Novated Lease Scam or Savings - My Calculations

apaul on 18/03/2024 - 23:08

I have been thinking purchasing an electric vehicle (EV) and exploring the potential benefits of utilizing novated leasing to take advantage of fringe benefits tax (FBT) savings. To assess the savings , I conducted a thorough calculation based on the purchase of a BYD Atto 3 extended range model. For calculation purposes, I assumed a cash payment of $50,000, inclusive of a $3,000 government rebate for the car.

Under a 5-year novated lease agreement, I would be required to pay $18,000 annually for 5 years, with a residual value of $15,000 at the end of the lease term. Therefore, the total amount paid to the novated lease company over the 5-year period (assuming I decide to purchase the vehicle at the end of the 5th year) would be $18,000 x 5 + $15,000 = $105,000. It's important to note that there is no Goods and Services Tax (GST) applicable on novated leases.

While I would receive tax deductions on the $18,000 annual payments over 5 years, totaling approximately $30,000, deducting this from the total amount paid ($105,000) leaves me with $75,000 as the effective cost for the vehicle.

Factoring in additional expenses such as registration, insurance, Compulsory Third Party (CTP) insurance, electricity, and tire costs, totaling $10,500 over 5 years, the total cost of the vehicle under the novated lease arrangement amounts to $64,500.

Therefore, since there is no GST applicable on novated leases, it becomes apparent that I am effectively purchasing a $45,000 car. This underscores that the novated lease option is not a means of achieving savings, but rather a disadvantageous financial arrangement.

IMO, novated leases revealing it to be a rip-off rather than savings.

or am I missing the huge savings ???

Poll Options expired

  • 298
    Novated lease = rip off
  • 78
    Novated lease = Huge financial benefit
  • 8
    No idea , I trust what leasing company say
Financial Novated Lease

Comments

      • Poor Ass on 20/03/2024 - 01:13

        But rich ****s pays more tax in Australia than any other non rich ****

        Yes they might spend a lot in deductions to minimise their taxable income to zero but in that process the spent heaps of GST and provided income to other businesses where most likely need to pay tax as well

    • TightAl on 20/03/2024 - 07:51
      +2

      lol what? You should buy a true blue aussie car then. Wait what?

      • R4 on 20/03/2024 - 09:08
        -2

        lol what? Plenty of EVs not made in CCPland. Wait what?

        • TightAl on 20/03/2024 - 10:06

          So which do you own?

          • R4 on 20/03/2024 - 10:55
            +2

            @TightAl: I don't own an EV but if I did buy one, it would be one not made by the CCP.

            • TightAl on 20/03/2024 - 10:57

              @R4: Budget problems

              • R4 on 20/03/2024 - 11:04
                +1

                @TightAl: No. Do you own one?

                • TightAl on 20/03/2024 - 12:48

                  @R4: Your car starts with a 3… Lel

                  • R4 on 20/03/2024 - 12:53

                    @TightAl: Sorry, I don't know what that means.

                    Which EV do you own?

        • Drakesy on 22/03/2024 - 13:55

          Which ones?

          • R4 on 22/03/2024 - 14:25

            @Drakesy: Let me Google that for you……

            Leaf, Cupra, various Kia & Hyundai models etc.

            Plus, if you have more money and no sense - BMW, Abarth, Mercedes etc

            • Drakesy on 22/03/2024 - 14:31

              @R4: And how many of them are $50k or below?

              • R4 on 22/03/2024 - 14:36

                @Drakesy: Don't know. Don't care. I won't be buying one.

                I just won't buy one made by the CCP. It's not always possible to buy non-China products but where there is an alternative, I'll buy that. I don't care what the cost difference is. I'll just buy and consume less.

                I'm not anti-EV - they have their place that's for sure, but right now, most are clown cars. EVs will be the real deal from about 2030.

  • timirasu on 20/03/2024 - 00:40

    novated lease is a way for people to be smarter with their income and get some benifits when buying a car. save on gst cost on car and no gst on Petrol,servicng,tyres,maintance,rego cpt . normally all these add on you would pay for after your income taxed . there is a reason so many people choose to go novated.

  • meoden1005 on 20/03/2024 - 06:57
    +3

    Novated lease will save you money. However, all your savings will go to the leasing company. I got quote before. They charge me 10% interest rate. They get lot commision if I sign the lease. If I lease 1 car, after the lease end I could end up paying 2 cars. The leasing company try to rip you off everywhere. My wife told me you can only save money if you manage the novated lease yourself. However, APS employee has no options to do that.

  • ratman on 20/03/2024 - 06:57

    Fuel maintenance rego insurance modifications etc all tax free. Unless you never use the car, the tax savings usually work out better than interest and brokerage.

    I just break even with mine at about 5000km a year at current fuel prices, without considering the work the deferred payments can do for me vs paying all up front (e.g. it can offset my home loan)

    So given that i do more than 5000km per year and ive been able to put the money to work over the lease period, it's worked pretty well for me.

  • apple2016 on 20/03/2024 - 08:07

    GST is payable on the balloon payment (ie $15000 ) at the end.
    Also I got quoted similar figures for a Tesla. There are some NL providers who are still reasonable but most are charging thru the roof that you don’t get any benifit . All your tax savings goes to the NL company’s pockets.

  • guidedlight on 20/03/2024 - 08:47

    It’s crazy that someone would consider $18k per year for a car, then have to pony up an extra $15k after 5 years.

    This is not the best way to own a new car.

    Pay cash, trade up, save, pay cash, trade up, etc.

    • MetaphorOZB on 20/03/2024 - 16:49

      That's because OPs figures are wrong.

  • drprox on 20/03/2024 - 10:11

    I'm not going to redo it for you but when I had a look the numbers worked which was odd and completely unexpected, even at fairly modest tax brackets.

  • FlyingMiffy on 20/03/2024 - 10:21
    +2

    Not sure if your calculations are correct.

    1) Alll incidentals are ex-GST too (u dont pay it)
    2) The car is only ex-GST because its novated
    3) You havent included your tax bracket so dont know the amount of pre tax benefit
    4) The FBT for EVs are extremely generous and offset the interest on the novated loan by quite a bit.

  • Davelovesdealz on 20/03/2024 - 10:44

    Its all about opportunity cost of the money you would be putting down upfront. Ive never been able to make the maths work….

  • sillyhead on 20/03/2024 - 11:17
    +5

    The EV novated lease scheme is:
    1. A way for a government to lose a huge amount of tax income. (Maybe $6000 a year based on a $15000 a year lease)
    2. The individual breaks even vs the home loan rate (and has to carry all the contract risks), (They save at best $1000-2000 a year)
    3. and the ($4000-5000) gains go to goes to….the leasing company.

    The only way it works out well for the individual is if you compare it to a personal loan and if not an EV it hardly compares.

    And the real kicker is the money that the lease company is receiving effectively from the government has to come from different sources so you'll have to pay for it anyway from other Taxes or cop less government services as a result.

    It would be much better if the government did tax offset incentives direct to the individual to promote EV ownership. It would cost them less and make it way better for the individual. Not so good for the lease company though. I wonder if they are party donors?

    Like everything if considering a lease its best to do a PV of costs calculation to compare different ways of financing over the term to select the best option. I think for EV's it can work out OK but in my case it the benefits would hardly outweigh the contract risk. Also note you can't claim a deduction for work use of the novated lease vehicle anywhere on you tax return so there's saving that can be missed there.

  • DarkOz on 20/03/2024 - 11:22
    +1

    We extended our novated lease for another 2 years with interest rate of 12% from 8% originally. I tried to negotiate it down to 10% but they won't budge claiming inflation blah blah blah. The high interest rate fully negated the couple of thousand dollars of tax savings. We are due for a new car in another 1-2 years and I wouldn't do it if interest rate is higher than 10%.

  • LlamaLlamaLamp on 20/03/2024 - 12:03

    Your novated lease sounds terrible although I'm comparing to something from over a year ago. They aren't always bad though. Post on Whirlpool if you want good advice.

    Ideally the government would just do something to allow people to take advantage of the savings without having to go through a stupidly complicated process of using loopholes to reduce tax liability.

    Edit: should have clarified, EVs under the LCT aren't usually terrible.

  • WhatWouldBiggieDo on 20/03/2024 - 12:42
    +10

    I don't think you've done your sums correctly.

    I pay $804 per month for a Tesla Model Y. I am well into the 45% tax bracket (47% with medicare).

    $804 x 12 x 5 = $48,180.

    Residual $20,532 including GST.

    Total cost for 5 years, including rego, insurance and tyres = $68,712.

    If paying cash:

    Car - $72,518
    Rego x 5 years = $4k
    Insurance x 5 years = $10k
    Tyres - $2,400

    Total = $88,918.

    Therefore, I save $20k over 5 years, plus $15k+ in mortgage interest if I keep the cash in my offset.

    • keejoonc on 20/03/2024 - 16:04
      +4

      People who whinge about NL not saving them money are those who are clueless about how NL works or those who are dealing with NL companies that are worse than robbers.

      • ScroogeMcChicken on 23/03/2024 - 13:43

        Exactly! Never organise your NL with the company that does your salary packaging. They will take every last cent of the benefits you should be receiving. It's not hard to organise your own asset finance for a novated lease and reap the benefits for yourself.

    • sillyhead on 20/03/2024 - 22:51
      +1

      True the 45c bracket is where the benefits really kick in. Probably should have had that in my comment.

    • TightAl on 20/03/2024 - 23:02
      -3

      What you didn't factor in is the resale of a tesla after 5 years. You'll be lucky to get 30.

      • WhatWouldBiggieDo on 21/03/2024 - 11:31
        +5

        Depreciation is irrelevant when comparing cash to novated lease. Silly comment.

      • Nom on 09/04/2024 - 21:02

        What you didn't factor in is the resale of a tesla after 5 years. You'll be lucky to get 30.

        He did factor it in, and the residual payment is right there in his post.

        If he can sell the car for 30 after he just bought it for $20,532 then he just made a profit of nine thousand five hundred dollars. This would be an excellent result.

    • eek on 21/03/2024 - 11:15
      +3

      I agree with this - for anyone deep into the top marginal tax bracket with a leveraged mortgage(s) it seems like getting a NL on an EV with FBT exemption is still a good deal overall despite the crippling admin fees and interest rates.

    • mrtin on 07/04/2024 - 23:18

      Would any of the $88,918 be tax deductible?
      Also, would the advantages of purchasing with cash be improved if the car lasts say 10 years?

      • WhatWouldBiggieDo on 07/04/2024 - 23:33
        +1

        Depends if you use your car for business. I don’t.

  • Fredfloresjr on 20/03/2024 - 13:13
    +8

    Bro, did your local plumber gave you those numbers?

  • StalkingIbis on 20/03/2024 - 13:49
    +1

    If you pull 50K out of your mortgage, how much extra is this going to cost you in interest payments?

    You included the interest payments on the loan for the lease/finance option, so its only fair to include the extra interest payments incurred by paying king cash.

    I did the figures recently, and for an EV, on my 30% tax rate, including saving money to pay the balloon outright at the end, the novated lease came out a couple of grand ahead even with the 6k rebate from the govt.

    The leasing companies will ream you with high interest and high insurance costs etc. But you still end up saving so much on tax with the 100% tax offset they are offering.

    Despite the roughly 5k savings offered to me over 3 years, I wasn't confident I would still be with my current employer and opted for the outright option.

    Edit: after reading through the comments, its pretty clear that people who can do the math, and show their calculations, all conclude that there are savings to be had going the novated lease option. The other people who are largely against it for various reasons haven't quantified it, just given some opinion on why it's not good.

    • WhatWouldBiggieDo on 20/03/2024 - 14:52

      Agree. it's almost impossible for there not to be savings. If your tax rate is higher than the embedded interest rate, you save.

  • Gyr on 20/03/2024 - 13:56
    +1

    When I did the calculations for a Model 3 the savings were huge. You have to be getting a really bad deal from the lease company for you not to be better off after a 32% (or more) tax discount.

  • surg3on on 20/03/2024 - 15:36

    I think your leasing company is a very bad one or theres something wrong here. My wife is leasing an Atto3 and after interest expenses it worked out to be better off. Also do the sums again on a 3 years lease as its usually the better option.

  • cnrmlj on 20/03/2024 - 17:26

    You seem to be ignoring the tax and interest / time value of money components, which make quite a difference.

    I have done the numbers multiple times in the past 20 years taking into account actual costs, tax and interest implications and each time, leasing was more cost effective than buying a car outright in my situation.

    YMMV.

  • quasio on 20/03/2024 - 17:58
    +1

    If u have the cash you should be comparing Cash vs 1 yr novated lease for argument's sake, or comparing the 5 yr lease with a 5 yr personal loan.
    Also that cash will be earning you interest so you have to NPV it.

    Dont forget you have to pay GST on the residual so it's not all GST free.

    Depending on your tax rate, novated lease on EV is nearly always better than cash if u have a high tax rate.

    Anyway with my calcs it was better, but no where near as good as what the novated lease calculators say as they always skip the GST on the residual.

  • jtc13 on 20/03/2024 - 18:02

    Had a novated lease that worked very well… But only because the business i worked for had a policy where they contributed 30% of the running costs for the vehicle. Every other time i looked at a novated lease with other employers i could never see the point.

  • Garbotoxin on 20/03/2024 - 23:39

    Your numbers look a little inflated….I have a Novated Lease taken out with SmartSalary/SmartLeasing for the exact same car, and I even paid for the dealership detailing before delivery (yeah I know, dealers are a scam but I just wanted it baked into the whole equation)

    My out-of-pocket per fortnight is $475.74 for a total of $12369.13 per year, across a 3 year lease term that's $37107.39

    Final balloon payment of $26640.45 at the end of the lease term if I keep the car (which I am)

    Equates to $63747.84

    That amount will include my
    - QLD Rego & CTP (approx $2139 total over 3 years)
    - Insurance ($3600 - $4500 depending on how willing I am to shop around total over 3 years)
    - tyres ($500 total over 3 years)
    - Roadside ($360 total over 3 years)
    - fuel/charging ($2700 total over 3 years)
    - Servicing ($504 total over 3 years)

    Deducting those plus the cost of the car from the total leasing amount I'm pretty close to breaking even or lose out ever so slightly (depending on how much of that balance I end up being able to claim for charging since I've been told SmartLeasing doesn't allow for the 4.2c per km yet)

    Adding on top that I don't need to take money out of high interest savings (which are easily 5% these days) or even out of a mortgage offset (easily 6%+ these days) - I think I come out ahead.

    I'm not even close to being on the 45% tax bracket, and don't make the cut for the 37% tax bracket with novated leasing…

  • lunartemis on 21/03/2024 - 06:42
    +3

    I remember reading somewhere that "you CANNOT claim work related travel car usage as tax deduction" if you do novated leasing because you are already saving on tax and doing so would be double dipping.

    • avoidfullprice on 21/03/2024 - 12:19

      Mileage - you can’t claim

      Fuel - yes you can

      Mileage based Fuel/Electricity charges - it seems you can under a recent ATO ruling

      So what are you suggesting OP is double dipping on?

  • Ahan on 21/03/2024 - 08:56

    you did not factor in the interest you could otherwise earn if you save the initial 54k. The real cost of buying the car outright over 5 years is $54k plus the interest you could otherwise earn.

    Invest it in a cash account at 4% that's $10,800 over 5 years. If you put the money in an offset account, assuming the mortgage interest rate is 6%, that's $16,200.

    Assuming you have a mortgage, then the total cost of buying outright is $70k vs. $65k through novated lease over 5 years.

    I did my calc and decided to buy through novated lease.

  • [Deactivated] on 21/03/2024 - 09:58

    Of course it's a scam. It's a way to divert tax money into private leasing company coffers. The way Novated Leases work is stupid, there is 1 or 2 groups that are ok because you can essentially manage everything yourself but the majority of leases are run by mobs who over-inflate everything (like charging $2,500 for a $1,200 set of tyres etc).

    The public got so mad at Rich people welfare with the EV rebates but no one is aware or understands how much bigger the Rich people welfare on this Novated Lease scheme is.

    EDIT: Also it's amazing how everyone here in the comments is like "Yeah NL great" but everyone I have ever spoken to, and every review online unanimously agrees the companies are god awful and the savings arn't worth dealing with them.

    • Phattattak on 21/03/2024 - 11:45
      +2

      The running costs are budgetted only to set aside funds, you only pay for what you use.

    • uncompressed on 21/03/2024 - 12:23
      +3

      What are going on about? It’s just a budget which can be adjusted and you only pay for what you use.

      If you change tyres during the lease, you go to your favourite local tyre shop, pay for the tyres, then claim it with the NL company. You don’t pay extra. And at the end of the lease, any unused funds in the budget is returned back to you as pay of PAYG with tax taken out. You can even do the same with insurance if you don’t want to use the one provided by the NL company.

  • toomuchdogfur on 21/03/2024 - 11:12
    +1

    Considering EVs are FBT exempt (i.e. the entire cost of your car repayments can be paid with before-tax money), whatever figures you are getting make no sense. Either your leasing company is indeed a scam or something has been lost in translation.

    Factoring in additional expenses such as registration, insurance, Compulsory Third Party (CTP) insurance, electricity, and tire costs, totaling $10,500 over 5 years

    Novated leases include these expenses in your monthly payments.

    If I plug in a $50k EV into a calculator with pretty modest numbers ($100k income, 15k kms a year) I get $779/mo = $46,740 over 5 years. Add the $14,065 residual and it comes to a total cost of just over $60k. Which is about the same as paying the $50k cash + $10k running expenses, except you get to pay that off over 5 years instead of stumping $50k upfront immediately.

    If your income is in a higher bracket than that and/or you drive more kms per year, the novated lease will start to become cheaper than the cash equivalent.

    • Gotchas on 22/03/2024 - 06:35

      Amount of ks you drive have zero impact on an EV NL

      ICE vehicle yes since you can claim more fuel

      • toomuchdogfur on 23/03/2024 - 09:05

        There's still an "electric fuel" component to the lease where you can claim electricity costs to charge the car against the fund. Other commenters have explained it better.

        Also tyres will wear out faster with higher KMs per year, so the tyre fund (and corresponding tax benefit) would be raised to account for that.

  • Phattattak on 21/03/2024 - 11:53

    Are people who are claiming its scam actually had a novated lease and run the numbers?

    I setup a spreadsheet that I can share with OP that does the calculations based on salary, tax (inc levies), running costs and the cost of money compared to paying cash which otherwise would offset a mortgage or be used for another investment.

    Car 1 resulted in a saving of $10k across three years. A lot of this was as a result of fleet pricing, coming off the street I could only achieve so much discount, but with fleet pricing it was more substantial.

    Car 2 was $6k more across three years of a lease, mainly due to a flat discounted rate/price for retail and fleet buyers and higher interest repayments compared to our home loan.

    Your mileage will vary, and you need to run the numbers for your particularly vehicle and case.

    The EV FBT discount is particularlly compelling.

    • kaleidoscope on 21/03/2024 - 21:35

      Are people who are claiming its scam actually had a novated lease and run the numbers

      Yes. It was a scam based on the breakdown I got. Their yearly insurance quote was alone $3k while I got my own comprehensive for 1-1.3k. There were other red flags as well such as reduced take home pay compared to financing at a good rate. They were literally pocketing our tax benefits and giving us carrots in return.

      • Phattattak on 22/03/2024 - 10:26

        It's often the other way around, if you're subject to a high premium the generic insurance is cheaper. $3k is something a < 25 year old would pay.

        The reduced take home pay is because you're salary sacrificing the repayments and gaining the tax benefits. The interest rates are higher, but that's why you run the numbers to see the eventual savings… Yes they're taking the cream off the top (like any other business that works in that kind of space), but you're also benefiting. The only one losing out is the ATO….and if you're 'not minimising your tax you want you're head read'.

        Who was the lease company? The company I worked for used one of the largest novated lease companies….not a backyarder who is taking the piss.

        • kaleidoscope on 22/03/2024 - 13:48
          -1

          but you're also benefiting

          You must be joking. how is it beneficial to me when;

          • My take home pay is lower than when I do my own financing
          • The lease I pay monthly to the lease company is higher than my own financing
          • other costs too are higher and has limitations through NV 🤷‍♂️

          here is a very rudimentary example.

          With financing:
          Take home pay - $6000
          Finance - $1000
          Balance - $5000

          With NV:
          Taje home pay - $5500
          Finance - $1500
          Balance - $4000

          This was from my experience and doing the math around it. I don’t say it’s the same figures for everyone.

          • uncompressed on 22/03/2024 - 16:10

            @kaleidoscope: Why do you still have a finance figure of $1500 if you're doing NV? All you get is a take-home pay after the lease has been taken out of your paycheck. Or is this a non-EV lease and you have $1500 post-tax taken out for FBT?

            • kaleidoscope on 22/03/2024 - 16:15

              @uncompressed: non-ev car.

              That’s how their customer rep explained it. I was like this is ridiculous 🤷‍♂️…

          • Phattattak on 22/03/2024 - 20:39
            +1

            @kaleidoscope: Something doesn't stack up it means the finance is 50% more that a standard loan.

            That lease payment does however cover insurance, rego, fuel costs, no more to pay. So maybe its comparing apples and oranges?

            • kaleidoscope on 22/03/2024 - 21:47

              @Phattattak: I got a detailed breakdown from them, which sort of explained certain things such as
              - very high insurance premiums with nv
              - their financing rates were more than double of what I got eventually
              - useless other things such as running fuel allowances, tyre replacements, etc

              • Phattattak on 22/03/2024 - 22:56

                @kaleidoscope: Umm….those allowances aren't useless. They're basically just a budget that's set aside each month. They always over allocate, so the key is to nominate about 2/3 the km's you know you will do so the allowance is no more than the actuals. If the actuals are greater, they just up the allowance a bit.

                The fuel allowance is salary sacrificed, and pay using the fuel card which is typically at a slightly cheaper rate than on the pump, plus the salary sacrifice savings (only issue is you need to use the provider they have for ease. You can use any provider but you have to manually submit the receipts and odo readings).

                Tyre allowance again is salary sacrificed. I bought 4 new tyres, submitted the receipt and they covered the cost out of the allowance.

                Sounds like you go reamed on the insurance and rates. For mine the insurance was the same as if I went to any other provider (but got the tax advantage), and interest was on par with a standard personal loan.

                • kaleidoscope on 23/03/2024 - 07:26

                  @Phattattak: Yeah it all depends on rates and other things from provider. For my not much choice as employer had only 1 company that did their nv leasing. ✌️

        • Matt P on 22/03/2024 - 23:27

          Challenge with insurance is, anyone who can get a better deal - the "good risks" - unlikely to make a claim, will plead their case to the leasing company and supply their own policy.

          The default leasing company policy then just fills up with bad risks. The people who think they're Ayron Sennas love child. The people who park by touch. Camry drivers.

          Over time, the policy just gets dearer and dearer because the people covered by it are shit drivers.

  • dji1111111 on 21/03/2024 - 14:21
    +2

    it seems your NL provider is ripping you off massively. I've seen interest rate as high as 23% from these dodgy NL providers. When I called them out on it, they quickly reverted to "let us have a look and come back to you". They came back with a much more reasonable quote (still more expensive than the competition) but not to the extent of me thinking this cant be right. Their goal is to rip off people who are clueless about NL and just get them to sign up based on the non sense promise of 'savings' they calculate.

    It's hard to generalise but for someone on top tax bracket, you will save 4-5k per year easy. Some of the more expensive quotes in my case dropped that number into the 3k mark.

    Anyone claiming NL is scam is an idiot 😆 certainly not worth the trouble if it is subject to FBT but it's no brainer with EVs since it's FBT exempt. Why do you think there are so many utes out there? Because they are milking the FBT exemption on the utes (even though many use it for private use and not really eligible for exemption)

  • Poor Ass on 21/03/2024 - 16:13

    Ya totally doing your sums wrong

    let me work it out for ya because I do this shit everyday

    $15000 / 0.2813 = $53323 (is this a BYD atto 3 extended?)

    $18000 x 0.655 reduce in take home pay rate x 5years (assuming your income is between $45k to $120k) = $58950 cost in lease payments and running expenses in an after-tax equivalent + $15000 residual is $73950

    Factoring in your running expenses you said $10500 over 5 years plus car purchase price $53323 = $63823

    so novated lease $73950 and purchasing outright with running expenses $63823 = $10127 more on the NL

    Now if you were to find an actual decent novated lease provider the novated lease would be cheaper than the purchase + running expenses over 5 years

    I say that the NL is ripping you off…. the comparison rate should be around 8-9% if you get a good one and i'm not talking about ones that you can pick and finance yourself because your NL will tell you to piss off

  • Jacobm on 21/03/2024 - 19:28

    While unlikely to change the discussion greatly, these calculations fail to take into account the net present value of money spent if 5 years time, the interest gain on money in your hand and inflation.

    • serpserpserp on 21/03/2024 - 21:45
      +1

      Your NPV is much lower so you should lock into a payment now?

      • Jacobm on 22/03/2024 - 09:30

        That's the principle yes, It would lower the cost significantly. it would just make the calculations more accurate. You would have to repeat them, to see if it's right for you.

  • ribze1 on 21/03/2024 - 20:48

    NVs are a scam to taxpayers. The real beneficiary is the NV company.

  • whyisave on 21/03/2024 - 21:11

    What I haven't seen in this thread is, that after the balloon payment,
    what would the expected sale price of an EV be ?

    Surely, it can't be the residual value at that time.

    With ICE cars, it's easier to figure out, as we have a history of data for this
    and it's also easier to trade-in an ICE car for another ICE car too.

    Who'd want to buy a 5-year old EV ?

    • rocketice on 21/03/2024 - 21:38
      +1

      residual value % is set by ATO based on the term of NL

      • whyisave on 21/03/2024 - 21:54

        I understand this, but that's not my query or concern.

        I was saying that all the other comments
        is doing the maths behind having a novated lease,
        and usually, at the end of the lease,
        you can recoup some costs with an ICE car
        or even make money on it,
        but how does all the "maths" in this thread,
        support the idea of selling a EV after the lease?

        We don't know what a used-car market looks like in Australia for EVs.

        • rocketice on 21/03/2024 - 22:19
          +1

          a very weird question but let's go with "maths".

          Actually a very easy search. Model 3 started selling in 2019, so they are 5-years old.
          Carsales has numerous 2019/2020 Model 3's on sale and the cheapest are at 60% of the value.
          This is in-line, if not better than other cars in the 60k mark when new - not everyone wants to drive Corolla's and Hilux and are happy with depreciation.

          Do you change the engine in your car eventhough its not required after 160,000kms just because it is less efficient? If so that is the same case with ev's with Tesla batteries under warranty up to 160/192k kms.

          • whyisave on 22/03/2024 - 00:46

            @rocketice: Thanks for replying.

            I understand that you've search Carsales, and I see non-EV cars there daily
            (I've been looking for something else, for last few months).

            Just because they're on Carsales, doesn't necessarily mean people are buying at that price.
            Fair enough, you can negotiate for a 5-10 % discount from asking price, etc. etc.

            So, let's say if an EV car is being sold on Carsales,
            and if it's non-dealer / Private sale, you can assume the asking price is close to the residual price of an end-of-lease EV.

            Those private Carsales prices are a snapshot of today's prices,
            and Teslas were first to market, and from their production standards,
            they can still fetch decent prices (eg. they are like iPhones).

            However, all the discussions here in this thread, are the calculations going forward, ie. next 3-5 years.

            I wonder if the residual prices can be matched, seeing that there're a lot more EVs now,
            eg. BYD, Cupra, Polestar, etc. etc.

            Then, there are sometimes hit pieces in the news of EVs having cost of battery changes,
            lithium-ION batteries combusting for e-Scooters (they are not EVs but these news works on perceptions of "EV"), etc.

            That's why I was just saying that will the "maths" stack up for the EVs,
            after 5 years is up, and trying to recoup some costs -AFTER- paying the balloon payment.

            I know that people who signed up to novated leases before Covid,
            for an ICE car, actually did well, because after Covid many car prices went up,
            so even after residual payments, lease owners did well and made some profit even.

            This was just pure luck (ie. car prices going up after Covid, for a myriad of reasons).

            It's just that before Covid, we all did the "maths" then too,
            as interest rates were lower and ICE car prices were quite reasonable then.
            Now, with EVs flooding the market, we just don't know what the used EV market will look like
            (or interest rates for that matter) in 5 years' time,
            that our current "maths" for novated leases would factor in those used EV car prices for that period of time
            …and sometimes, any future unemployment events can jeopardise the car lease,
            because coming up with the instant cash for the balloon payment while having a mortgage is distressing too.

    • serpserpserp on 21/03/2024 - 21:44

      You agree to balloon payment up front

      • whyisave on 21/03/2024 - 21:56

        I already know this about leasing, and the mechanics of the lease agreement.

        That was not my query.

        I'm talking about the "realistic expectations" of selling an EV at the end.

        There is no real precedence of it yet, before Tesla
        and now, no precedence of the 2nd-hand market with BYD, Polestar, Cupra, etc…
        …that who would want to buy a 2nd-hand EV when the battery replacement costs are high.

        With ICE cars, you know that there's a timing belt change due at a certain km,
        so you can work out the cost of buying an ex-lease car, etc.

        • serpserpserp on 22/03/2024 - 09:20

          ICE cars are not without risk. When you buy a new brand of car straight off the assembly line, you also have no idea of RV. You can assume it might be in line with similar vehicles but often they will be well under if some issue rolls out.

          There is a lot of hysteria around EV batteries. People seem to believe they'll be completely dead in 10 years which isn't the case. Even when the battery runs down they'll still be capable short range cars. Just like my ICE cars, I have a hatchback that is 20 years old and given wear and tear I wouldn't drive it over 100km from the city. Just like a Atto 3 in 12-15 years time, not without replacing the battery probably. But technology will be so vastly different then.

        • Nom on 31/03/2024 - 23:36
          +1

          It's irrelevant, because you get to find out this information when you have to make the decision at the end of the lease.

          Five years from now, your residual balloon payment is $20K.
          Is your EV worth $10K ? No worries, hand it back, don't pay the balloon. Instead buy the used one for $10k if you like.
          Is your EV worth $30K ? No worries, pay the balloon. Sell the car for $30K if you like.

          You get to make the decision at that time 👍

          • whyisave on 01/04/2024 - 01:04

            @Nom:

            It's irrelevant …

            It's relevant because I needed to work out all of the post-tax payments and the balloon payment,
            and then try to recoup those monies, through the sale price.

            Then, I can compare with buying a car, without lease.

            A long time ago, when I was hitting the kilometres, I was penalised in my lease,
            and there were a lot of other costs, which left a sour taste with novated leases for me.

            However, current lease is alright, but that's only because of sheer luck,
            in that some cars actually went up in price during C-19 ,
            and so my car is holding its value if I sell it, after the balloon payment.

            • changyang1230 on 01/04/2024 - 11:53

              @whyisave: It is only relevant only if your decision at five year marks is to sell for NL vs is to keep for cash purchase.

              If your decision is the same regardless of your funding option, then this resale value is a constant for both parts of the equation.

            • whyisave on 02/04/2024 - 00:05

              @whyisave: I just saw the word that I left out
              and I was meant to write the following:

              A long time ago, when I was hitting not the kilometres, I was penalised in my lease,

  • kaleidoscope on 21/03/2024 - 21:29

    Did similar calculations when i bought car few years ago. Math didn’t seem right at all. Was lot more cheaper to go through finance and do everything else by myself (insurance / rego/ fuel etc).

    It literally felt like the scummies were pocketing our tax benefits while us getting lesser take home pay and higher overall cost. What a load of $hit

  • aurotaro on 21/03/2024 - 21:40

    2019 Kia Sportage (existing car) over 5 more years of ownership would have costed me more or less the same as a 2024 Model 3 or lesser on a Novated Lease

    No brainer for me to go via Novated Lease

    • whyisave on 21/03/2024 - 21:57

      The maths for leasing works better with ICE,
      but with an EV, we can't only look at the costs of ownership,
      but also the ability to 'recoup' the cost after the balloon payment too.

  • serpserpserp on 21/03/2024 - 21:43
    +1

    What people don't take into consideration is the opportunity cost of researching and then the admin on a NL. Sounds like so many hours goes into research, then the additional maintenance of tracking everything and then fiddling at tax time.

  • apaul on 21/03/2024 - 22:10

    Did some more digging into novated lease. The only time I found is worthwhile is if you are getting an EV. The net savings could be equvalent to 0%finance or saving up 11K on vehicles close to Lux threshold of 89K

    I got quotes from three NL companies for an 87K EV car for 5 years

    • Poor Ass on 22/03/2024 - 00:26

      yes that you found

    • the4thzodiac on 24/03/2024 - 09:36
      +1

      Your post starts by admitting you're looking at purchasing an EV and now you say you've looked more into it? What a suss OP and suss Post.

      apaul on 18/03/2024 - 23:08 I have been thinking purchasing an electric vehicle (EV) and …..

      • mandelbrot on 24/03/2024 - 13:38

        Haha. Sounds like OP got nfi

  • argamond on 21/03/2024 - 23:23
    +3

    Best benefit is a one year novated lease. Assuming you have the cash to spare

    FBT free, GST rebated and tyres/insurance pretax and only for the cost of the finance interest. Keep the car and pay the balloon/residual payment

    • Poor Ass on 22/03/2024 - 00:29
      +1

      one year leases give you the most aggressive tax saving provided you got the salary to support it and in a stable role or industry

      it is one year and then refinance for another year and then another year and so on until you cannot refinance anymore

      the residual then would be minimal and your market value of the car much higher provided you don't do insane amounts of kms

      • whyisave on 22/03/2024 - 00:52

        I agree with everything you wrote, …

        one year leases give you the most aggressive tax saving
        provided you got the salary to support it and in a stable role or industry

        … and I also want to add that within that one-year lease,
        you should be hitting around 20K - 25K kilometres,
        to get even better tax savings, because of the depreciation amount,
        but for many people who live inner city, getting over 20K kilometres can be difficult too.

        • Poor Ass on 22/03/2024 - 10:24

          you see anyone who drives more is always going to get more tax savings because you are spending more regardless of the car. for ICE cars you satisfy the post-tax requirement everything else can be done in pre-tax so more pre-tax is used more tax you save

          the thing is with most NL companies their selling point are the tax savings rather than how much it is going to cost. we should focus on the cost rather than the tax savings because it's always inflated.

          so only budget for what you need because if you don't use it, it will eventually be tax in some way like wages or super if you put in super and below the concessional threshold

          also depreciation doesn't come into play because it's the lease payments that's will yield you the best tax savings.. but at the same time more you drive the less your vehicle is worth at the end

          so if you want the best tax savings if it is within your situation it's always cheap purchase price and high kms

          I've seen cars that drive alot been able to beat cash even for ICE cars without FBT exemption

      • shiny1 on 22/03/2024 - 11:38

        It costs $500-$600 to redraft the novated lease, so doing it multiple years will cost a few thousand. On top of that, I'm not sure if you can refinance the car and expect the residual percentage to start from 100% again and expect a 35% cut down to 65% year after year. Surely, the ATO would see the same car and just calculate it as a subsequent year of leasing and move down the lease term percentages.

        • Poor Ass on 22/03/2024 - 11:57

          It costs $500-$600 to redraft the novated lease

          depends on the NL provider and financer they all vary… sometimes $0 but rare… but you got someone that has $$$ and don't really care as long as they are saving big e.g $200k+ individuals they will do it

          On top of that, I'm not sure if you can refinance the car and expect the residual percentage to start from 100% again and expect a 35% cut down to 65% year after year. Surely, the ATO would see the same car and just calculate it as a subsequent year of leasing and move down the lease term percentages.

          It's allowed and all NL providers do it… to date I have not seen any company audited if they choose to re-lease multiple one year leases to bring down the residual

  • microsnot on 21/03/2024 - 23:31
    +1

    I have a 2 year NL in Victoria for a Model Y.

    Costs for 2 year NL is $23,404.68 (post tax)
    Residual value is $39,546.36 (incl GST)
    Total cost for 2 years is $62,951.04

    Driveaway price for Model Y in VIC is $71,063.40 then add rego for 1 year, insurance for two, and money not in offset.

    Works for me as long as long as I don't lose my job and get stuck with 7.99% finance. That is why I only did 2 year NL.

    I should add that I didn't get tint, paint protection and all that other stuff. Will just pay post tax if I want that

    • Poor Ass on 22/03/2024 - 00:30
      +4

      if you lose your job and the next employer is ok in taking on the novation then you can continue salary sacrificing again

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