Bilbo replied:

I had a novated lease on my Cruiser. These leases aren't all they are cracked up to be. You really have to UNDERSTAND the tax laws on novated leasing - I had to read 'em about 100 times before the penny droped.

By the time all was done and dusted with salary sacrifice, FBT etc,etc. I saved about $1500.00 on a Cruiser that cost around $58,000.00 (just under the luxury car tax limit at the time)

It was hardly worth the messing about.

The bottom line is that "Pete & Johnny - the best mate the workers' ever had" will get ya whatever ya do.

Bilbo

gramps replied:

You and the dealers are also contending with a psychological barrier buyers have with purchasing recent model vehicles (especially petrol) with over 100k on the meter. Be prepared for more of a shock once the lease runs out and you have over 200k on the clock.

JustyWhyalla replied:

Another point a lot of people misunderstand is THEY are responsible for the loan. Having sold cars I have come across several people who didn't fully understand what they were getting in to.

Also be very aware of residual value's. Eg vehicle cost $50,000 you only finance $30,000 over three years because surely it will be worth $20,000 in three years! Often presented as a way of saving money if you trade regularly. Why finance the whole amount when you will only keep it X number of years anyway. Then often quickly move on to how much lower the weekly payments will be. If either the vehicle has devalued more than that, you end up with negative equity or worse still you now need to refinance the other $20,000 over 3 years. (Calculate how much it is now going to cost you!)

Another one to watch is adding to your home loan, low rate but work out how much it is going to cost you over the 20-30 years!

Of course sometimes this is the only way for it to be affordable especially if you have a vehicle that is costing you big $$$ in maintenance

Member - Blue (VIC) replied:

That's exactly why taking as much info to your accountant as you can, is your friend... Cover all the possible scenarios before you sign...

Member - JohnR (Vic)&Moses replied:

Hey guys, it is a betting/guessing game always which ever way you play it. My car 4by I had before the current car did exactly the same thing to me as commercial HP so don't think you are out of the ordinary.

You may think you have a win when paying up front when buying but then you have lost the opportunity value of that money too. Deprecianble assets are best using someone elses' money somehow particularly if you can use the deduction in your business. Use your own cash to make money on something else. Best of course don't spend on something you can't afford ;-] I try not.........

Richard replied:

Did OK on the first one when the trade in was worth $3,000 more than the residual. The last one cost me as I added a suspension lift and long range tank into the lease and with some long trips the running costs were underestimated. Even though I increased the salary sacrifice it cost me a fair bit over its value when I paid it out.

Member - Tonester (VIC) replied:

You signed up for 4 years, and wanted to swap over at 3 years, so that sounds about right. At the 4 year mark it would have been around $14K. You should try swapping a lease over after only 1 year in. You owe about $1K less than the original. IMO, 4 years is too long for a lease anyway.

Farside replied:

Dear All

I had a 2000 Prado GXL on 5 year leased at 40% residual. Had to do 25000km per year, so at the end I had 130 000km on the clock and had to pay off $19000 for the residual.

Sold it for a decent profit even after the dust had setteld between the ATO and the lease company.

I now have a 2005 Patrol , at 35% residual, which I saved just over $10 000 between the lease discount and getting my GST back on the list price. The lease company even went into bat for me in order for me to get a free bull bar and driving lights even though this these items where only meant for a 2004 model.

Best thing I have ever done.

Angus

porl replied:

and don't forget the tax rates have dropped and from 1 July this year and are dropping further. That is a key issue in a novated lease situation as you are paying from pre-tax dollars which when the top marginal rate was 48.5c in the dollar made it possibly well worthwhile if you were on a top dollar wage and doing the miles to cancel out FBT. But with the top marginal tax rate plummeting and the level at which it cuts in rising, i reckon its possibly goodbye novated lease cultures.

Member - Phil G (SA) replied:

I got turned off by all the paperwork. Too much BS, and get penalised if you didn't do enough k's. All sounded stupid at the time.

JamieMac replied:

I had a novated lease and it worked fine as I had min residual for 12 months and then did this three years running to get a better result This allowed me to buy more tax free equity in the car.

The trick is balancing the value of the car and your driving patterns etc to see if it works as some people will be a lot worse off under a novated lease. Esp now the tax scales have increased and you need to earn more money to make it work best.

I now have an Associate Lease where my employer leases my car from my wife and I get the lease payments back as well as saving GST and Tax on my purchases. All adds up to a sweet deal as it is akin to income splitting to my low wage partner. Still need to know how it works and do the math properly first though.

JamieMac