Expensive Cars are much more expensive

You can lose more than double that you think!

Buy a brand new Mercedes Benz off-the-shelf for P 1 million, use it for 4 years and sell it for P 600,000. 

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You think you lost P 400,000 and you further think that you are fine with that loss or “expense” for using it for 4 years – P 100,000 a year. 

In reality, your loss is not only P 400,000 but also another P 313,500 (more than 75%) because of additional taxes that you will pay for expensive cars plus the other P 200,000 (50% more) for lease interest, if you lease at 5% flat interest.   So, your loss or “expense” for using it for 4 years is P 913,500 or P 228,375 per year.  It is not P 400,000 loss but P 913,500 loss..  This is more than double than what you normally think.  Here is the calculation in Botswana Pula :-

Description

Purchase Sale Loss

Purchase/Sale Price of big car

1,000,000 600,000 400,000
Less: Deemed Cost  (175,000)  (175,000)  
Add: Disallowed Costs   175,000  
Disallowed Costs   825,000 600,000  
Tax percentage 22% 22%  
Tax paid for expensive cars 181,500 132,000 313,500
If you lease it at 5% flat interest 200,000   200,000
       
Total loss / “expense” for 4 yrs     913,500
Total loss / “expense” for 1 yr     228,375
Total loss / “expense” monthly     19031

 

Please think twice before you buy.  You get taxed not only for the excess of purchase price but also for the excess of sale price.

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