Novated Lease conundrum

ilsan0 on 11/06/2014 - 19:05

Hi Guys,

Looking for some advise please.

I bought a Mazda CX-9 under novated lease in 2011.
Come 2013, I changed my jobs and the new employer will not deal with MAcquarie leasing. They were midst chaning the providers and assured me it should not be a problem.

Liars!

So, my current expenses on the car as follows:

car repayment – $1150 per month
Petrol – $600
Misc – $100

So, I am spending $1850 per month on Car after tax :(

I use my car mainly for work and get $15k pre tax in Car allowance yearly which is clearly not enough for my expenses.

I claim the remainder in tax.

A friend advised me to trade in my car and get new lease with my existing employer.

Payout figure for the car – $46000 included residual $22k end of Sept 2016.
Trade in price for my car – $35000 circa as per Redbook.

what are my options here?

  1. Continue paying the car and just claim expenses on tax?
  2. Look at Trade in?

many thanks

sorry about the long post

Financial

Comments

  • Steptoe on 11/06/2014 - 20:20

    Can you re-lease the vehicle through another approved provider?

    • mini2 on 12/06/2014 - 11:01

      That will mean breaking the lease with the incumbent provider. What happens if the other provider uses Macbank to fund their vehicle…will that get around it somehow?

      • ilsan0 on 12/06/2014 - 21:59

        No, I dont think I would be breaking the lease as they calculate repayments by the month. So my total payout is number of months * $1150 + $22k = $46k

    • ilsan0 on 12/06/2014 - 21:59

      I could re-lease it for another 5 yrs at $700 a month as opposed to $1150.
      Would that be the right way to go though?

  • ilsan0 on 13/06/2014 - 13:09

    any more ideas guys?

  • Temjin on 14/06/2014 - 10:57

    You will need to find out what's the penalty if you break your lease with your incumbent provider. Remember, monthly lease consist of the car principal repayment, interest on the original car value and "expected" running cost such as fuel, insurance, rego, etc. Your only expense on a novated car lease is really just on the interest (which a portion of it comes from pretax) and account keeping fee.

    If you keep your arrangement with your incumbent provider, that means you will pay all those expenses (ignore any allowance from your new employer) with after tax income. That's no different to basically getting a loan on your car and paying the expense as per normal.

    If you can break your existing lease by only just needing to pay the residual value and no need to pay the remaining future interest payments that you would have to, then do it. It's no different to paying off the car completely and own it. Then just re-lease it with the new provider and go from there.

    Again, the key is the penalty from breaking the existing lease.

    If your cash flow permits, go for a shorter term lease for flexibility.

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