Novated Lease.

[markxr6t]

After 4 years, your residual will be 35%, so lets say $15750 including GST if your BF was $45k driveaway.

The car will be worth more than this (ie don't just hand it back to the finance co.), so regardless of whether you plan to lease another car or whatever this is what you should do:

1. Pay a year's insurance, rego and a service just before the end of the 4 years out of your pre-tax $

2. Find the cash, redraw or borrow $15750 to pay the finance company the residual.

3. The car remains registered in your name, but is no longer encumbered by the finance company.

4. Drive it for a year with your only expense being petrol (cos you paid other expenses whilst under lease) and sell it for $20k. The $4250 profit is yours as CGT does not apply to your personal car.

5. Alternatively, you could sell it straight away, but at least you don't need to be in a hurry.

Mark

[Falchoon]

If the idea is to make money out of the deal then you would want to sell it ASAP as every day you own the car it is worth less and potentially needs more maintenance.

Otherwise you just pay the $15K and drive it around. Not sure if it would be worth more to sell really.

If you look around you can pick up 2002 XR6Ts for $20K or less now, what are they going to be worth in a year's time when the Orion comes out?

I reckon you would lucky to be offered $15K now for an early XR6T on a trade-in.

Might be just as easy to trade it if you want to update to a new model, and go through the whole lease thing again for another 4 or so years..

[Blonk]

You can always re-novate it for the 15 grand and then own it outright...

Up the payments and get rid of the finance in a year.. After 5 years you pay off a new car written 100% of your income tax free.....

Then give it to the missus or kids and buy a new one

[tonester]

Might be just as easy to trade it if you want to update to a new model, and go through the whole lease thing again for another 4 or so years..

Just be careful when turning it over.

If the depriciated value is less than the trade value. You will have made a Capital Gain and therefore have to declare it.

Eg: Trade In = $23000, Book Value = $20000, Profit = $3000

Got hit this financial year with a profit !!!

Tony

[Falchoon]

You can always re-novate it for the 15 grand and then own it outright...

I don't think you can lease a car that is over two years old. Different companies may have different policies on this so best to check with the one you're with.

[Blonk]

I don't think you can lease a car that is over two years old. Different companies may have different policies on this so best to check with the one you're with.

Sorry Falchoon but that's crap.. You can Novate a car that is 20 years old for $2000....

Finance companies "encourage" you to novate a new model car because they make a truck load more money out of you..... Employers "encourage' you to novate a newer car, because it makes there employees more attractive to clients...

The tax office "encourages" you to Novate a newer car because your FBT payments will be more...

If you are a certain worker, you can salary package a vehicle, that vehicle will attract FBT, more if you dont do many k's...

that's it, that's all the rules from the tax office.. your finance company simply gets paid the lease from your packaging company, They dont care who the money comes from... Your packaging company simply sends your money to someone else.. They dont care who...

And remember, you can get finance from anyone you want and if you are entitled you can package with anyone you want, dont let the finance company, your employer, or the packaging company tell you different.... Salary packaging is a Tax Office controlled facility, everyone else are just the vultures picking round the edges of your hard earned....

Edited 08/08/07 09:19 AM by Blonk

[tonester]

If the depriciated value is less than the trade value. You will have made a Capital Gain and therefore have to declare it.

I have to correct myself. With a Novated Lease you don't own the car, so you don't depriciate it, you just clam the payments as a tax deduction.

The depriciation only applies if it's a Hire Purchase/Loan'purchase outright.

The big Novated Lease catch = You must do a reasonable amount of K's or the FBT will kill you.

Tony

[tab]

Some actually "insist"

[Beaker]

As has been pointed out above - you have the choice of either handing it back (which would be dumb in 90% of cases as its almost certainly going to be worth more then what the residual is) or pay out the residual and then you own it.

From there you can either keep it, or sell it and keep any money you get, so if the residual is 15K and you sell it for 20K you keep the 5K difference (no tax too ).

Some lease complanies have a third option - in that they have a deal with an auction house, you can simply hand the car over on the last day of the lease and walk away, they sell the car for you, take out the residual and hand over a cheque for the difference (you can also set a reserve to make sure you don't end up with a bill).

If you are thinking about it - talk to a financial adviser, Its worth doing in most cases, but a word of warning if you find you can't keep up the payments and have to break the lease you are going to end up with a MASSIVE bill. And I mean that seriously, the lease company will bend you over the counter and root you up the tailpipe with an elephant.

Edited 09/08/07 12:51 PM by Beaker

[Blonk]

Some actually "insist"

So your saying that Finance Companies, Salary Packaging Companies and Employers, will overide Australian Taxation Legislation (LAW) that has been formed by an act of Parliament, and lead you to believe that it is actually them that make the rules..!!!

What have you been smoking today Trent...