Novated Leasing

[DexterPunk]

Hey all. Has anybody had any experience with a novated lease on a car? Or know much about it.

I've done some reading and to me it seems to be a better deal than a car loan, even though you don't own the car at the end. Although you do have an option to pay extra and keep it. The info I've found seemed to indicate that it was worth while so long as you hit the magic 25,000 km a year mark. Some people even indicating that it can be a better deal than buying a car with cash due to tax benefits etc. which is really where it starts going over my head.

I know that half the repayments come out of your salary pre tax, and that includes all running costs, fuel, tires, rego, insurance, servicing etc etc. So I guess since you pay tax on all that, it can have its benefits? I imagine it lowers your taxable income and you pay less tax at the end of the financial year. The fringe benefits tax is what I don't fully understand. I know it's a tax on a benefit you get from your employer but I'm not sure why hitting your nominated amount of kilometres a year changes it. Or why 25,000 km makes it more worth it than a low amount of k's. I walk to the train station to go to work, so the car is only really used on weekends and trips etc.

The info I found seemed a bit old, and I believe there's been some changes to the FBT in recent years (2014 comes to mind?) that make leasing much more beneficial than it used to be for people doing low k's. but I have no idea what's been changed or how much better it really is.

Cheers!


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[nutty]

I haven't looked into it for a couple of years, but when I did it wasn't all it is made out to be unless your putting serious KM's onto your car.

My old job had it but the company we had to use the interest rate was terrible (like 12-13% compared to the 4% I could get at the time through my partners work) which added a huge amount per year.
I based it off 15,000km, which was about what I did, but everything was the upper end of costs (ie they didnt get capped price servicing, insurance and fuel ect..) so that added more per year

If your travelling heaps of KM per year, it may be worth it. But remember you can claim the tax back on that work travel anyway, just means your out of pocket to tax time.

[Montey]

Similar to nutty, when I did the numbers it forecast saving me about $500 per year; but after all the extra running around, paperwork, additional agencies involved, I concluded it wasn't worth the heartache.

I believe that novation used to be very much worthwhile, but as seems to be the norm these days, once the previous generation (who had put it in place) started retiring and had no need for it the rules started changing.

In my opinion, if you have sufficient redraw available on your home loan that is the best way to finance a car - its the lowest interest rate you'll get.

[Cursed]

In my opinion, if you have sufficient redraw available on your home loan that is the best way to finance a car - its the lowest interest rate you'll get.

We used that principle to drive our choice of when and what car to buy. We were on the lookout for cheap finance (less than mortgage rate) car loans which the various manufacturers offer from time to time. We ended up with a 1% loan from VW for a Jetta and made sure not to buy their redundant insurance options. So for us it was even cheaper than mortgage rates. We just need to be prepared for the $3.5k balloon payment.

I've also shied away from novated leases due to low km usage.

[norbs]

When ever I look at new cars I get a funny feeling in my guts. Any sort of finance added to the depreciation as soon as it leaves the lot makes me cringe. We are looking at a new car and will be looking for a finance deal like cursed got. Just have to be patient.

[Cursed]

Depreciation is only interesting if you're looking at selling it. I don't buy a car as a financial investment.

My deal came in January last year, so it was a stock clearance effort for previous year plated models.

[DexterPunk]

I'd be looking at hopefully an ex demo or low K's second hand if possible. The novated leasing company are cool with that, and tailor everything to the K's etc you dominate.

Montey when did you look into it? Before the changes to FBT?


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[nutty]

We were on the lookout for cheap finance (less than mortgage rate) car loans which the various manufacturers offer from time to time. We ended up with a 1% loan from VW for a Jetta and made sure not to buy their redundant insurance options. So for us it was even cheaper than mortgage rates. We just need to be prepared for the $3.5k balloon payment.

Also just be careful with that too, friend of mine did that with Audi at 1%, but they made him basically pay close to sticker price


30k @ 1% = Total amount to pay $30,769
Total interest paid $769

30k @ 4% = Total amount to pay $33,150
Total interest paid $3,150

So if you can take 2.5k off the sticker price and not use their finance you will be better off.. naturally this is a mute point if you can bargin anyway

[norbs]

We were on the lookout for cheap finance (less than mortgage rate) car loans which the various manufacturers offer from time to time. We ended up with a 1% loan from VW for a Jetta and made sure not to buy their redundant insurance options. So for us it was even cheaper than mortgage rates. We just need to be prepared for the $3.5k balloon payment.

Also just be careful with that too, friend of mine did that with Audi at 1%, but they made him basically pay close to sticker price


30k @ 1% = Total amount to pay $30,769
Total interest paid $769

30k @ 4% = Total amount to pay $33,150
Total interest paid $3,150

So if you can take 2.5k off the sticker price and not use their finance you will be better off.. naturally this is a mute point if you can bargin anyway

like a fucking demon. The i30 I spent days going back and forth with the sales guys. I know they still make money on me, but the price dropped nearly 11% from the start position.

[Montey]

Montey when did you look into it? Before the changes to FBT?

I am fairly sure it was after the FBT changes.

like a fucking demon. The i30 I spent days going back and forth with the sales guys. I know they still make money on me, but the price dropped nearly 11% from the start position.

When I bought my BMW (my previous car) I had the sales guy bring it off the lot to my house for the test drive. When I had decided I wanted it I gave him a price, which he rejected, I then said I wanted 3 years of servicing for free, which he accepted, I then gave him another price (much lower than they had listed), which he rejected again. So I told him that that was my number, that if he could agree to that I could do a cash transfer right then for the money and could drive him back to his office in my new (used) BMW, otherwise he could take it back to his yard and see how long it takes for the next interested party to come along. I got my price (with free servicing).

[Cursed]

Also just be careful with that too, friend of mine did that with Audi at 1%, but they made him basically pay close to sticker price

We were aware of the catches. We bought the bottom of the line base model and were okay with what we got at around sticker price. We saved ourselves the trouble of doing an endless loop of finding the best possible deal by assessing what we wanted and how much we were happy to pay for it. My time is worth something too.

Use of no financing was not a possibility.

[ysu]

Depreciation is only interesting if you're looking at selling it.

Not quite. Another view: if you compare the new car cost & depreciation with a 1 yo car then you are effectively giving away something around 30% of the new car's price in that one year.

You can save a truckload by not being too picky about having a few k's and a year of age on the car. Which will not matter at all after a few years (which seems to be your position - to keep the car longer, like me).

[Cursed]

Perhaps I oversimplified. The car being new (or at least the current model) was one of our preferred features that we figured into our value-for-money calculation. Anyways, my purchasing decisions are a bit off-topic here.

[ysu]

And we shall never go off topic on the ARSE forums!

[pixelboy]

I had a novated lease previously but would probably extend mortgage next time.

[DexterPunk]

How did you find it pix? I have no house as yet to attach it to. At this point I'm looking at buying in about 12 months and I'll put some money away to contribute towards it. But just trying to weigh up a loan vs novated.


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