Anyones Passat on Novated lease?

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Yet, the whole novated lease complex just leaves me scratching my head.

see if you can find a good, reputable, no-nonsense company that specialises in novated leasing/salary sacrificing. Mine goes through the math with me each time and it always comes out better. However, one qualifier, it's only better than if I were still going to finance a vehicle (e.g. personal loan or other standard finance arrangement).

Other advantage is I never have to negotiate discount (saved $7k on this one), just negotiated a few free services. There are a few things you can also tweak to get slightly better advantage, especially if you intend not seeing out the term of the loan - e.g. making advanced payments with your pre-tax dollars etc. (although this may depend on the finance company).

[Marakai]

see if you can find a good, reputable, no-nonsense company that specialises in novated leasing/salary sacrificing. Mine goes through the math with me each time and it always comes out better. However, one qualifier, it's only better than if I were still going to finance a vehicle (e.g. personal loan or other standard finance arrangement).

Other advantage is I never have to negotiate discount (saved $7k on this one), just negotiated a few free services. There are a few things you can also tweak to get slightly better advantage, especially if you intend not seeing out the term of the loan - e.g. making advanced payments with your pre-tax dollars etc. (although this may depend on the finance company).

Thanks for that! Any chance you could say what company you went with? PM is fine if you don't want to post it here. My employer has an agreement with one, but I don't think I'm obligated to go with them, but that way I can compare numbers.

Cheers!

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My employer has an agreement with one, but I don't think I'm obligated to go with them, but that way I can compare numbers.Cheers!

From my understanding, legally you're not obligated to use them. PM sent.

[cru22z]

For me advantages are the Less GST on all
Car related items such as the car, fuel and maintenance cost.
Not having to worry about if I have enough money for
Service/Fuel/Tyres when I need to.
Also having it come out of my salary is I don't end up spending
It on something else. Plus huge discount on the car.

[FSI 220]

For me advantages are the Less GST on all
Car related items such as the car, fuel and maintenance cost.
Not having to worry about if I have enough money for
Service/Fuel/Tyres when I need to.
Also having it come out of my salary is I don't end up spending
It on something else. Plus huge discount on the car.

Yeah, that!

[Marakai]

For me advantages are the Less GST on all
Car related items such as the car, fuel and maintenance cost.
Not having to worry about if I have enough money for
Service/Fuel/Tyres when I need to.
Also having it come out of my salary is I don't end up spending
It on something else. Plus huge discount on the car.

I hadn't actually looked at it from that perspective, pretty good point.

I think it's time for a *serious* chat with the accountant and actually have her plug in the numbers and get a yay or nay.

[Marakai]

And wouldn't you know, like some sort of "apropos" to the discussion, VW Aus has a 3.8% financing campaign going on until end of August for Passats. Vehicles in stock only, of course, and I doubt the Alltrack would be included. *sigh*

[Marakai]

Another follow-up: I now got a formal quote from my employer's leasing partner company (using a fully maxed out and loaded Highline to get in the ballpark of the Alltrack which isn't in their system yet) and using both their comparison and my own spreadsheets that I'd created, I was surprised that I'd actually have more money left in my pocket at the end of the year than if I finance the vehicle on my own.

Mind blown!

Thanks to all for the good advice in this thread! Obviously YMMV, but it seems at least for me it works in my favour.

[Stelex]

Been reading this thread with great interest as I'm kinda facing that decision.

Even at my salary range (which is now very near the top tax threshold, curse you, ATO ) I just can't seem to make these numbers come out such that I *really* end up with an advantage.

This whole thing just seems like such a... I dunno, ... scam! Maybe I'm overlooking something and would love enlightenment, but at this moment it looks like it's just a shell game which allows people to drive more car than they could normally afford. Especially if you go by the "well I'll always have a car payment one way or the other" anyway.

What am I missing?

You save on following:

Purchase price (fleet discount)
GST on vehicle purchase
GST on fuel, maintenance, rego, insurance, or anything that is paid out of your pre-tax monies
2c/l of fuel
Approximately 50% discount on servicing costs
TAX - part of the money that you pay for your lease is before tax, about half of it.

Here is my case (using employee contribution scheme):

Golf 118 TSI DSG7

Purchase price $32,100 (got about 8% fleet discount and no GST payable [yet]* )
I pay total of $400 per fortnight. That includes pre and post tax money out of my salary, but total take home pay is $400 less than without lease.

This is all I pay for the lease. This covers: Vehicle repayments, fuel, insurance, rego, tyres, servicing, lease guard (in case of involuntary redundancy they pay your lease for 11 months if you're unemployed)

4 years lease equals 26 x 4 x 400 = $41,600

Residual value is $11,200. This is where you pay GST, not on total price of the vehicle, but only on the residual value, so 11,200 + 10% = $12.320.

And the car is mine.

Total cost is $41,600 + $12,320 = $53,920 for owning the car completely and having ALL costs for the duration of lease.


Comparing that to the total cost of ownership after 4 years if you were to pay the retail prices of everything (e.g. drive away price at the time of purchase was very close to $37k) ...

When I add the price of the vehicle + finance interests, fuel, insurance, maintenance, tyres, rego ... it comes to around $67,000 from memory.

So I save about $13,000 over 4 years.

Another thing to consider is that at the end of lease you can pay the vehicle out and sell it for a nice sum. Say my Golf payout is $12,300 but 4 y/o Golf sells easily for $20,000.

If you opt for a lease, don't put any down payment, as that is out of your post tax money, so you'd be only financing the remaining value, so you don't save anything on your downpayment part.

I know you'll ask ... it's SG Fleet.

[Transporter]

...and like with everything, do your own sums and read the fine print to the last dot.

[iampivot]

"what are your formulas and what data are you precisely using?"

Maybe this page will explain a bit how it works? Novated Lease Tax Savings - Smartleasing

[introspekt]

One benefit that I have found for novated leasing compared to a loan is you lose the ability to use the deposit money for investment. Just keeping $20,000 in the bank can net you over $5,000 with a 5 year lease. It's worth even more if you add to it over the lease due to compounding.

Personally, a loan would have resulted in a monthly finance cost (excluding running costs) that is nearly as much as the leases cost to my take home pay (which includes running costs). The reason the lease is so much cheaper is as others have said: GST saving on purchase price, fleet/company discount if applicable (for me 10% on list price excl options), decent interest rate and tax/fleet savings on fuel and maintenance. Repayment insurance if you lose your job can be included too, 10 months worth of lease costs can be payed out over the life of the lease.

I found if purchased outright, you will save money compared to a lease, but it still means you no longer have that cash available to use.

There are two kinds of people using novated leases, people who do it to save money on a car they would have gotten anyway, and those who use the savings to get a nicer car . YMMV so spend the time to learn how it works and/or give an accountant a call.

[VAG newbie]

I found if purchased outright, you will save money compared to a lease, but it still means you no longer have that cash available to use.

Not necessarily. It depends on your purchase price, the depreciation of the car and your tax bracket. For someone like me on the highest tax bracket, ie, 48.5%, novated lease is better than anything.

Say, a Passat 125TDI with some nice options (GPS, RVC, Bixenon...etc) might cost you $50k to buy out right. Assuming the resale value is 50% in 3 years, you lose $25k in 3 years just simply by owning the car! That is $8333/year! Running cost is not included! To do a full maintained lease of $50k car, the cost is about $18k/year pretax, which at my tax bracket, is only $$9288 out of pocket. So for extra $1000/year, I get fuel, rego, service, tyre and insurance all included! If I own the car myself, $1000 is only enough fuel for 3 months of driving!

Yes, I know there is the issue with FBT. But I've gone through this with me accountant, it's still worth it.

The situation where buying outright might be better is if I get a cheap sub $15000 car and plan to drive it for 10 years. Then depreciation cost will be negligible.

[Marakai]

There are two kinds of people using novated leases, people who do it to save money on a car they would have gotten anyway, and those who use the savings to get a nicer car . YMMV so spend the time to learn how it works and/or give an accountant a call.

That's precisely what I did a few weeks ago. Had her run the numbers. Yep, novated is the way to go for me.

Now if only VW would pull their fingers out and get the Alltrack here I wouldn't have to continue driving the current bomb worrying about it breaking down with something costing more than it's worth.

[MJW]

Sorry, forgot to reply. My FBT component currently comes out of me pre-tax pay so I don't understand the benefit in post tax payment. My total lease payment each month, including budgeted maintenance & FBT is deducted before tax.

Did you look at the employee contribution method? Where you make a post-tax payment equivalent to theFBT amount, reducing FBT liability to nil? My two employers when I had mine under lease both recommended doing this - although I wouldn't be surprised if this is no longer allowable. I'm not sure, since I bought mine outright about 18 months ago, because I didn't think leases were worth it then, and still don't (other than allowing better finance options when a car is new....).