Is Novated Lease Right for Me?

jaemink52 on 01/05/2023 - 15:03

Hi all,

Trying to get my head around the novated lease - I have the money to buy the car outright but few of my friends seem to recommend NL so wanted to get your professional opinion too.

I'm on $140k salary (but do have small HECS debt that I want to pay it off before the financial year), looking to buy the standard Tesla 3 RWD (white), no options so roughly 63k drive away cost. Planning to take the lease for 2 years, drive 15-20k km a year. I live in Sydney NSW.

My NL quote came back the following:
Looks like my fortnightly payment reduction is $555.46 from my salary (works out to be about $14.5k annually) and residual value after 2 years is roughly $33k
Looking at the cost breakdown (annually)
Lease Payment: $19,249.88
Fuel: $600.08 (guess they had taken into account the charging fee instead of fuel here)
Servicing: $450.06
Tyres: $0.00
Registration & CTP: $632.58
Comprehensive Insurance: $2,265.38
Management Fee: $179.92
Roadside Assistance: $60.06
Sundries: $0.00

Based on this circumstances, do you think it's worthwhile taking the NL vs buying it outright?

If NL, is there any payment that I need to look out for? I'm trying to reduce insurance cost but anything else I should be aware?

Thanks in advance for your awesome information here.

Financial Novated Lease

Comments

  • Caped Baldy on 01/05/2023 - 15:21
    +2

    Go for the Mercedes AMG for the high yield.

    (Somehow this happened almost 7 years ago https://www.ozbargain.com.au/node/273269)

    Caped Baldy on 01/05/2023 - 15:21 (Collapsed - Offtopic. Show)
    • Cyphar on 01/05/2023 - 15:53

      Oh man I can't believe that was nearly 7 years ago. Was becoming an investment analyst and believed that a depreciating asset would be high yield. I was laughing throughout all of his responses. Surely it was parody!

      • spackbace on 01/05/2023 - 16:11

        Well that post was their last post and last comments…

  • Wiadro on 01/05/2023 - 15:24
    +1

    why do you want a tesla in the first place?

    • CuteWittleCorgi on 01/05/2023 - 15:30
      +7

      Why wouldn't they want a Tesla?

      • cheekymonkey97 on 02/05/2023 - 09:59

        Because they’re dog shit compared to all the other EVs available on the market?

      • afah0447 on 02/05/2023 - 14:53

        Their actual 'coachwork' (build) quality is pretty poor compared to other new cars in the same price range.

    • jaemink52 on 01/05/2023 - 15:32
      +1

      EV - so FTB exempted, government rebate, less depreciation so far (and looking to sell in two years time)

      • altomic on 01/05/2023 - 15:57

        QLD recently announced they are doubling their gov rebate for EVs from $3000 to $6000 (if you're in QLD then yah!)

        • jaemink52 on 01/05/2023 - 16:00

          I'm in NSW unfortunately - not sure if we will follow QLD soon :( i can hope!

          • djkelly69 on 01/05/2023 - 16:58
            +1

            @jaemink52: I don't believe you are eligible for the EV rebate anyway in NSW when using a novated lease (as you don't actually own the car).

          • Nugs on 01/05/2023 - 17:00
            +5

            @jaemink52: "I'm in NSW unfortunately"
            yes, that is unfortunate
            .

  • dasher86 on 01/05/2023 - 15:51

    What interest are they charging - some companies hide this.

    I believe Tesla comes with Roadside Assistance - someone correct me if i'm wrong.
    Also you may want to shop around for your own insurance - could be high (depending on factors etc).

    Make sure they don't ming mole you either.

    Management fee seems to be okay… but what is the establishment fee?

    • jaemink52 on 01/05/2023 - 16:00

      it's 8.60% - I'm not exactly sure what establishment fee is - will check with them.

      RE; tesla roadside assistance - can anyone else confirm this for me too?

    • randombrick on 01/05/2023 - 16:11

      Yes, beware of the aftermarket offerings. If you dig deeper into some of their offerings, you will find they are usually lower quality products, etc. Even with tints - you will pay $$$ but not get ceramic for e.g.

  • pao2x on 01/05/2023 - 15:51
    +1

    The only negative of a novated lease for an EV is the car loan interest rate AND Lease fees+ HIDDEN charges. You need to calculate that against opportunity cost or at the very least the cost of that with respect to keeping that in a mortgage offset with buying outright.

    Lots of bonuses due to FBT

    • drewbytes on 02/05/2023 - 17:38

      and that you're locked in for x period, and if you change jobs or need to sell the car for some reason, the pay out could be more than the car is worth.

      • notmyfault on 17/05/2023 - 12:01

        Isn't that issue regardless of what finance mechanism you choose.

        And cash transaction is the same, except usually we don't recongnise the interest not earned, and a car payout has had interest charged. (yes interest charged is a higher cost :) )

  • randombrick on 01/05/2023 - 16:15

    It is not an easy comparing.

    One way is to calculate the outlay for just the vehicle for 2 years. So in your case something like ((19,249.88+179.92) * 2) + $33000 - (Tax Saved).

    • jaemink52 on 01/05/2023 - 16:20
      +1

      Wouldn't this make more direct sense? ($555.26 (my fortnightly payment to NL) x 26 x 2) + $33,000) - ($4530 + $900 + $1265 (insurance + regos + servicing/charging etc.) = $54,000 or have I missed something?

      • ihgjuk on 01/05/2023 - 16:49
        +1

        Yes. In this case, assuming all your calcs are right, you'll be paying less over 2 years (including the residual) than the sticker price of the car. This makes it a no brainer, if your only other option is to purchase the car outright. You may be able to ask the novated lease company to reduce the allowance for fuel and service (given it's an EV) and your fortnightly payment will reduce.

        Being ozbargain, formal guidance is that you should buy a 10 year old corolla.

        • subydooby on 02/05/2023 - 07:44
          +5

          Ahem, Camry

      • notmyfault on 17/05/2023 - 11:38
        +1

        Yep

        Cost novating is the salary reduction $555.26 * 26 * 2yrs + residual $33k = $61,872.53

        Purchase out right
        $63,000 + lost interest over 2yrs + running costs (Fuel: $600.08,Servicing: $450.06,Registration & CTP: $632.58,Comprehensive Insurance: $2,265.38) = $66498.04
        (Didn't include the interest loss in the amount, add that on top)

        So rough saving doing nothing different in owning the car, is about $4,500 in real value.

        • jaemink52 on 20/05/2023 - 22:17

          Thanks - think u need to x2 for insurance and other running costs since it goes over 2 years since the cost mentioned was annually :) so more saving!

  • Pcosmic on 01/05/2023 - 16:17
    +4

    Cash outright is always the best. All these NLs need to make a profit after all.

    • Aureus on 01/05/2023 - 16:56
      +5

      Not true for EVs, as they are FBT exempt using NL now.

    • Hearthstone on 02/05/2023 - 14:46

      NL on EV is great no FBT work out lot cheaper than with cash

    • afah0447 on 02/05/2023 - 14:56

      This!

  • Aussiebargainer on 01/05/2023 - 16:45
    -1

    Novated lease only works out if you are looking to finance a car.

    If you have the means to purchase outright, this is the best approach to take. NL will charge you around 8 - 9% interest on your loan plus a monthly management fee and a $500 - $750 establishment fee.

    • ihgjuk on 01/05/2023 - 16:50
      +4

      Not always. Look at OPs calcs. They're paying less over two years than the price to outright buy the car on day 1.
      The tax concessions on a novated lease (especially for an EV) make it an appealing proposition.

      • Aussiebargainer on 01/05/2023 - 17:09
        -1

        Maybe… I'm not sure on the EV side. I can only speak for my current NL.

        I paid $82,500 for an Audi SQ5, and over a 3 year NL will pay all up paying back $109,000.

        • Hearthstone on 02/05/2023 - 15:00

          This you be up for luxury tax and not allowed claimed back GST through NL
          plus FBT on this amount makes it a shitty purchase on NL
          these two factors alone will stack against you

        • notmyfault on 17/05/2023 - 11:54

          Is the $109k / 36mths = $3,027 the payroll cost?
          So what is the comparison if you used cash

          Car price $82,500 + interest lost + the running costs over 3 years?

          I'd guess you are ahead with the novated lease but not as much as the EV would provide

  • original15 on 01/05/2023 - 17:34
    +3

    OP!
    If you want to pay your HeCs before indexation please do before June 1.
    Indexation is not end of financial year
    Whatever has come out of your wage thus far will not be on the balance, you need to pay full remaining amount owed/showing in ATO portal.
    Any that has been taken from wage will then be refunded after you file your tax return (unless you had a tax debt)

  • dstar012 on 01/05/2023 - 18:53

    Why selling in two years time?

  • NeoX on 03/05/2023 - 14:41

    The saving in NL is the Tax Savings and opportunity cost. Eg if use your upfront cash to invest elsewhere while paying off the lease. There's an excel spreadsheet somewhere which shows all this. Generally NL you'll save a bit depending on what's the "opportunity cost" u get from cash investment.

    Been through this whole process and i've always worked out that NL is better, now with FBT exempt it's even better as well. Go NL you won't regret.

  • freedomofspeech on 05/05/2023 - 10:44

    I wouldn't pick an EV for novated lease. Normal one for which price is higher or around the same after the 1-year lease end is much more profitable..

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