Thread: Salary sacrifice and leasing a car

Doesn't the full stop or caps key work on your keyboard ?

In my experience, Salary Sacrificing /Novated Leasing to buy a car is only really beneficial if a) you are on the highest tax rate and b) you do a lot of km a year. I had one but don't now.
You need someone to sit down with you and go through the sums for your circumstances.
I'm betting the Govt will change the FBT rules relating to novated leases anyway, because it's ridiculous in these days of reducing greenhouse gases etc, you get a bigger tax break the more km you do. If anything you should be rewarded for the less km you do !
I presume you're looking at a Novated Lease or Associate Lease ?
Some points to ponder :

-They're not bad but can be heavy penalties for getting out early. so you need to be sure you're going to keep the car for a while.
- If she loses her job, can't work for any reason, you will still need to make the same lease payments. ( or get out of the lease at big penalties )
- You need to look after the car, as the resale value affects what you have to pay out at the end of the lease. ( not like a company car where you just hand it back )
- You should get all your maintenance and fuel GST free.
- But it is still a loan, so you are paying interest, which would probably more than negate the GST rebate.
- You don't need to lease a new car, and suffer the devaluation when you drive out the door. You can lease up to a 7 year old car. ( depending on your leasing company )

Salary sacrifice is expense. But the cost can be out weighed by the tax savings. It depends on how much she earns. Your accountant will tell you if it is worth it for you.
If you get a LR you can get the corporate plan, if the company has a turnover >$30m, free servicing and free loan car (although Alto give a free loaner to all service customers) plus floor mats.
Most companies make you go through their leasing company but you do not have to buy the car through their dealer. Do your homework and wait till the end of the month and push dealer for the best price and you will do better than the corporate they will give you.
And get a motorpass card rather than a majors card as you will get diesel cheaper. (no dicount on diesel as petrol )
Oh yes as Wayne said if you lose job it is expensive to pay out. You can get insurance to cover this included.

I look at leasing this way:

If you are going to purchase a new/used vehicle with the assistance of a loan, then leasing generally will be more beneficial. Break it down into three areas:

Loan Cost
Whether you purchase a vehicle privately with a car loan or lease a vehicle, the vehicle is still under finance for a period of time i.e. 5 years.

Operating Cost
Whether operating a vehicle under a lease or privately, the majority of operating costs will be the same i.e. Insurance, Rego, Tyres, Servicing & Fuel. In regards to fuel, yes, with a Fleetcard or Motorpass card, you get a few cents of the pump price of fuel.

Balloon
Under a lease, there is a balloon where as with a a privately owned and financed vehicle; the loan is finalised on the last payment (60th month)

Write all these costs down and compare. I have assisted staff at work do these figures and on every single occasion, leasing has worked out better. My car is better for it as I can actually afford all the operating costs instead of skimping and skipping things each month to make payments...it's all just goes on the card.

[QUOTE=waynep;

- You need to look after the car, as the resale value affects what you have to pay out at the end of the lease. ( not like a company car where you just hand it back )
- You should get all your maintenance and fuel GST free.
[/QUOTE]

When you leave the lease, most lease companies don't give a stuff about the state of the car. They just need you to pay what they call the resisdual. This is based on the "original cost" at the start of your lease and is normally a percentage based on how long the lease was set up to run for, ie 1 year 75% of the cost, 3 years 40% etc. The only time conditional value is an issue is if you intend to continue leasing another car and want to use the first car as a deposit.

Leasing can be a good thing or a bad thing. Yes you get tax releif on services and fuel, tyres and accesories (providing they are purchased with the car in the original sales contract), but you do have to pay a management fee. Also if you do less kms than you plan to, or you use more rubber, or more fuel, or they got the original figures wrong (ie wrong fuel consumption prediction) your payments will go up in the following year.

They can be good for easing the pressure when it comes to affording on road costs but they do not guarantee that you will be financially better off.

One other big downer is that the new Defender is classed as a comercial vehicle under the new fbt rules and some lease companies have refused to lease them.

Ray.

I have just leased a new D3 and the difference between paying for it on CHP or similar and Novated leasing is about $11k per annum. You do need to work out the costs based on your own circumstances.
Find out which Novated leasing company your wife's employer uses and their web site will have a calculator that allows you to calculate the impact on their take home pay.
A comment regarding having to pay for the vehicle if you lose your job, most companies force you to take out insurance cover that protects you if you lose your job through illness or redundancy.

An accountant is a good move though before commiting.
Regards,
Tote

I'm surprised the difference is $11k. The luxury car limit is about $57,000, so a D3 is caught. You realy need to factor in the tax consequences, not just repayments.

Anyway, salary sacrifice invokes FBT, which at 48.5% is rarely viable unless you're in the top bracket, i.e. over $150,000 now.

Regards
Max P

As others have said, find out who the company is that's doing the novated lease and speak to them. I was new to Aus when I did mine, so didn't know the tax laws here (But have a good understanding of finance and tax laws in other countries so I could ask lots of questions!) but the advisor explained everything, did the savings calculations (and explained them to me so I could see they were both accurate and how they worked) showing I'd save significantly leasing my just bought D3 back to them!!

Basically, it allows you to pay for lease and operating costs of the vehicle from your gross (pre-tax) salary, and avoid paying GST on them. If you are in a higher tax band, this outweighs the additional cost of the lease over a cash purchase. If you also travel a good distance (Typically reckoned to be over 25k km's a year) you reduce the FBT liability too.

Bear in mind you do get a residual payment at the end of the lease that you owe on the car though, and it's your responsibility to pay this and then own the car, or sell the car to pay this. Not a problem if you're rolling it into a new lease, as they're calculated to be less than the trade-in, but worth thinking about. I just stuck the money that I would have used for a car purchase in an offset account so I'm saving the mortage interest on it too!

For me, coming from the UK where you get screwed on both company cars and car allowances, Novated leasing is the best thing since sliced bread!

Originally Posted by foz.in.oz

When you leave the lease, most lease companies don't give a stuff about the state of the car. They just need you to pay what they call the resisdual. This is based on the "original cost" at the start of your lease and is normally a percentage based on how long the lease was set up to run for, ie 1 year 75% of the cost, 3 years 40% etc. The only time conditional value is an issue is if you intend to continue leasing another car and want to use the first car as a deposit.

Ray.

You're right, but what I meant was if you want to sell the car to use as part or all of the residual payment. ( or hopefully even have a surplus ). As with any second hand car, what you get for it will depend on it's condition.
Well that's how it happened for me anyway. I hadn't heard of one where they'll take it back at a pre-agreed value.
In the good ol' days of company owned cars it was so simple - we just used to hand them back and get a new one - sigh
Some people at my place still get a company Shellcard. That's a very valuable bonus these days.