Novated Lease Is It Normal for Setup Cost and Originator Fee in Addition to Ongoing Management Fees

bjasani on 02/02/2024 - 22:54

Hi Everyone,

I am super confused about this quote and how the novated lease quote works as i am looking for the first time this option and like to purchase EV Hyundai Ioniq 5 Epiq RWD version to save on Tax and FBT

I have been quoted as below and I want help to understand this quote if this is Ripoff or i will be able to save anything at the end of lease!!!

Ioniq 5 epiq Rwd (drive-away): $86,978.80 - GST Savings: $6,191.64 + Originator Fee: $590.00 + Introducer / Set Up Cost: $5,218.72

Total Amount Financed $86,556

Term: 36 months
Interest Rate: 8.60%
Balloon: $41,660,.32 (48%)

Fortnightly Pretax Payments: $997.42
Fortnightly payment effect to take home pay : 577.41 - Basically this is fortnightly payment

total Cost breakdown per Fortnight

Finance: $840.67
Fuel: $17.31
Service and Maintanance: $5.77
Tyres: $17.95
Rego/CTP: 27.04
Comprehensive Insurance: 57.69
Management fee : 11.54

Total 997.42

Based on what i am thinking

Fortnightly payment $577.41 X 78 = $45037.98 Payment over 3 years
Plus Residual amount : $41660.32

So after 3 year Total cost of car will be $86698.30 which means it will almost same as today's Driveaway price.

Please advice me if this is making sense or have i got this completely wrong…

Thanks

Automotive Novated Lease

Comments

  • Hybroid on 02/02/2024 - 22:57
    +1

    Technically correct, but comparing lease to driveaway total price is not apples for apples.

    Today's driveaway price does not include insurance, servicing, registration, fuel etc. Add those on top.

    • bjasani on 03/02/2024 - 09:32

      Yep Correct

      3 years cost approx.

      Total 156.75 Per Fortnight X 78 = 12226.5 Profit!!

  • avoidfullprice on 02/02/2024 - 23:07

    total Cost breakdown per Fortnight

    Reminder the amount they take is just the budget. Your running cost is not fixed. Your fuel cost is not fixed at $17.31 pf. They just put that much aside to pay for your fuel bill.

    • resubaehtgnolhcs on 03/02/2024 - 00:45

      Isn't the car an EV? why is there a fuel cost?

      • Mechz on 03/02/2024 - 01:06
        +1

        Electricity is the fuel.

    • elgrande on 03/02/2024 - 04:57

      Do they ever make you 'chip in'?

      • bjasani on 03/02/2024 - 09:33

        No, No additional cost It's included in fortnight payment of $577.41

        • avoidfullprice on 03/02/2024 - 11:20

          That’s what I’m trying to remind you. If you ever spend more than your budget, say insurance, they will adjust your budget. It is not a fixed price.

          Any underspent at the end of lease will be returned to you like a lump sum salary payment.

          I’ve done novated lease before, just not on a PHEV.

          • bjasani on 03/02/2024 - 19:48

            @avoidfullprice: Thanks, Yep Correct, I have review these cost and it seems ok at present time.

          • elgrande on 06/02/2024 - 17:11

            @avoidfullprice: So can your payments increase based on your actual spend?

            • seannami on 01/03/2024 - 11:47

              @elgrande: Yep- at the beginning they ask you your estimated KM/annum and calculate running costs based on that. If you then report the next year that you did twice the estimated, they'll recalculate the payment. My lease doesn't account for running costs on a full EV, so I am not sure if mine will recalculate. My insurance premium went up a little bit, but the repayment didn't, but that will probably be recalculated in at the one year mark

  • FoxJump on 02/02/2024 - 23:19
    +1

    so you're comparing 3yrs of rego, insurance, "fuel" , tyres as if they were free if you DONT have a novated lease?

    also… even if you had the 80k in cash to buy right now, you could have invested that money instead of paying for the car, so cash outright still has a theoretical interest cost. of say 3%.

    • bjasani on 03/02/2024 - 09:35

      Correct i have now added that

      Rego : $600 X3 = $1800
      Insurance : $1200 x 3 = $3600
      EV charging : $675 X 3 = $2025 @0.25 Kw *2700 Kw = 15000KM
      Servicing $1660 - 4 years
      Tyres: $1500

      Total approx $10585 which will be profit i guess or $12226.5 Profit!! based on their running cost

      • FoxJump on 03/02/2024 - 11:25

        also you save gst on those items on the nvl
        and if youre sneaky you might be able to budget a fourth year rego , ctp and insurance.

        • bjasani on 03/02/2024 - 19:48

          yep true

  • FoxJump on 02/02/2024 - 23:20

    and yes they sometimes do add those fees on top of the finance. kudos at them for being transparent. try haggle them down. its excessive i think.

  • sumyungguy on 02/02/2024 - 23:45

    Due diligence needs to be applied to your chosen lessor. Nationwide News Pty Ltd published an article today cautioning that novated leases are generally not regulated under the National Consumer Credit Protection Act; novated leasing companies are not required to comply with obligations to not lend to customers where doing so would cause significant financial hardship, provide assistance to customers facing financial hardship or be a member of the Australian Financial Complaints Authority.

    • Mechz on 03/02/2024 - 01:07

      They're not lending, they're leasing ;)

      • chickenchipsgravy on 03/02/2024 - 11:59

        it's not consumer credit, leases are commercial lending — they're lending to your employer and employer notates their obligation to you — it's effectively b2b & b2b2c not b2c

  • apple2016 on 03/02/2024 - 00:21
    +3

    So after 3 year Total cost of car will be $86698.30 which means it will almost same as today's Driveaway price.

    Actually the novated lease company gets $997.42 X 78 + $41,660.32 = $119459.08
    And GST is payable on the residual. Its not clear if gst is included in your figures above.

    Instead of tax savings going into your pocket, with novated lease, it goes into the lease company's pockets. This is what i am seeing with most novated leases these days. Paying is cash is cheapest. If you are using car loan then , you might have a bit of savings with novated lease.

    • FoxJump on 03/02/2024 - 02:30
      -1

      youre looking at the pretax cost for the fortnightly payment. you need to look at the post tax cost

      • bjasani on 03/02/2024 - 09:36

        correct i need to pay post tax amount which is $577.41

        • apple2016 on 03/02/2024 - 11:53
          -1

          $557.41 is the hit to your take homesalary after tax.
          You are paying $997.42 towards the novated lease.
          If there was no lease, the difference (997.42-557.41) will be going to ATO as tax.

  • changyang1230 on 03/02/2024 - 01:18
    +2

    All the calculations you ever need for EV novated lease.

    https://docs.google.com/spreadsheets/d/1CtpBXmuhRW3HrBjqJqnP…

    • bjasani on 03/02/2024 - 09:36

      Thanks I have now downloaded this

      • Nugs on 03/02/2024 - 13:16

        and what was the outcome?
        .

        • bjasani on 03/02/2024 - 19:53
          +1

          Novate lease total cost : $87069.38
          Offset Cash total - $96892.18 Including running cost
          Car loan @6.5% total : $104738.06

          Based on the calculator.

          Novated lease comes cheapest option.

  • AndyC1 on 03/02/2024 - 09:25

    Novated leases are designed such that the company providing the lease make money from you and you may or may not be able to afford it and it may or may not be worth your while. Unfortunately you did not include your income and tax deductions in order to see if the pre tax deductions for the lease make it worth your while.

    Advice is to pay your accountant to go over the lease with you to see if it is beneficial from a financial point of view or not.

    • bjasani on 03/02/2024 - 09:40

      Thanks @AndyC1 I will check with my accountant as well. Based on their quote calculation i will save approx $52692.12 over the lease term

      Total tax savings $38872.08
      GST on running cost $7628.4
      GST on purchase price $6191.64

      • AndyC1 on 03/02/2024 - 10:20
        +1

        You definitely need to get your accountant to advise you based on your response.

        You may save $X in tax but overall pay $2X in fees, so you may go backwards by $X and at the end have the HUGE balloon payment that means that you may end up with nothing.

        • bjasani on 03/02/2024 - 19:54

          yep sure i will check with my accountant before committing to buy. Thanks for your input.

  • hsbc on 03/02/2024 - 10:07
    -1

    Good choice buying a EV

  • FoxJump on 03/02/2024 - 11:26

    also, early termination of the lease WILL KILL YOU as you pay all future finance repayments remaining upfront. ie: future interest

    • bjasani on 03/02/2024 - 19:55

      Yep good point. I need to ask them about the early termination fees and charges. Thanks

      • FoxJump on 03/02/2024 - 20:20

        they'll say they cant calculate
        but its all non-running cost fees and finance + residual+ residualgst for all remaining months.

        so 1 year leases hurt more, but are safest

  • Ozbargainite on 03/02/2024 - 21:29

    Think of a Novated Lease as an IQ test. Pass and you'll save thousands of dollars.

    • changyang1230 on 04/02/2024 - 19:04

      That’s a bit obscure - you mean pass as in not taking it up?

      • Ozbargainite on 05/02/2024 - 03:40

        You have to pass to pass.

        • changyang1230 on 05/02/2024 - 18:20
          +1

          NL is however a good deal for many people in the right set of circumstances. I am saving 46,000 dollars over 5 years so I don't know where your conclusion comes from.

  • jimwh on 08/02/2024 - 19:45

    Introducer / Set Up Cost: $5,218.72
    What is this? seems very high to me.

    • bjasani on 11/02/2024 - 20:34

      @jimwh I have managed to negotiate the price based on another quote compare so overall cost now come down by about $4k.

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