Novated Lease

[dieterbohlen]

Hi all.
How much do you pay per week if you take out a $30,000 car on novated lease over 3 years?
Just trying to figure out if it's worth getting it through novated lease instead of buying it outright.
Thanks

[99_FGT]

Depends a lot on your personal circumstances. How much you pay doesn't of course, but whether it is worth it is another thing entirely.
Does your work have a dedicated provider? Best thing you can do is ask them for a quote.

[dieterbohlen]

I have my own business and I thought it may be more beneficial to lease the car instead of buying it outright.

[Ideo]

Chattel Mortgage.

[wai]

Do the sums.

The difference between buying and leasing is with one you negotiate a good deal and pay up front. With leasing, you generally have less to negotiate, but you pay at the end of the lease by way of residual.

With a purchase, you can claim depreciation plus interest on a loan (if you have to take one out) as a tax deduction. With a lease, you claim the lease payments as a deduction.

The thing to remember is that the lease company does not lose. It is a case of betting whether the residual is going to be worth it in the end. A lease can be good if you are going to continue leasing and you are able to claim a deduction (i.e. your income is sufficient to be able to realise the benefit). If work dries up, you still have to make the lease payments.

If you purchase and look after the car, you can get a better price than if you lease. A lease is always based on the worst case for you and not the best case for you.

Let's put it this way. My accountant advised against leasing unless your income is at such a level that you could afford to ignore the fact that you are leasing. It is just that for the majority, a lease benefits the lease company more than the company or individual with the lease. It is to do with the residual that is always in favour of the lease company. That is why you have lease companies. They make a good living out of the business.

[Martin]

Excellent post Wai
It is entirely a myth that novated leasing is cheaper in absolute terms
For some there may be an accounting advantage (via moving some cost out of net pay and into before tax)

Many of my friends went for novated leasing for two simple reasons:

• Want a nice car but can't afford to buy it
• Regular all inclusive payments

(These are the wrong reasons to lease in my view)
Most of them have regretted the lease in the fullness of time
The three year lock in is tough for people who switch every 2 years

One of my friends owned a TV servicing business - he had 4 vans for collecting/returning TV's
These vans clocked up some serious km and were very well used by the end of the lease resulting in minimum residual value
It was a small business cashflow decision to lease and it worked for him

[blutopless2]

like others have said... the decision should be based entirely on your circumstances. What is good for you is not necessarily good for someone else etc.
I would be asking the leasing company to give you a full run down of all the costs etc associated with the lease.
These days with FBT being fixed at 20% regardless of klms travelled it can be less of an incentive to lease a car. If its purely for business use (to and from work) then a ute (FBT free) may be worth considering (but there are restrictions on its use etc).

[brad]

I have my own business and I thought it may be more beneficial to lease the car instead of buying it outright.

Why would someone in their own business take out a novated lease? NLs are generally for employees

Suggest you talk to your accountant as to the best solution that suits your circumstances.

[Flipper]

I just signed a lease for a GTI and for my circumstances it's a lot cheaper to lease than either buying it outright or getting a loan based on me doing 40k yr with a high work %. If you want some really basic numbers try zenra.com.au they have a handy calculator to get you started.

[wai]

I just signed a lease for a GTI and for my circumstances it's a lot cheaper to lease than either buying it outright or getting a loan based on me doing 40k yr with a high work %. If you want some really basic numbers try zenra.com.au they have a handy calculator to get you started.

It might be, but you need to take into account everything. For example, when I got my Caddy, I had a Hiace (purchased). The book value was $3,000 to $5,000, and had it been a leased, I would not have got any more - probably closer to $3,000 than $5,000 no matter what the condition. As I owned it, I got $7,000 as it was fully dealer maintained and no bumps or scratches. The dealer actually kept it as a service van for themselves!!. Also, there are quite generous discounts on vehicles struck between manufacturers and associations. These are only available on purchase and not on lease because you are not actually purchasing anything.

So, if all the numbers add up, then go for it. My brother has leased his cars, but overall, he has always lost out. Each time he thinks he will do a better deal, but lease companies, like insurance companies, do not make money by advantaging the customer over themselves.

[Flipper]

Your right it depends on your individual circumstances and as I said for me after checking all the alternates I'm $1000's ahead by leasing. Don't forget that with a lease you don't have to pay GST so there's $5000 off the purchase price in my case as well as 10% off every service, fuel, tyres etc then at the moment corporate pricing on the GTI will beat anything I could get just walking in off the street. Even if I could get a better price I can then just use that quote for the lease and still save the GST on top. It really surprised me that it worked out the best I thought for sure just buying the car outright would be way ahead but by the time you account for the loss of interest that $50k would have made if invested for 3 years and the savings from GST then the tables turn. If I didn't have 85% work use (log book) then the FBT would have turned it back in favour of outright again.