So, I'm interested in taking advantage of the Geely finance deal on at the moment. It says a comparison rate of 3.88%. With my limited knowledge of finance, I'm assuming I am better off keeping my money in the bank earning 4.8% as it will earn more than the interest I pay on the finance.
I'm thinking it's probably not as simple as this. What am I missing/what should I look out for?
this is the wisdom i came for (y)
Would novated lease be a better option?
I'm thinking it's probably not as simple as this. What am I missing/what should I look out for?
In addition to what scrambledeggs said, if you are looking to get a mortgage a financed car will look very bad on the application.
Very bad is an overstatement. A car loan is irrelevant, they care only about your total incoming - total outgoing plus a buffer for repayments.
Obviously a car loan will hurt your maximum borrowing capacity but it’s not going to look ‘very bad’ unless you’re doing something stupid like financing a $100k car on a $50k income.
Obviously a car loan will hurt your maximum borrowing capacity but it’s not going to look ‘very bad’ unless you’re doing something stupid like financing a $100k car on a $50k income.
that's literally what i mean. Your max borrowing power will be decreased by much more than the total loan amount for a car.
own my place but good food for thought for others
Double check the duration of any finance also. While the finance rate might be better than any interest (saving) rate, the duration of the finance also plays a big part. Being locked in for 3 or 5 years of financing, even at a lower rate, might be more to pay in the long run if you need cash sooner. Typically, they provide a good rate but get you with a long finance period.
As it were, I picked up a Geely EX5 last Friday for my wife. Got it through novated lease. Putting aside any durability issues as we've only had it a few days, the drive and features have been great.
Also, Geely unlikey (say) BYD are open to negotiating on price, or have other inclusions. Whether they negotiate on price if financed is another item, but getting a good deal and paying cash might be the ultimate win
good to hear, its a 3 year finance period. one of the things id like to find out is if theres a penalty for paying it off earlier. as scrambledeggs mentioned, id also be missing out on about $1200 over 3 years through tax. did you have any luck haggling?
I didn't haggle directly, but did through the lease company and they got $1,500 off. Not a great deal, but better than nothing.
If you could get a novated lease, and are otherwise an appropriate candidate for NL, look into it as you are likely to be way better off than finance from numbers perspective.
Here's the calculator to help you compare the options.
https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu
And here are some caveats to watch out for if you are considering NL.
https://www.reddit.com/r/AusHENRY/comments/1i4zrzr/comment/m…
Way better off than paying cash?
I didn't check your links, but I had to do lots of justifying to convince myself that a novated lease comes close to using savings.
In my case NL for 5 years is cheaper than cash by 46,000 dollars. Top bracket though so this is the most optimal situation. And there are lots of caveats around NL so it's something that you have to put some thought into. (hence the links - the info are all there - I have put a lot of work in this area as educational resource over the last few years)
ahh thanks, I like your work. Your spreadsheet did confirm that a NL isn't great for me. I think your situation is different than the average ozbargainer. But when I re-read your post, you did have a disclaimer "if an appropriate candidate for NL".
It could also be the FleetPartners are a rip off and some are more reasonably priced.
@changyang1230: It's just that the unreasonable lease costs negate the tax savings.
I would love to see comparison of fleet company quotes and see if some are less expensive than Fleet Partners. Unfortunately it's not a very transparent industry.
Car financing is one of the worst financing option you can take. If you need to finance to get a car, that means you are not financially stable yet and better to avoid it.
Rubbish, OP has made it clear that the financing rate is lower than what he can earn on interest and thus the question. It says nothing about their financial state.
I have a car loan because I have a novated lease. I am financially stable, but it was financially beneficial to have the novated lease (yay EVs). You can't just say any kind of specific finance is bad, it all just depends how you use it.
Like credit cards, they're absolutely the worst if used poorly. Used well, they're free points funded by those who use them poorly.
As freefall101 has stated, alot of very wealthy people finance their cars. Its not because they can't afford it, its simply because they can make better returns with their money else where vs. cost of financing a car.
You learn everyday, my friend.
Typically this is also paired with the fact that they can claim deduction on the interest due to business use etc.
Ah yes! if they put it through business expense. Agree.
The only way to purchase an EV is via a novated lease… any other method (including cash) is stooopid.
FBT revenue agrees, with a big thank you for your generou$ contribution$.
I'm interested in taking advantage of the Geely
commiserations … they are interested in taking advantage of you..
match made in heaven
Make sure you find out what the real rate is, their description of a comparison rate is weird. They base it on a 5 year loan, but the term is only 36 months. They say it may not include all fees and charges, despite that being the point of a comparison rate - it should have all those.
I'd also haggle on it. Go to them, get the price with financing then ask what the price will be if you pay upfront. Possibly they can't do anything, but sometimes they might because the financing terms are just providing a hidden discount.
Also check out EV novated leases, if you can get this financing with a novated lease (i.e. you can pick your own financing) this would be a great setup.
Comparison rates use a set figure eg $30,000 loan over 5 years.
Any monthly fees?
What am I missing/what should I look out for?
Fees, initial installment, account maintenance charges, anything really.
Quadruple check their conditions.
There must be a reason, they will not lose money.
It says a comparison rate of 3.88%. With my limited knowledge of finance, I'm assuming I am better off keeping my money in the bank earning 4.8% as it will earn more than the interest I pay on the finance.
There is definitely something else going on.
Why would they give you $10,000 and earn 3.88% interest on it, when they can put it wherever yours is and earn 4.8% on it?
Their aim is to maximise their profit, not yours.
You pay your marginal tax rate on interest earned
I.e. if you are in the the $45,001 – $135,000 k tax bracket, 30% of your interest earned goes to tax man
You're almost certainly better off paying cash and not having a loan, unless it is a work vehicle and you can deduct the interest from your taxable income
I am not a tax lawyer
Thanx