Novated Lease Help - Advice on Vehicle

Lsimmo77 on 31/10/2018 - 13:15
Last edited 31/10/2018 - 13:28

Long time reader - first time poster!

Recently I have been successful in obtaining a Government job that allows me to salary package and enter a novated lease on a vehicle.

Basically I have a HECS debt from Uni and drive about 500km a week for work - by my calculations if I obtain a novated lease on a car it will drop my taxable income and in turn my HECS repayment percentage and total tax withheld a considerable amount. It will actually be cheaper/break even when compared to putting petrol in my SWB NL Pajero (Avg. 15-18L/100km) to do the trip plus wear and tear/maintenance. I have now figured out HECS is on total package not taxable after deductions - thanks for updates

I have been looking in the small car market but also want something fun to drive. I really like the following options so far so opinions welcome;

Hyundai I30 SR Premium (1.6L T-GDI 150kw)
Mazda 3 SP25

Are there any other cars around that high $20k to low $30k worth considering? It's only for a 2 year lease and I would not be looking to purchase after. Just want something fun to drive that is a little punchy, I would use the Pajero on weekends for all 4x4/camp expeditions so no need to tow etc.

Alternatively I can lease a second hand car as long as it won't be older than 10 years by the end of the lease (2009 onwards)

Any help would be greatly appreciated.

Automotive

Comments

  • trustnoone on 31/10/2018 - 13:20
    +1

    and in turn my HECS repayment percentage

    I don't know if it drops your HECS? But, I could be wrong as I know very little on tax etc. My understanding though is HECS is based on your total? As I've heard of people dropping the income similarly, which makes their company put less away each pay for HECS but then end of the year you end up with a couple grand they need to pay back for ATO.

    • simmo77 on 31/10/2018 - 13:29

      You are very right, I am looking into it further and found the same thing.

  • Donaldhump on 31/10/2018 - 13:21
    +3

    your hecs wont reduce

    • simmo77 on 31/10/2018 - 13:30

      Thanks, I will update the post.

    • Imhereforcomments on 31/10/2018 - 13:36
      +1

      Your hecs balance will never reduce as mentioned above. All your car expenses and running costs are pre-taxed, hence effectively increasing your 'disposable income' in comparison (Therefore may put you in the lower tax bracket and decreasing payment percentage of HECS). Best to speak to your salary sacrifice department to fully understand a novated lease before entering an arrangement. At the end of the day if you don't need to finance a vehicle then I wouldn't suggest going down the path.

      • GG57 on 31/10/2018 - 13:45
        +1

        And, of course, add into your analysis the impacts of keeping the Pajero in addition to the leased car. Whilst fuel costs may reduce, mandatory costs will remain (rego, insurance, etc).

  • HighAndDry on 31/10/2018 - 13:58
    +1

    Hyundai I30 SR Premium (1.6L T-GDI 150kw)
    Mazda 3 SP25

    Both good options, just keep in mind the usual tricks: Buy demo, buy near the end of a month, wait for promotions, etc.

    BUT, and GG57 raises a good point - money-wise, I'm not sure the extra costs of having a second car will actually mean savings (from mileage?) after all's said and done.

    Say you save an absolutely massive 10L/100km with your new car over the Pajero - that's 50L per week. Times $2/L (because we're getting there and I'm lazy), it's savings of……… $100 per week (or $400/month). That sounds like a lot, but I can't imagine your car payments being anywhere near that low.

    But do the maths and see if you're actually saving money or not, if that's the main goal.

    • simmo77 on 31/10/2018 - 14:32

      Cheers and thanks for that advice. I guess the goal is to stop putting Km’s on the Pajero at this current point in time. The engine is high km’s already and the mud tyres won’t last with 500km a week highway driving. I will check around with some experts before making any decision.

      • redvaldez on 01/11/2018 - 10:11
        +1

        I had a LWB NL Pajero V6 and was doing 500km+ a week for a while, mostly highway (gf lived 125 km away). The NL was a bit of a beast but it was an effort to drive on the highway (even after throwing a fair bit of money fixing the suspension and steering), and the safety (or lack thereof) worried me. I ended up buying a second-hand Mitsubishi 380 as a daily and effectively kept the Paj for bush bashing.

        Even though I sold the 380 for what I paid for it, I know I lost money overall having the two cars - but I don't regret it for the extra safety and comfort the 380 bought me. So considering I've been in your boat before, I definitely support your decision.

        For what it's worth I ended up selling both the NL and the 380 recently and replaced them with a new Pajero Sport. Brilliant car and such an upgrade over the NL (on road at least - haven't given it a serious off road run yet).

        • simmo77 on 01/11/2018 - 12:06
          +1

          Appreciate the comment, the shorty NL I have with 33” muddies and all the bits and pieces on top of big lift really make the highway trips a little sketchy sometimes, completely agree with you. Also don’t even bother breathing near the accelerator in the rain (que Tokyo Drift themesong). I just know I’m going to pour money and fuel into the Paj keeping it operable on the road, more than it’s worth! Offroads a completely different story however.

          As much as a cheap 4 cyc second hand car would be a good option for my situation I kind of want a newer car with a decent amount of get up and go plus a high safety rating. The missus and I both earn good coin with no kids on the horizon so it feels like a guilty splurge but I just flicked off a request for quote on an i30N so we will see how that goes.

  • BewareOfThe Dog on 31/10/2018 - 14:38
    +1

    I have a novated lease on a demo Hyundai.
    1. It does not reduce any student loans.
    2. You will still have to pay tax, however it will work out cheaper
    3. Unfortunately My fleet card is Caltex/Woolworths only, so other fuel stations in the area maybe 20 to 30c cheaper due to the 'Woolworths Rewards Tax'.

    • simmo77 on 31/10/2018 - 14:55

      Thanks for the input, would you suggest novated leasing an ex demo or even older / higher KM model a few years old but still from a dealership?

      • BewareOfThe Dog on 31/10/2018 - 15:58
        +1

        I puchased a demonstrator. Hyundai 130 for $31777 (Normally $38000k). Only had 400kms on it. Originally I was looking at a Kona at $28000, but due to the fuel economy, the repayments were the same. Most dealers buy from the Auctions, and make as high as 25-30% in the Used market (though margins may have changed in recent years).

  • imaustralian on 31/10/2018 - 14:51
    +1

    Hi

    I had a novated lease a few years ago , but my BMW X1 was in a hail storm at 12 months of the 5 year lease. The car was a write off. The novated lease payout was as much as the original loan , as in a novated leaase you have to pay all the interest up front , then the principle of the loan . If you do a novated lease make sure you take out loan gap insurance. My $50000 car was valued at $32000 after 1 year and I had to come up with $18,000 out of my own pocket.

    hope that helps.

    Regards

    • simmo77 on 31/10/2018 - 14:56

      I am sorry to hear that, hope you are okay financially now.

    • meiztom on 31/10/2018 - 15:16
      +3

      How did they get away with valuing a car at only 64% after 1 year?!

  • Colombian on 31/10/2018 - 15:01
    +1

    I wouldn't buy a 2.5L car to drive $500kms weekly for work. A Mazda 3 2.0 will suffice I think.

  • pao2x on 31/10/2018 - 16:28
    +1

    I am almost sure you would lose out if you just lease a runabout car bnew for 2 years. Heaps of depreciation and interest not to mention rego insurance and maintainance for a 2nd car

    What I would do is lease your pajero (if it is less than 8-10 yrs old). I.e the leasing co will buy it and you pay a lease And buy it back afterwards in the end

    • simmo77 on 01/11/2018 - 09:47

      Received my first novated lease supplier quote back for an i30… The balloon payment on a 2 year lease was over 50% of residual value… I guess I'll be looking at the 4 - 5 year lease option if anything. Unfortunately the Pajero is a 1998 model but was purchased years ago as a camp/4x4/beater car that is mechanically A1 now but will deteriorate quickly if its kept as a commuter vehicle.

      • pao2x on 01/11/2018 - 16:20
        +1

        Then its between two things

        1) Lease a nice new ride you intend to keep - no use paying all that money only to leave it to the leasing company in the end. Its like leasing an iphone or changing iphone every year or two. Quite dumb, financially speaking.

        OR

        2) Lease a commuter car - 3 to 6 years old like an old mazda 3 corolla or i30 then let it go at end of lease

  • [Deactivated] on 31/10/2018 - 21:17
    +1

    Will you even be able to get a lease soon? I doubt you'll be allowed until you pass probation, which would be six months or so if not more?

    • simmo77 on 01/11/2018 - 09:48

      I transitioned from an agency hire temp to internal hire temp and now permanent within this department and I don't believe my probation reset however I will check today, thanks.

      • [Deactivated] on 01/11/2018 - 13:55
        +1

        If you were a temp of any kind, let alone external, I highly doubt thatd count towards your probation. Check your enterprise agreement (or equivalent) if you're not sure who to ask.

        On the car front, I recommend something a touch older, a touch cheaper, and still fun. A Polo GTI from a few years ago? Or a slightly older Golf GTI? Truth is, if you want something fun, your fuel economy savings are going to be way less pronounced, and you're going to be spending more on putting 98 in if you get a turbo or euro.

        You could get a diesel i30 or something and mod it lmao. My mate has a diesel Forester that he has done some mods to and it sounds filthy and is lightning.

  • Freitag on 01/11/2018 - 09:49
    +1

    I think there might be a new Mazda 3 coming out end of the year / early next year.

  • Medrad on 01/11/2018 - 11:09
    +1

    As mentioned above, it's all about the maths and the requirement of you owning another vehicle.

    Novated leases are great if you do lots of kms a week (as you are) and want to use the car as a "new" car but are willing to make a whole new lease within the 4-5 year range.
    After your lease period, if you decide to purchase said vehicle, you're more than likely to lose money over a very low finance (or even 0 finance if saved enough) vehicle and smart servicing etc.

    I have access to novated leasing and figured out when purchasing my car in 2006, I was better off going independent. I controlled where it got serviced etc, and with FBT applied to my wage (Salary packaging is great but ATO punishes it), I wasn't gaining anything in the long run tax-savings wise. I was still in the same tax bracket, I still had to pay all the higher assessed penalties (MLS, HECS etc). Not to mention that the rules changed about kms driven and amount of tax savings to be had with that.

    Sounds like if you get a cheaper car (Hyundai is a good choice, but if only 2 years, go whole hog and i30N), you might scrape together some tax savings. Your Salary Packaging representative should be able to work it out for you without the sales push (they do get a kickback) and analyse the figures. Just make sure you look at annual savings before and after Novated Leasing to see the true saving vs. the "You'll save yourself $100 in tax each pay" speech.

    Best of luck to you!

    • simmo77 on 01/11/2018 - 11:24

      Thanks for the advice! I am currently waiting feedback from an accounting friend to justify the long time benefits (or lack thereof potentially). My father actually has a 2018 Golf R apart of his salary package and after driving that… The Hyundai N would be a nice substitute - although the new auto golf R would kill the manual only i30N IMO. I'm leaning towards a 4 - 5 year lease at the moment to lessen the burden of the balloon payment if I don't end up renewing the lease.

  • simmo77 on 06/11/2018 - 11:46

    UPDATE - Did the calculations and had an accountant friend look it all over. Cheapest option would have been to buy an old and cheap run around 4cyc and drive it into the ground but I couldn't see myself being happy doing that. Also considered leasing a 4x4 but I wouldn't be able to get anything near as capable as the shorty front locked Paj and I do more bush/hard track work than touring so majority of the modern dual cabs are out.

    Officially picking up my blue Hyundai i30 N next week - ended up with a 4 year lease doing 30,000km a year - Balloon payment of $14k

    Thanks to all involved for advice and opinions. Must say I nearly went with a i30 SR but the red seat belts and lack of real "get up and go" power made the jump to the N worth it for me.

    • greenbox on 08/11/2018 - 13:19

      What's your monthly premium if you don't mind me asking? Did they negotiate the rrp of the car down for you as well? I am currently in the same boat and I am looking at my options of either novated leasing a i30N versus a personal car loan.

      • simmo77 on 14/11/2018 - 09:23
        +1

        Yeah they "negotiated" but I ran around to several different Hyundai Dealerships and got them to shoot their "best price" to my Novated Lease representative.

        Was just over 42k for the vehicle cost base model Performance i30N in Performance Blue w/Tint + Floor mats etc - added lease gap cover and extended warranty etc which ended up with a finance amount of $43k (+ insurances etc and - GST savings)

        My Fortnightly EX GST payments are as follow (note a 4 year lease term @ 35,000km a year)

        Vehicle Lease Repayments - $391
        Rego - $25.60
        Scheduled Maintenance - $51.22
        Fuel (@9L / 100km) - $165.21
        Replacement Tyres - $17.94 (12 over term of lease)
        Roadside Assitance - $2.73
        Comprehensive Insurance $33.13
        Salary Packaging Fee - $8.03

        Total $694.86 Ex GST - pre tax deduction fortnightly

        Things to consider:
        - I had trouble getting the loan approved with no credit history, had to show proof of savings!
        - I do very high KM's (20-25km/year for work alone)
        - I will blow the 9L per 100km fuel budget with my… driving… lucky it is all adjustable.
        - The cost price may be inflated as there is not a whole lot of i30N stock around
        - Could have gone with a cheaper car but at this stage in life I decided to "live a little" after graduating a few years ago and recent career achievements

        I'm sure some people could find a better deal going privately and others got a better arrangement with their lease but I am happy with what I ended up with.

        • greenbox on 15/02/2019 - 11:52

          Sorry to revive an old thread.

          I ended up using your numbers as a benchmark to budget around and found out I could afford an i30N.

          So here I am 4 months later in Brisbane driving a phantom black i30n financed through remserv. Thanks again for being transparent and posting your numbers.

    • Medrad on 09/11/2018 - 17:11

      Officially picking up my blue Hyundai i30 N next week

      I'm officially jealous! Driving a 2006 Mazda 3 MPS, owned since new and it's awesome fun to drive. Manual is definitely the more fun option for these asian hot hatches.

      You are right about the Golf R, but there is a price difference that reflects that. I couldn't afford nearly $20k at the time over my car to purchase a top-end Golf, so I didn't.

      I hope you'll be smiling every time you get in the N, they look awesome and seem like a whole tonne of fun to drive.

      • simmo77 on 14/11/2018 - 09:26

        I wish they continued the MPS range - I remember driving a friends SV6 commodore (the 210kw ones) and getting smoked by a silver MPS that looked stock as!

        It is killing me right now the dealership has rung saying it's ready but the final documents are sitting with HR for to sign the deed of Novation…

        I cannot wait to get it and go for a spirited drive (once it's run in of course ;) )

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