Leasing 4wd

Submitted: Monday, Apr 06, 2009 at 20:58
ThreadID: 67618 Views:2094 Replies:6 FollowUps:2
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I have the opportunity to lease a new 4wd over 4 years and then it's mine.
Has anyone had experience with leasing and can give their opinion.

Cheers.

SCOEY
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Reply By: Saharaman (aka Geepeem) - Monday, Apr 06, 2009 at 21:15

Monday, Apr 06, 2009 at 21:15
Scoey,

Why let a third party (the leasing company) make money out of the deal. If you have your own company for business or your own super fund - let that entity buy the vehicle and lease it to yourself under mutually agreeable terms and conditions determined at arms length. Or alternatively if it is the company who will be using the vehicle - you could buy it in your private name and lease to your family company under the same arrangements.
In other words keep the extra costs associated with leasing in house. Obviously leasing companies do this sort of thing for a profit - so keep that profit for yourself or an entity you control and own.
Cheers
GPM

AnswerID: 358469

Follow Up By: Member - Fred B (NT) - Monday, Apr 06, 2009 at 21:48

Monday, Apr 06, 2009 at 21:48
Usually lease companies charge a buy out figure at the end for you to retain the vehicle. Unless you are in a very high income tax bracket, it's usually viable to lease the vechicle unless you can get a substantial tax break AND the buy out figure is small. I usually would not recommend leasing for an individual. Get independant tax advice if you go this path.
All the best.
Fred B
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Reply By: Member - Fred B (NT) - Monday, Apr 06, 2009 at 21:48

Monday, Apr 06, 2009 at 21:48
OOOPPPS! Meant to say UNVIABLE
Fred B
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AnswerID: 358482

Reply By: Member - Mark (NSW) - Monday, Apr 06, 2009 at 21:54

Monday, Apr 06, 2009 at 21:54
If you are a standard employee and don't have the $s to buy the vehicle outright, it can be a good way to get the vehicle of your dream. Most lease companies (Orix, NLC) have interactive websites which enable you to play around and look at the reduction in after tax income.
There is no way the vehicle will be "yours" after 4 years, there is such a thing as the ATO approved depreciation allowance and you will have to buy out the residual value.
The residual will depend on lots of things such as km driven (Fringe benefit tax liability and so on). You will also still need to shop around to negotiate the best purchase price, don't just take the lease company's price.
There is a lot of $s involved so spend a very small amount of that and see your tax accountant to get best advice. Have an idea over what it costs to run such a vehicle (Leaser company web sites will tell you), total number of km driven pa and % which can be claimed as work related.
Your accountant should be able to give you some hints as to maximise work deductions as there are a few different ways of substantiating your deductions.
IF you do high km (low FBT) you may be better off taking a loan and running the vehicle as your own Tax deduction. Bit of paper work, but may be well worth it.

AnswerID: 358486

Reply By: PatrolSTL04 - Monday, Apr 06, 2009 at 23:42

Monday, Apr 06, 2009 at 23:42
In most one off individual cases, Chattel Mortgage with a balloon will be best (baloon to lower your payments if thats what yuo are after).

You own the vehicle and claim all depreciation.

You dont pay any GST on the payment so its lower per month, you wont have any penalties if you exceed the lease conditions on expiry of the lease (too many kilometres etc).

Most accountants would not recommend a lease unless for novated purposes (through your employer) or for a fleet of vehicles (for simplicity of accounting).

Your accountant should be able to advice you the best way.
AnswerID: 358502

Reply By: Richard W (NSW) - Tuesday, Apr 07, 2009 at 08:47

Tuesday, Apr 07, 2009 at 08:47
Scoey,

I had different experiences with two vehicles on novated leases. The first I came out $3,000 ahead on the payout figure. The second I came out $5,000 behind after I didn't increase the payments enough to cover running expenses after a suspension upgrade and far more outback travel than planned.
As others have said on a high salary and as long as you travel the kilometers it can be tax effective.
AnswerID: 358531

Reply By: Muddy doe (SA) - Wednesday, Apr 08, 2009 at 21:14

Wednesday, Apr 08, 2009 at 21:14
In my situation a novated lease has saved me around $6,000 a year over the cost of doing the same thing as an after tax personal loan.

It was the difference between having a Prado or a Rav4.

As sid it is very dependent on individual circumstances so make sure you know the figures for the various options before you decide.

Most leases have at least a 25% residual due at the end (which is supposed to be about what the vehicle is worth at that point). This is what makes it attractive as a lower cost option over the term and then you either pay it out and keep the vehicle or just hand it back. Interesting that you have been offered a zero % residual.

Do the sums and seek advice.

Happy to answer specific questions if you need it.

Muddy
AnswerID: 358867

Follow Up By: Member - Scoey4 (SA) - Thursday, Apr 09, 2009 at 20:00

Thursday, Apr 09, 2009 at 20:00
Thanks to all for the advice.
I have done some more research this week and the difference between leasing and taking a loan is not that much - mainly the saving of GST on the new car price - but this can be made up on a loan by paying out the loan early.

Anyway, things have changed a bit this week career wise, so buying the dream 4wd is on the back burner.

Thanks again for the input.

SCOEY
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