Advice on Buying a New Car - Is Novated Leasing a Good Option? Toyota Yaris Hybrid SX

iamapineapple on 04/07/2022 - 10:20
Last edited 04/07/2022 - 10:51 by 1 other user

Hi all!

I am looking to buy a new car as I require one for my partner, just very unfortunate timing for us! I would absolutely consider second hand but given the inflated costs of the 2nd hand market currently, I would prefer to just buy outright new.

Ultimately, I want to buy something with good fuel efficiency in the current climate…something like a Toyota Yaris Hybrid.

I have enough savings to purchase outright but wanted to explore what the best financial option might be.

I work in the public hospital setting making approximately $180k a year pre-tax and was wondering if novated leasing may be a good option? I am not very familiar with the option but understand that I would enjoy some tax savings as I am close to the top tax bracket already.

Based on the calculator on my salary packaging company's website my yearly costs for a 2022 Yaris Hybrid SX would be:
$13,007.64 based on a 1-year lease and 20,000km. I would owe $20,433.55 at the end of the lease. This totals $33 441.19 and I am assuming I get to keep the car (but I need to confirm).

Buying directly from Toyota (apparently sold out countrywide) for a base model Hybrid Yaris SX on their website is $33,164.

The novated lease includes running costs including fuel, registration, insurance etc and apparently as these costs are taken out of my pre-tax salary, I would save approximately $4k in tax over my lease.

Do you guys have experience with novated loans, or suggestions on what the best way to get a hybrid car would be? As well as the cost saving, I am hoping my salary packing company has these cars in stock as Toyota does not which is one of the reasons I am also looking at this option.

Automotive Car Toyota

Comments

  • oscargamer on 04/07/2022 - 10:21
    +3

    Have you tried an online novated lease calculator?

  • pao2x on 04/07/2022 - 10:30
    +1

    It usually is cost effective provided you were going to get a loan for the car in the first place. The biggest cost to a novated lease is the inflated loan, so shop around you can definitely get your own and not the ones they recommend.

    Also a corolla hybrid or corolla cross, niro hybrid is much more capable for a tiny bit more on the sticker price, unless you are hell bent on a small car.

    • kerfuffle on 04/07/2022 - 10:36

      corolla hybrid

      Long waiting list for as long as 12 months

      corolla cross

      Not out yet and probably long waiting list as well

      • netjock on 04/07/2022 - 10:45

        Long waiting list for as long as 12 months

        Get it in bog standard fleet white and they'll find you one on the next shipment. That is my experience. 4 month wait turned into a 2 month wait (they offered me one on the spot but I didn't need it then and there)

    • pao2x on 04/07/2022 - 10:54

      Same goes for all insurance service etc. shop around as their default option is rarely the best value

  • bobbified on 04/07/2022 - 10:36
    +2

    I am hoping my salary packing company has these cars in stock as Toyota does not which is one of the reasons I am also looking at this option.

    The leasing company gets their cars from Toyota too 😋

    • iamapineapple on 04/07/2022 - 10:42

      :'(

      • Amaris on 04/07/2022 - 10:57
        +1

        The interest rate for novated leasing is usually inflated. They put in things like maintenance, tyres to the package so that it becomes impossible to compare. If you're a doctor try BOQ specialist and Medfin who have very competitive rates.

        • iamapineapple on 04/07/2022 - 11:50

          Just based on the calculator on my salary packaging company's website it would seem though that with a 1 year lease I am better off financially - $33 441 with lease vs $33,164 outright but buying outright does not include a purported $4-5k tax benefit or runnings costs. That is why I was wondering if it was the better option?

          • Coops1 on 05/07/2022 - 09:20
            +1

            @iamapineapple: The calculator always comes out better. It’s comparing apples and oranges. All it does is says how much tax you save, a pretty simplistic calculation anybody can make. It doesn’t tell you that the interest and charges eat up 70+% of that saving, and if you take up all the default options, eg recommended insurance, that’s the rest of it

        • ColtNoir on 05/07/2022 - 12:16

          Not true in my experience.

          Through ORIX I had a full breakdown of costs, including the finance payment. It also showed individually the interest rate and any monthly admin charges. This was 2019.

          This was of course on a full quote, not the online calculators.

  • Euphemistic on 04/07/2022 - 10:47
    +1

    IMO novated leases for cars are for people who turn over their car at the end of the lease or every few years. The balloon payment at the end is a big hit and trading in and rolling over the lease seems to be a favourite option.

    If you are financially smart, and prepared to do some legwork, chasing insurance quotes, tyre prices etc, it apparently can work really well. Especially if you are willing to sell the car at the end privately to maximise its value.

    Otherwise, if you intend on ‘keeping it forever’ then it’s probably better to pay cash or take out a loan.

    Other thing to consider is with a lease you are kinda locked in. A small Yaris might seem great now, but what if you have kids during the lease, you might look at getting a larger car and be stuck in the lease.

  • Pcosmic on 04/07/2022 - 11:03
    +2

    100% cash only

  • avoidfullprice on 04/07/2022 - 11:17

    Which income tax bracket you’re on and likely to be on throughout your lease?

    If it is just for one or two years, maybe there are benefits without fully understand your situation.

    After 2024 July your tax bracket will be flattened to 30%

    • iamapineapple on 04/07/2022 - 11:48

      After 2024 July your tax bracket will be flattened to 30%

      Really?? From what I have seen by tax bracket will remain unchanged next financial year. I can only see in 2024-25 the 45% bracket will change its threshold to $200,000+ which I might fall into again

      I am currently in the highest tax bracket and would remain throughout my lease regardless of length but aim to have the shortest lease possible. I'm only really exploring leasing as an option to save money as it results in a tax benefit and includes running costs

      • avoidfullprice on 04/07/2022 - 12:33

        in the highest tax bracket and would remain throughout my lease regardless of length

        As i said i don’t know your situation. 20k payrise in two years sounds a bit of a flex.

        exploring leasing as an option to save money

        The devil is in the details of the Lease payment component of the breakdown, not what the calculator tells you.

        • iamapineapple on 04/07/2022 - 12:46

          I'm sorry, don't mean to flex at all but I work as a doctor so we have guaranteed pay increase year on year until we meet a cap and each year of seniority comes with more (largely unwanted) hours

          • avoidfullprice on 04/07/2022 - 16:19

            @iamapineapple: Get a quote and share the breakdown. The calculator uses a number of assumptions. 20000km affects your fuel saving and not much. Maybe you get extra benefit being a doctor, i don't know.

            If you are earning 180k on the dot, novated lease will bring your taxable income down, so your tax benefit is at the 37% bracket for the next 12 months. Note that you pay at 20% FBT related rate even if you don't drive. That cost is concealed in that lease payment.

            Finally, sh!t happens in life. You would expose to lot being in public hospital. 180k comes with burnout and other occupational risk. You look after yourself mate.

  • Drakesy on 04/07/2022 - 11:32
    +1

    Looked into this but for a BYD Atto 3.
    The total payment would've been $55,000, whereas if you bought it with cash around $45,000.

    I think the leasing companies have now gutted the novated lease system to the point where its better financially to buy outright as they inflate all the other costs and interest rates.

    • iamapineapple on 04/07/2022 - 11:51

      Very interesting, I'd not seen this before. Any first or second hand experience with this?

      • knasty on 04/07/2022 - 12:46
        +1

        Total payment includes depreciation, interest, fuel, maintenance etc. Apples & oranges. You have the option of buying the car yourself with cash then novating it; I did this each time as I was able to find better deals on the car myself then the leasing company provided through its purchasing network.

        • Drakesy on 04/07/2022 - 13:00

          Yep, i'd understand the total payment if it were a petrol powered ICE vehicle with expensive maintenance items, however given they wouldn't be paying for electricity and maintenance is pretty much just brakes and tyres every 40-50,000k's i would've expected a much lower figure as they're also buying in bulk at fleet prices.

          • knasty on 04/07/2022 - 13:12

            @Drakesy: Depreciation is the #1 expense in pretty much every novated lease. Agree the consumables will be much lower for an EV.

      • meowsers on 04/07/2022 - 13:36

        Also FBT is now exempt on EVs so you will save quite a bit which may actually make it worth it. The only issue is electrical power can't be claimed on novation.

        For our atto 3 we have on order we will be putting it under the corporation and given everything will be fully deductible and no FBT you're looking at 12k savings easily + GST of about 4k.

  • Fredfloresjr on 04/07/2022 - 11:36
    +5

    wait what. $180k annually.

    Easy. Range Rover top of the line, heavily tint, 3 digit plate numbers.

    • Muzeeb on 04/07/2022 - 12:21
      +1

      RRS SVR - they sound awesome

      $33k for a Yaris is criminal by comparison.

      • Drakesy on 04/07/2022 - 13:01

        Agreed, $33k for a small hatchback is really Toyota taking the piss.
        I remember when these were $20k drive away.

        • Rayzorback on 05/07/2022 - 14:55

          I got a new Yaris for $15k

  • DarkOz on 04/07/2022 - 11:55
    +2

    It's still a good option but the benefits are about 50% of what it used to be. If you are going to do it here are a few tips that I could think of.
    - Do your own research on the absolutely cheapest price you could get and ask them to match it. It's much harder now since popular vehicles are in short supply so there is less room for negotiation.
    - Negotiate for a lower interest rate. If you don't ask they won't reduce it.
    - Get your own insurance policy especially if you have max no claim bonus with your current insurer.
    - Don't buy into their upselling of numerous insurances that cost thousands. They have them listed tricking you that they are compulsory.
    - Don't buy into their hardselling of paint and leather protections that could be a couple of thousands.
    - Have the loan fully paid or paid as much as possible by the end of the lease. Otherwise the balloon payment will include the 10% GST which you didn't have to pay in the beginning.
    - We salary sacrifice all car expenses as well. Including petrol, services and repairs. This is very time consuming though. You have to keep so much records and claims.

    EDIT: Just noticed OP earns $180k a year. Forget it. Just pay cash in full.

    • Euphemistic on 04/07/2022 - 19:18

      We salary sacrifice all car expenses as well. Including petrol, services and repairs. This is very time consuming though. You have to keep so much records and claims.

      Seems the lease company’s have got a great rort going on. Thought the whole idea of a lease was to bundle up all the costs into a monthly payment to save you knew how much you vehicle was going to cost from start to finish.

      • DarkOz on 04/07/2022 - 19:58

        Sorry for causing the confusion. Car expenses as part of the general everyday expenses which was salary sacrificed. It was not part of the novated lease. I hope that made sense.

  • spackbace on 04/07/2022 - 14:30
    +1

    I am hoping my salary packing company has these cars in stock

    Yep, Maxxia etc run car dealerships these days…

    Lol

  • toniyellow on 04/07/2022 - 18:05

    Don't compare against the price you see on the Toyota website. Try a car broker - e.g.

    https://www.productreview.com.au/listings/motor-scout?q=toyo…
    https://www.productreview.com.au/listings/onlineautocomau?q=…

  • Hardlyworkin on 04/07/2022 - 23:09

    I was looking to do the same for a Carolla Hybrid though the 9-12 month wait and extra 3k or so for the next gen has put me off. Looking at other options, probably non hybrid smaller cars.

    Still trying to figure out the financial side of a novated lease for us though I think leaving our cash in our offset and getting a novated lease instead should equate to about even.

  • nephilim on 04/07/2022 - 23:23

    Does need to be hybrid? you can get top of the line Polo (non-GTI) for 30k, only uses 5/100km.
    Lot of choices around that mark which are small turbos, may not be 3.5/100 like the yaris, but atleast a bit fun.

  • ColtNoir on 05/07/2022 - 08:41

    If you’ve got the cash to pay outright, a 1 year lease could be really good, depending on a few things.

    Ask for a proper quote, it will itemise everything including the interest rate. Through ORIX a few years ago I locked in a 2.92% promotional rate. The calculators are pretty general. Also consider if your employer has multiple novated lease and get quotes from all.

    If you can get low interest rate, and the insurance isn’t stupid, you also save on the stamp duty, which for a similar priced car was about $3.5k (from memory).

  • jhaley3180 on 05/07/2022 - 09:27

    Novated leasing has worked for me. Your tax bracket makes a significant impact and the loan interest rate. Your interest rate will vary depending on your credit history and file. Don't get sucked into thinking you need to do everything through the novated lease company… Interest rates are negotiable, insurance can be sourced independently and reimbursed etc etc…. Search some previous threads on here for good advice.

    • Euphemistic on 06/07/2022 - 07:21

      So you do all the legwork, hand them the info and then they take a cut and give you back lease payment figures?

      Might as well just get a low interest loan and do everything yourself.

      • ColtNoir on 12/07/2022 - 14:22

        But you’ll then have to pay running costs and fuel after tax. Also have to pay stamp duty.

  • LFO on 05/07/2022 - 13:39

    Please correct me if wrong but itsn't FBT (Fringe Benefit Tax) to be charged each and every month the big killer for brand new cars on a Novated lease?

  • Dogsrule on 10/07/2022 - 18:25

    In case this hasn't already been said, the cheapest Yaris hybrid is $33,283 D/A in Vic vs the cheapest Corolla hybrid @ $31,473.

    The Corolla is twice the car and $1.8k cheaper, seems a no-brainer to me.

  • HelpMeiCantSee on 11/07/2022 - 10:39
    +1

    On a Yaris, no. Novated leasing only reaps rewards for high value vehicles driven quite a lot. At least that’s been my experience with them.

  • spad on 12/07/2022 - 15:37

    I tried to understand the calculation using the autopia calculator https://autopia.com.au/novated-lease-results/?st=3

    Your income before tax $200,000.00
    Pre-tax car deductions -$20,672.27
    Taxable income $179,327.73

    Income tax -$55,004.81
    Post tax car deductions -$13,100.00

    Net income $111,222.92

    What's the Post tax car deductions?

    • Coops1 on 13/07/2022 - 07:56

      You can’t pay for all running costs pre-tax, some has to come from post tax to avoid FBT.

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