of
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before
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basically what it means is that if
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you're buying something purely for
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business use
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then you can take the cost of it out of
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the business rather than out of your own
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personal bank account so if you've got a
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business and you buy something that's
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exclusively for business use
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what you can do is you can write it off
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as a business expense which means the
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cost of the item
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doesn't count as your profits because
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it's an expense and therefore you don't
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have to pay any corporation tax on it in
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the uk corporation tax is 19
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at the moment so let's say your business
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makes a hundred thousand pounds in
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profit for the year
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19 of that goes to the government so you
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pay 19 000 pounds in corporation tax but
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let's say i wanted to buy something like
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a tesla model 3 for the business
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that would be 50 000 pounds and so it
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would reduce the overall profits of the
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business down to 50 000
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i'd still pay 19 corporation tax on the
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remainder so i'd be paying 9500
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but my total corporation tax bill is 19
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less than the cost of the vehicle so i'm
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paying 9 500 pounds less corporation tax
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because this counts as a business
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expense and so if we think about this 9
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500 pounds of tax that we're saving
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in the end this 50 000 pound car
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actually only ends up costing my
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business
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40 500 because of the corporation tax
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saving but that begs the question of is
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it actually legit to write off a car as
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a business expense so if you want to
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write something off as a business
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expense the rule is that it has to be
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wholly and exclusively used for the
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business
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and any personal use is insignificant or
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incidental so if you're a youtuber and
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you're buying a camera for example
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that's very easy to justify as a
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business expense because obviously
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you're using that mostly for business
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use but it would be a lot harder for me
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to justify for a car especially because
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this business doesn't require me to
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travel all that much so in the uk if you
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buy stuff as a business but then there
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is some personal use as well
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that gets a special tax called benefit
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in kind and it's like the government
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thinks that you're being paid the value
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of the thing that your business
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bought you and therefore you kind of get
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income taxed on that amount and so if
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this were a normal car
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that would be quite a lot of tax i would
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have to pay every year for using it for
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personal reasons and often that would
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mean that it's actually not worth buying
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a car as a business expense but
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crucially in april 2020 the new budget
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which the chancellor of the exchequer
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sets out every year
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said that specifically fully electric
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cars are exempt from benefit in kind
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tax and so the benefit in kind tax rate
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for this car is zero percent
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which means i can buy as a business and
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i can use it personally however much i
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want and i won't have to pay any extra
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tax on it and the reason they've done
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this is because in the uk
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over half of the cars that are bought
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are bought by businesses
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and so the government's realized that if
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they incentivize people to buy electric
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cars by reducing the tax rates
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that means overall more cars in the uk
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will become electric and that will be
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good for the environment in the long
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term so currently the car's costing 40
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500 pounds because of the corporation
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tax saving but there's still a few more
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discounts we can add to the price of the
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car so if you're a business owner and
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you want to take money out of your
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business usually the best way of doing
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that is by something called dividends
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the problem is that like everything else
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in life
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dividends also get taxed and so in
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england if you're a higher rate taxpayer
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i.e you earn more than 37
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500 pounds a year which i do then your
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dividend tax rate is 32.5
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so let's say i wanted to take out 10 000
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pounds in dividends i'd be paying
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3250 to the government as dividend tax
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and that would leave me with 6750. now
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this is very relevant to our tesla
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discussion because the tesla costs 50
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thousand pounds and
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the alternative are you not buying the
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car and taking out cash instead means
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that i'd be taking out that fifty
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thousand pounds as a dividend so firstly
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because that fifty thousand pounds is
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profit
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it means it's taxed at nineteen percent
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for corporation tax which takes it down
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to forty thousand five hundred and then
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i take that forty thousand five hundred
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out as a dividend which means it's going
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to be taxed at thirty two point five
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percent that means i have to pay
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thirteen thousand one hundred and sixty
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two pounds to her majesty's revenue and
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customs which leaves me with twenty
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seven thousand three hundred and thirty
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seven pounds and fifty p
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so thanks to corporation tax first and
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dividend tax second this 50 000 that
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i've tried to take out of the business
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has gone down to just over 27 000 pounds
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but that's still not the end of the
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story we also have to take student loans
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into account so i spent six years at
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university studying medicine
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if you didn't know and so my student
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loan has gone up to about 60 000 pounds
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that i still have to repay and because
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the system is quite nice in the uk you
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only pay a certain percentage of any
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amount you earn above
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around 20 000 pounds and so i've got to
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pay nine percent of everything that i
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earn above a certain threshold to the
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student loans company so if i want to
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take out the price of this car as a
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dividend first it goes down from 50k to
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27.3k thanks to corporation tax and
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dividend tax and then i pay another nine
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percent to the student loans company
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which takes it down to 24
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877. so putting it all together let's
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think about these two scenarios number
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one buying the tesla model three and
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number two taking out that fifty
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thousand pounds in cash instead if i buy
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the tesla model three for fifty thousand
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it ends up costing my business forty
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thousand five hundred
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and i get a tesla that i can ride
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whenever i want but if instead i try and
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take that 50 000 pounds in cash instead
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it gets whittled down by corporation tax
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dividend tax and student loan repayments
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to around 24 000 pounds and so in a way
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i'm getting this 50 000 pounds car
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for around 24 000 which is less than
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half price and personally i would be
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more than happy to pay 24 grand for a
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brand new tesla model 3. and this whole
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thing about business expenses is one of
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the reasons why
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having your own business is such a
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powerful thing because especially if
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you're a solopreneur or a creator
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or an internet entrepreneur most of the
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stuff that you're going to buy for
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business
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purposes is actually going to be tech
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and so you can afford
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a fancy ass camera or a fancy ass
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macbook or like a super wide screen
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monitor
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because effectively you're getting all
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of this stuff at half price
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or less if you found this interesting
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and you're potentially interested in
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starting your own business here is a
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video called how to make money online
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like the three levels of making money
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online
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where i explain how i got started with
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making money on the internet and how you
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can do the same thanks for watching and
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i'll see you in the next video bye
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