novated lease!

[walldog]

Two leased vehicles, both pre tax + contribution = $70 / fortnight better off than if I still drove my old zuke, just sayin' your circumstances my be different so get some good financial advice



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The difference between theory and practice is, in theory there is no difference...

[humdingerslammer]

I worked out the costs of a novated lease as against a personal loan and re-draw on a house loan. The cost for a novated lease was 2.5 times the cost of buying the car outright. The personal loan was about double and the home loan re-draw was about 60% of the cost of the car.

With novated leases, all costs for the period of the lease r calculated at the time of making the lease (all delivery fees,fuel, tyres, rego, insurance, maintenance, etc r added to the lease principle upfront for the duration of the lease (so 5 years then 5 yrs worth added).Interest is calculated on all this added to the price of the vehicle. In other words, you r paying interest on money for fuel etc when you haven't even spent it!! Over 5 years, all this could add up to around $25000 and an interest bill of about $13000 compound over this time at an interest rate @ 9%. Novated leases make little sense to me. Better off with a personal loan if u haven't got a home loan to re-draw on and add this to your salary sacrifice payments if you can.

[rjvines]

Originally Posted by humdingerslammer

With novated leases, all costs for the period of the lease r calculated at the time of making the lease (all delivery fees,fuel, tyres, rego, insurance, maintenance, etc r added to the lease principle upfront for the duration of the lease (so 5 years then 5 yrs worth added).Interest is calculated on all this added to the price of the vehicle. In other words, you r paying interest on money for fuel etc when you haven't even spent it!! Over 5 years, all this could add up to around $25000 and an interest bill of about $13000 compound over this time at an interest rate @ 9%. Novated leases make little sense to me. Better off with a personal loan if u haven't got a home loan to re-draw on and add this to your salary sacrifice payments if you can.

Not sure who you got your quote from but this is certainly not the case with Orix or Fleet Partners. No running costs are added to the principle and interest is not calculated on future costs, in fact if you buy up early in the lease (like I've just done with muddies) you end up using the lease as a free line of credit.

Im on my 4th fully maintained novated lease with orix and due to some fortuitous timing I'm using the log book method of FBT calculation. What this means is that 92% of the costs associated with owning and running my car are paid out of pre-tax income.
This means that while the car actually costs $19k/year to own and operate, my income only suffers a $12.5k hit. (although i have no tax deduction for work related travel)

[walldog]

Yeah your first mistake is letting the lease company pay your costs , go to an accountant who knows what they are talking about, rj is correct,. - 9 years leasing and counting ( Tiguan and JKU)



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The difference between theory and practice is, in theory there is no difference...

[Vards]

Originally Posted by humdingerslammer

I worked out the costs of a novated lease as against a personal loan and re-draw on a house loan. The cost for a novated lease was 2.5 times the cost of buying the car outright. The personal loan was about double and the home loan re-draw was about 60% of the cost of the car.

With novated leases, all costs for the period of the lease r calculated at the time of making the lease (all delivery fees,fuel, tyres, rego, insurance, maintenance, etc r added to the lease principle upfront for the duration of the lease (so 5 years then 5 yrs worth added).Interest is calculated on all this added to the price of the vehicle. In other words, you r paying interest on money for fuel etc when you haven't even spent it!! Over 5 years, all this could add up to around $25000 and an interest bill of about $13000 compound over this time at an interest rate @ 9%. Novated leases make little sense to me. Better off with a personal loan if u haven't got a home loan to re-draw on and add this to your salary sacrifice payments if you can.

This isnt correct, the finance component of your lease is on the cost of the vehicle only. You can package your maintenance costs how ever you like and change them up or down to suit you as required, they are merely looking after your pre-tax dollars for you.

Looks like you need to re-calculate! Vehicle cost is GST free and your employer pays the GST on your repayments for you.

[humdingerslammer]

Nope, I am still in front.

[AroGantz]

Originally Posted by humdingerslammer

Nope, I am still in front.

I also did the maths on the lease vs personal loan and once the running costs were factored in they came in very close together but I pay less tax with the lease so it worked to be a better deal for me, when I did the dame exercise five years ago the lesser was not the best option so it comes down to individual circumstances. I love just making a payment a fortnight and not worrying about any other costs, fuel, rego, insurance and servicing are all covered.

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