Novated leasing still viable?

[turbodewd]

There are 2 ways of paying the FBT - pre and post tax right? Why would anyone choose the post tax method? Why are there 2 methods at all???

[GT0132]

Originally Posted by turbodewd

There are 2 ways of paying the FBT - pre and post tax right? Why would anyone choose the post tax method? Why are there 2 methods at all???

Because if your marginal PAYG tax rate is lower than the FBT rate, by making post tax contributions you can reduce or eliminate the FBT - a cost that is calculated at 46.5% .

[Zenra]

Originally Posted by KIWI-1

Can Zenra please give some figures on a novated lease for a used vehicle?

Hi Kiwi,

Novating a used vehicle is a great idea. While its hard to quote an exact example, if you looked at a one or two year old vehicle etc the reduced cost will leave more in your take home pay.
The hardline point that most financiers have, is the used car not to be older than 7-8 years at the end of the finance term (some also have limits on the kms too).

Salary $100k
[eg rough numbers on month pay]
1) $34,800 / 4 years / 20,000 kms pa = Cost to pay $986.04
2) $29,800 / 4 years / 20,000 kms pa = Cost to pay $901.28

Both 1 & 2 have exactly the same cost for Fuel rego insurance etc, but 2 is $5k cheaper.

Regards
Zenra

[turbodewd]

does anyone here lease a ute/pickup and enjoy the FBT exempt caper?

[KIWI-1]

Originally Posted by Zenra

Hi Kiwi,

Novating a used vehicle is a great idea. While its hard to quote an exact example, if you looked at a one or two year old vehicle etc the reduced cost will leave more in your take home pay.

Thanks Zenra,
and if its a one year old ex rental XR6 like this http://www.fordforums.com.au/showthread.php?t=11365054, you'll be $200-250 a month better off, for a vehicle you will dump at the end of the lease anyway.

[davez104]

Originally Posted by Zenra

Novating a used vehicle is a great idea. While its hard to quote an exact example, if you looked at a one or two year old vehicle etc the reduced cost will leave more in your take home pay.

That can be dependant on the vehicle, probably not an issue if you're looking at a Falcon due to the high depreciation in the first couple of years.

I got a Toyota Prado, when you take into account their high resale values and the fleet discount I got through lease, a new one was cheaper than a 12 month old one.

[blueoval]

Just be aware of the age of the vehicle you are trying to get your lease thru. I'm trying to get a 5 yo car on a novated lease term and apparently by they won't allow a car of that age to have a residual value of more than 15%. Newer cars would be better I would imagine but any older and you get less benefits.

[Zenra]

Originally Posted by blueoval

Just be aware of the age of the vehicle you are trying to get your lease thru. I'm trying to get a 5 yo car on a novated lease term and apparently by they won't allow a car of that age to have a residual value of more than 15%. Newer cars would be better I would imagine but any older and you get less benefits.

What finance term are you looking at and how many kms on the clock?
The other concern with doing a aged vehicle ie like five years old, is that the vehicle value is low and the financiers impose a higher interest rate.

You may find that a novated lease on a 5 year old car, really isn't giving you much of a saving.

regards
Zenra

[ute83]

Another point to consider would be the finance rate, my novated lease has a rate of just over 9% whereas with car company offers now at 1-3%. Quite a saving there.

[turbodewd]

Originally Posted by ute83

Another point to consider would be the finance rate, my novated lease has a rate of just over 9% whereas with car company offers now at 1-3%. Quite a saving there.

Thats a good-sounding hook, wonder if the catch is that u pay full RRPrice.

[Zenra]

Originally Posted by turbodewd

Thats a good-sounding hook, wonder if the catch is that u pay full RRPrice.

Most of the time the money is funded via the Bands home country (Ie Japan) at their interest rate. So the sale and the finance are two separate transactions.

Regards
Zenra

[turbodewd]

Originally Posted by Zenra

Most of the time the money is funded via the Bands home country (Ie Japan) at their interest rate. So the sale and the finance are two separate transactions.

Regards
Zenra

Great! So not only do you send your money overseas to buy the Mazda3, youre financing goes overseas as well!

This little black duck buys Australian wherever possible.

[blueoval]

Originally Posted by Zenra

What finance term are you looking at and how many kms on the clock?
The other concern with doing a aged vehicle ie like five years old, is that the vehicle value is low and the financiers impose a higher interest rate.

You may find that a novated lease on a 5 year old car, really isn't giving you much of a saving.

regards
Zenra

Yes, this is what I have come across. Thanks for the confirmation of that. On todays rate a car 4yo and under can be done on a 8.15% rate and a 5yo car will be done on a 8.65% rate but the residual/baloon amount can be pumped to its maximum of 40% dependent on who is financing the vehicle.

I am looking at a 4yr term and the car has only done 52,000km.

Also be careful of the cheaper rates quoted by car companies. My accountant stresses that these rates sometimes dont include hidden fees like organization, administration and other fees on top of the amount looking to borrow and it will end up driving the interest payments up.

[smartleasing]

There are some common misconceptions when it comes to novated leasing – and we’d like to clear a few of those up now to avoid any confusion, because we DO believe taking up a novated lease can be financially beneficial.

Firstly, its important to note that the 2011/2012 Federal Budget introduced changes to the statutory formula rates that apply to novated leases. By 2015, all new novated leases will be subject to the same 20% tax bracket, which we consider to be a big win for every day Australian drivers. Regardless of the number of kilometres travelled, we’re confident you will still save, and there is no risk of a tax liability if you drive less than 25,000 kilometres a year – which wasn’t the case prior to these budget changes. In fact, no matter how many kilometres you drive, as long as you stick to your broad nominated kilometre bracket, the risk of incurring liability is in reality very low.

It’s also worth remembering that savings achieved through a novated lease come not just through tax-free lease repayments, but also through tax-free fuel, tax-free service and maintenance, tax-free registration and tax-free insurance. You continue to enjoy unrestricted use of your vehicle – whether its for work or pleasure or both – and you’re not locked in. You can upgrade to something any time you like, so any change in your circumstances can be accommodated.

While its true that some tax is payable on a novated lease, it will be set up in the most tax-effective way possible. The amount of savings you gain will depend on the distance you travel each FBT year (and we’ve already seen that driving less kilometres no longer has any financial disadvantage), and the base value of the vehicle.

You’ll find a good novated lease calculator (and plenty more information) at www.smartleasing.com.au – however we ARE a bit biased because it’s ours!



Cheers,

smartleasing

[blueoval]

Thanks smart leasing. That was how my accountant had explained it to me.

Just an update on my situation. I was able to get a 4yr lease on 7.5% on a 5yo car with 52,000km. So for those considering it and want to look at a second hand option, it is out there. Just need to research your options.

[Luke G]

Another good thing to note is that when leasing a brand new car they can get a much better price then what the average person can get. I saved atleast 6k on leasing my new cruiser rather then buying it myself.

[turbodewd]

Originally Posted by Luke G

Another good thing to note is that when leasing a brand new car they can get a much better price then what the average person can get. I saved atleast 6k on leasing my new cruiser rather then buying it myself.

Thats not a lease specific thing tho. Anyone can go thru Private Fleet or Fleet Capital or similar mobs for the same kind of discount.

[Zenra]

Originally Posted by turbodewd

Thats not a lease specific thing tho. Anyone can go thru Private Fleet or Fleet Capital or similar mobs for the same kind of discount.

No its not specific to a vehicle but its down to the fleet provider and what the best pricing is that we can find for you.

On some occasions, you may be able to get the best pricing when your standing in front of the dealers salesperson but we still chase our know dealers to see if there is any better prices.

Regards
Zenra.

[Chopped]

Originally Posted by smartleasing

......You’ll find a good novated lease calculator (and plenty more information) at www.smartleasing.com.au – however we ARE a bit biased because it’s ours! .......

That calculator is great, cheers for posting.

[SSVPom]

Originally Posted by smartleasing

There are some common misconceptions when it comes to novated leasing – and we’d like to clear a few of those up now to avoid any confusion, because we DO believe taking up a novated lease can be financially beneficial.

Firstly, its important to note that the 2011/2012 Federal Budget introduced changes to the statutory formula rates that apply to novated leases. By 2015, all new novated leases will be subject to the same 20% tax bracket, which we consider to be a big win for every day Australian drivers. Regardless of the number of kilometres travelled, we’re confident you will still save, and there is no risk of a tax liability if you drive less than 25,000 kilometres a year – which wasn’t the case prior to these budget changes. In fact, no matter how many kilometres you drive, as long as you stick to your broad nominated kilometre bracket, the risk of incurring liability is in reality very low.

It’s also worth remembering that savings achieved through a novated lease come not just through tax-free lease repayments, but also through tax-free fuel, tax-free service and maintenance, tax-free registration and tax-free insurance. You continue to enjoy unrestricted use of your vehicle – whether its for work or pleasure or both – and you’re not locked in. You can upgrade to something any time you like, so any change in your circumstances can be accommodated.

While its true that some tax is payable on a novated lease, it will be set up in the most tax-effective way possible. The amount of savings you gain will depend on the distance you travel each FBT year (and we’ve already seen that driving less kilometres no longer has any financial disadvantage), and the base value of the vehicle.

You’ll find a good novated lease calculator (and plenty more information) at www.smartleasing.com.au – however we ARE a bit biased because it’s ours!


Cheers,

smartleasing

THE most informative first post ever on AFF perhaps ?