Novated Lease Help + Pros/Cons and Calculators
Last edited 16/08/2018 - 15:43
I have found the Notated Lease process to be very hard to understand and the providers very dodgy and not helping with providing real figures.
I have put together a list of Pros and Cons and a calculator that may help people. I have seen calculators before but none that calculate benefit after interest and fees etc.
Overall I find the notated lease and finance company benefit a lot and you get a small benefit if you pay attention.
Here we go:
+ GST Credit on Running Costs and Load Repayments (not the cars purchase price)
+ Taxable income is reduced so lower Medicare levy ~$150 per year (Car of ~$43k income $~$105k)
+ Can get a good purchase price for car (although you can then use this to negotiate your own better price)
+ If otherwise paying cash you can earn interest on your cash instead (remember that interest is taxed so if you get 3% after 37% tax that’s only 1.89%)
+ Part of your repayment is Pre-Tax so if you earn under $90k that’s 32.5% off and over 90K 37% off. E.g. 1x litre of petrol @ $1 costs you 67.5c/63c
+ If you use a discount gift card for fuel (or other expenses) you can claim the full amount back. E.g. Pay $95 for $100 Woolworth gift card and use for fuel. Submit Fuel receipt of $100 and get $100 cash back. The $5 is a saving + 32.5/37% off the $5 is also saved so total $6.63/$6.85 per $95 spend on gift card.
- GST Changed on Post Tax contribution (can be half or more of your repayment so that’s your running cost GST saving gone)
- Hard to workout Interest Rate for finance (see * Below)
- Interest rate often higher that if you got in independently (see * Below)
- Fees are not disclosed and can be hidden in many areas. (Go green, establishment, move employer, admin, etc)
- if you start your lease then there is a delay in getting your first payment from your employer you can incur a FTB Shortfall that can be quite a lot e.g. 3 weeks without payment and be ~$400 in tax. I suspect a good notated lease provider could account for this and take more from your employer but if not it’s a loss.
- Notated lease providers charge admin fees NLC is around $15-25 per month
Watch out for redundancy insurance which can often prove little benefit for a large cost. E.g. $1,000 cost to cover a max of $3,000. Note the value of your car will always (unless damaged etc.) be more than the residual so cover for the difference is useless.
Get your own insurance or at least compare as NLC was 3 times the price I got.
To work out your effective interest rate :
Cost of Car (Inc GST) $42,500
Less Residual (inc GST) $23,506
= Total Payment for car $18,994
Total Rent (inc GST) (from Contract) = $22,968 less Total Payment for car
=Total interest $3,974
Use calculator here: https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/personal-loan-calculator#!how-much-will-my-repayments-be
Amount borrowed = Cost of Car (inc GST)
Set loan length to term length
Fees to $0
Now set interest rate at 10% to start and see on the left how much interest in $ that is. Then change the interest rate up or down until you get to the same amount as your Total Interest (or within a few $)
FTB Short Fall:
FTB Year is Apr-Mar
Post Tax payments must be at least 20% of the cost of the car within this period. If not you will get an FTB Short Fall (Tax) See FTB Short Fall calculator for more info
Calculators: https://ufile.io/pea8x if someone has a better place to store it please do or let me know as this expires in 30days.
FYI My Lease Company (NLC) said my benefit over 2 years would be around $7k I found it to be around $1.5-2k. My renewal after the 2 years (for 1 more year) was estimated to be a benefit of around $200 but I worked out it would cost me around $1500 in a best case scenario.