Thoughts on Novated Leasing for New Car

• 

  FoxJump on 10/06/2023 - 23:47

  +1

  1yr NVL is the most effective way.

  but check for hidden fees and interest rates.

• 

  Hybroid on 11/06/2023 - 00:03

  +5

  You have provided no details whatsoever on the breakdown of costs for each scenario. What responses are you expecting from us?

  Make a table for each option and assess them quantitatively.

  Something like this with whatever data is important to you. There's probably tax saving and depreciation to factor in somehow too.

  -	Purchase	1-Year	3-Year
  Cost	47000	22000	66000
  Fuel	1000	0	0
  Registration	500	0	0
  Insurance	250	0	0
  Servicing	500	0	0
  Balloon Payment	0	40000	10000
  Total cost	49250	62000	76000

• 

  kawinuyo on 11/06/2023 - 00:05

  How to calculate.
  Outright cost
  Cost of car (47k) + rego (for the following year as you can pay it within the 1 year novated lease) + ctp (for the following year again as this comes with new car) comprehensive car insurance cost x 2 (this year during the novated lease and the next year) + cap price servicing charge + petrol cost for one year (your average kms drive per year times an average cost of petrol) + possibly how much interest you have to pay extra taking a lump sum out of offset account (this is a presumption).

  Novated Lease cost
  Repayments per month x 12 (quoted from your lease people) + residual value MINUS the amount that you save in tax (i.e. If you don't do novated lease and have to pay 40k in tax, but now with novated lease you pay 35k in tax then minus 5k)

  • 

    kawinuyo on 11/06/2023 - 00:15

    Another common misconception is because of the fringe benefits tax there's no point if it is not EV. The novated lease should be set up with the employee contri ution method (ECM), so a portion on that monthly amount taken from your salary is actually post tax dollars which then eliminates any fbt required. It might not be as money saving as ev (although really? Ev so expensive….) but there's no extra you have to pay at least.

    Make sure to get your own insurance instead of using the novated lease company's.

    • 

      kawinuyo on 11/06/2023 - 00:17

      We just got a cx8 for 45k and hubby's salary is higher and we've only just saved like 3k doing it through novated lease. So definitely do the sums for your own situation, don't just look and see that other people have benefited so you will too.

• 

  Pcosmic on 11/06/2023 - 00:25

  Cash always if possible. They gotta make a profit from someone.

• 

  seannami on 11/06/2023 - 06:42

  If it's not FBT exempt, I wouldn't bother, the employer-passed on FBT + crazy interest would outweigh the tax benefit (they calculate the "better of than finance" on their interest rate rather than the cheaper rates). Though it does depend how its set up with your post-tax contributions (though if its post tax anyway and you have the ability to pay outright… why bother?).

  Admittedly 99% of my NVL experience is an exempt car and a 5 year lease.

• 

  geekcohen on 11/06/2023 - 07:42

  Besides the payments being pre-tax, what other benefits are there?

  This is the only benefit in my view.

  • 

    Euphemistic on 11/06/2023 - 09:22

    And some of that benefit is offset by the inconvenience of dealing with a lease company plus their profit margin. Having a lease makes it more difficult if your circumstances change and you suddenly want a different vehicle or different job

    • 

      geekcohen on 12/06/2023 - 07:42

      Yes, I have somewhat found this out recently. Moving job and the new job doesn't support a leasing arrangement.

  • 

    Reginald7711 on 11/06/2023 - 10:44

    this can be a strong benefit depending on the tax backet, but still need to calculate expenses over the lease vs. buying outright

• 

  Euphemistic on 11/06/2023 - 07:45

  +1

  $100 per week in fuel? Consider getting something more fuel efficient (hybrid or EV). That’ll be much more cost effective.

• 

  thatonethere on 11/06/2023 - 09:17

  The NVL default packages at my work for the mandatory provider have heaps of small fees. Check for those

  Eg

  1. Roadside assist - many new cars include it now for a few years
  2. Green or carbon credits
  3. Dent removal subscription
  4. Wheel rash removal etc etc

  Can obviously turn them off but do that at the last

• 

  uncompressed on 11/06/2023 - 09:41

  Do a 1 yr novated lease, then buy the car for 65.63% of the purchase price (as defined by ATO for residual costs after 12 months).

  Sure you can buy the car outright, but you also need to calculate the lost opportunity cost of using that lump sum of $47K. Might as well use some of your pre-tax income to pay for the operating cost of the vehicle. Besides, you can get some of it back at the end of the lease if you don't use up the operating budget (fuel, servicing etc). Plus you could also benefit from fleet pricing via the novated lease.

• 

  freefall101 on 11/06/2023 - 10:34

  +1

  Get an electric, FBT free on the novated lease. Unless her usage of the car is counted as 100% business usage there'll be some FBT component to it (even though it's paid pre-tax).

• 

  altomic on 12/06/2023 - 14:26

  buy a 3 year old car for half the price of new, and go on a month long holiday with the price difference.

  • 

    bhubb18 on 13/06/2023 - 09:57

    +2

    What 3 year old car is half the price of new in this market?