Redhawk ....Time to lay this fairytale aside...... Donating Members 2,657 Member For: 21y 9m 12d Gender: Male Location: In the Ferry on the River Styx, not getting out just yet! Posted 25/01/04 09:30 AM Share Posted 25/01/04 09:30 AM I think it all boils down to your financial position.I looked at novated lease and worked out the cost (to me) including the savings on pre tax income etc; did'nt look good as I am not on a $200k pa salarySpoke to my accountant and he said given my financial position I would be mad going for novated lease as the km's I need to do would depreciate the car too much and I was locked in for 5 years. Also the insurance the lease mob had on the car was triple what I could get elsewhere.It worked out I would have to pay $1400 per month (after tax) and have a $25000 balloon at the end of the 5yr lease.......stuff that!!My way I pay $1000 pm for 4 yrs (due to deposit), put an extra $400 pm aside for all running costs and at the end of 4 yrs own the car outright, and have a little extra in the bank. Also claim part depreciation and running cost against some of my investments. Link to comment Share on other sites More sharing options...
aaronmihe Upstanding Member Member 759 Member For: 21y 3m 18d Location: Canberra - ACT Posted 25/01/04 12:03 PM Share Posted 25/01/04 12:03 PM I have Bruce on a Novated lease.I don't earn enough from the job that Bruce is novated through to be in the top tax bracket. ie (less than $60K) but the advantages of Novation are not just tax ones...1. Packaged costs. I pay no car expenses out of my hand, so my pay goes directly to me.2. Protection against depreciation. At the end of my 3 year lease I can sell the car privately and keep any margin above the residual (if the T's depreciate as forecast this will be about $5K) or if the value dumps I just hand the car back...3. Protection against "bracket-creep". I have two jobs and other money making interests. Chuck in a "on-call" loading and all that and at tax time I find myself leaping into a high tax bracket and owning the Govt a big lump of cash that I won't have in the bank. The lease keeps me a fair distance from this bracket jump.4. Pay less for stuff I paid some $8K less for the car, and pay no GST on anything that goes on or int he car... essentially it costs 10% less....Like Redhawk my T costs me about $1400 a month all inclusive. I'm paying part of the lease on pre-tax income and part on post-tax to minimise FBT exposure, I pay 20% tax in FBT on the pre-tax amounts. (better than 30% I pay post tax). If I was doing 25001>40000km a year that would only be 11%. Now that's a saving. As for going "cash" or "novated" or "finance"....I'd go Novated every time becuase it protects me against bracket creep - in may case that's a very real danger, and can cost me more than the interest I pay on the finance loan portion of the Novation.If it was between Cash or Finance I'd say cash - cars are not an investment, so the less they cost you and the more you can make them owrk for yout he better!A. Link to comment Share on other sites More sharing options...
richdave SLOJAM, Gone but not forgotten Lifetime Members 1,841 Member For: 22y 2m 12d Gender: Male Location: Outer east - Melbourne Posted 25/01/04 02:34 PM Share Posted 25/01/04 02:34 PM I am not on a $200k pa salary.....It worked out I would have to pay $1400 per month (after tax) and have a $25000 balloon at the end of the 5yr lease.......stuff that!! You dont need to be on 200K to benefit from a novated lease....On a 5 year lease the car is usually written down to 25% of the value so unless you were purchasing a $100k car, a $25k residual seems wrong. Link to comment Share on other sites More sharing options...
hammer007 Donating Members 149 Member For: 21y 9m 19d Location: Canberra Posted 25/01/04 08:12 PM Share Posted 25/01/04 08:12 PM Just to confuse things even more you can make post tax contributions equivalaent to the FBT amount and pay no FBT.This is called the Employee Contribution Method - rather than retyping - have a gander athttp://forums.whirlpool.net.au/forum-repli...es.cfm?t=152529 I thought I said that.......but I didnt call it "the contribution method"you are paying for the fuel and maintenance post tax to offset the FBT? Correct. You also said that paying for FBT and running costs out of pre-tax depending on income you may be better off. My experience with salary packaging is that for most people where I work are better off using ECM rather than paying FBT.I also reccomend you talk to a financial advisor but there are also some good calculators around which can help you run the numbers ie at www.mcms.com.au"My last employer took the FBT liability post tax where as my new employer takes the (reduced) FBT pre tax, effectively saving me $300/month post tax" Again depending on your income you may be better off using an ECM method rather than FBT. From what I've calculated the changeover figure for someone with a $45k XR6T doing 30,000 km per month is around $75K.Another point to remind if you work for a charity, hospital or some schools you can away without paying any FBT at all. Link to comment Share on other sites More sharing options...
Velvet Glove Team Blueprint Member 532 Member For: 21y 8m 11d Posted 25/01/04 08:26 PM Share Posted 25/01/04 08:26 PM I have found that, by and large, many accountants have no idea of the application of tax laws with respect to novated lease etc (I know, some do, but I have received mostly factually incorrect stuff from them). Our work makes us speak to a financial adviser who specialises in novated leases before we are allowed to enter into the lease.You dont need to earn 200K and you can lower the costs by having a longer lease. My lease is over 3 years and at the end of it I can do one of two things.a) Hand the keys back, say thanks very much, and enter into another lease with another carb) Pay out the residual, sell it, then get another lease on another car.My residual is about $19000 after 3 years. Unless the *ss falls out of the car market I figure I will be able to seel it for anything between $25K-$30K as, with all inclusive costs in the lease, it will be immacu;ately maintained and detailed. Whatver the diff between the residual and the selling price I get to keep. If that's not viable at the end I'll just give the car back and no harm done.The more you earn the easier it is to afford, but there are plenty of guys in my job who earn a lot less than me who drive around in very nice cars, who have just juggled their finances well.The best thing about novated, as most have ssaid, is that everything is pre-paid, so once your fortnightly or monthly amount is paid (mine comes out of my wage every f/n) you dont have to dip into your pocket again. When you averaged out all the costs of my previous car that I owned on a fortnightly basis I am about $100/f/n worse off, but I no longer drive an Excel !! Link to comment Share on other sites More sharing options...
Redhawk ....Time to lay this fairytale aside...... Donating Members 2,657 Member For: 21y 9m 12d Gender: Male Location: In the Ferry on the River Styx, not getting out just yet! Posted 25/01/04 11:34 PM Share Posted 25/01/04 11:34 PM I am not on a $200k pa salary.....It worked out I would have to pay $1400 per month (after tax) and have a $25000 balloon at the end of the 5yr lease.......stuff that!!You dont need to be on 200K to benefit from a novated lease....On a 5 year lease the car is usually written down to 25% of the value so unless you were purchasing a $100k car, a $25k residual seems wrong. Sorry mate it was 19,000 residual.By 200k salary I meant that the more you earn the more attractive leasing is.The problems were the fixed 5 year contract, and the km's needed to avoid FBT. I plan on keeping the GT for about 10 years so need to keep the km's down, so financing like I did suited me. Damn PAYE At the end of the day I'm cruising around town in one of the best cars in town and definately the best car I have ever owned. The.......feeling is..............intoxicating! :D Link to comment Share on other sites More sharing options...
hammer007 Donating Members 149 Member For: 21y 9m 19d Location: Canberra Posted 26/01/04 12:08 AM Share Posted 26/01/04 12:08 AM b) Pay out the residual, sell it, then get another lease on another car. My residual is about $19000 after 3 yearsBe aware also that you do have to pay GST if you are paying out the lease. My residual after 3 years is around 22K GST inclusive.I agree with VG that a 3 year old XR6T well maintained etc etc should be worth more than my residual so not only have I 'saved' money by salary packaging there is a potential to make a modest profit at the end. Link to comment Share on other sites More sharing options...
aaronmihe Upstanding Member Member 759 Member For: 21y 3m 18d Location: Canberra - ACT Posted 26/01/04 12:33 AM Share Posted 26/01/04 12:33 AM Hammer007, ouch that residual... Mines about $18K + GST which places it aroudn the $20K mark....Gotta agree with VG.... While Kitty and I were in Tasmania we ran up 4000km on the island. That's a fair whack of petrol money to carry around for holidays and not spend on trickets... But we just keep clocking up the kms and it all comes out in the wash A. Link to comment Share on other sites More sharing options...
hammer007 Donating Members 149 Member For: 21y 9m 19d Location: Canberra Posted 26/01/04 01:21 AM Share Posted 26/01/04 01:21 AM Hammer007, ouch that residual... Mines about $18K + GST which places it aroudn the $20K mark....Now look what you made me do - get the paperwork out.Residual is $19,500 + 10% GST (@ 45% of $43,000 base value) so total residual is $21450. If I can't get $21.5K for a 3 yr old XR6T with 75,000km there has to be something wrong. Link to comment Share on other sites More sharing options...
Velvet Glove Team Blueprint Member 532 Member For: 21y 8m 11d Posted 26/01/04 02:04 AM Share Posted 26/01/04 02:04 AM that's my rational mate. After 3 years I'll really know if a novated lease is for me (it definitely is now) and I think I'm in a win/win situation at the end of the day. Its definitely not for everyone, but it suits me fine as I dont have to worry too much about mortgage repayments etc as I have a ton of residual in the house, and have no other debts besides the house and the car.It is the best way I know to afford a more expensive car without having to put yourself into another big chunk of debt. I couldve gotten a loan for it, but the all inclusive benefits of the novation make it completely worthwhile Link to comment Share on other sites More sharing options...
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