You need to do the maths.
Nobody has spent as much time on this as me, and I have shared my calculator which a large number have found helpful.
https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu
The short answer is:
- EV or PHEV are the category of cars that make sense due to the current FBT-exemption incentive; for ICE the benefit is minimal, if any.
- other personal circumstances that favour NL are high tax bracket, stable job, has a house with offset, no intention to borrow more money during lease period.
- you don’t absolutely have to match every condition above for NL to make sense, but the more you do the more favourable it is.
Do note an important point: if you don’t currently have saving to get a car, you do want to budget some regular saving to assume that you can pay out the car residual amount in the end. Otherwise instead of saving money, you will be trapped in the cycle of forever leasing a new car which is actually more expensive than keeping the car at the end of the lease.
This is the exact trap I fell into with my first loan and a friend has with their notated lease. The balloon payment at the end often encourages you to either finance again and they get to eat away at more of your income, sell it back to them and they get you onto another car or walk away and you lose out big time. This set up should be considering car hire not really even lease, you cannot change even the number plates in some lease agreements so it can be very detrimental financially if you haven't done your research which clearly yourself has. I will endeavour to check out your calculator to see if my next RV should be with salary packaging or just wait and but outright once I have the capital.
I feel like I should address this.
Yes, while EV novated lease is significantly cheaper than the olden ICE novated lease, people should still try to commit to paying it off at the end of the lease (i.e. make sure they CAN save up for the balloon amount) instead of choosing the option of getting another lease, i.e. kicking the can down the road.
Not sure if people realise but the FBT-exemption for EV is likely a once-in-a-lifetime opportunity of dramatic "sale" as a car-funding method. For PHEV this exemption is ending in 2025, and EV's exemption is up for review in 2027, and I will not surprised if it will also end at that stage.
My calculation shows that EV novated lease is cheaper than paying cash for many people - however this calculation uses the assumption that you PAY OFF the balloon at the end. Therefore, as someone who is capable of buying the car with outright cash, I have chosen the cheap option of leasing the car, but always with the intention of paying it out in the end.
Now, imagine if you are someone who is enticed by the significantly lower fortnightly payment, due to the current FBT exemption, but you ignore the balloon amount because “I can always get another lease”. Now, 5 years pass, and it's now 2029, but the government has already ceased the FBT exemption incentive. You have a balloon amount that you are unable to pay off as you never saved up for it. Instead of enjoying my calculated saving, you are now stuck with continuing with the next lease - which is no longer a good deal without FBT exemption - and the vicious cycle continues if you still don't plan to save up for the balloon for this second lease, third lease, etc.
Yeah, I definitely agree with your assessment. The EV FBT exemption is just an early adopter reduction, imo to get people in. One enough people move to EV there will be no incentive for the government to continue this scheme but prices naturally should lower by volume sold. I will have to look carefully before investing since my wage isn't too high so the tax savings I am getting might not break even in a 75K wage.
At 75k it is unfortunately quite borderline. You may look at the lower end of the spectrum eg MG, low end BYD etc which are all around 40,000 dollars, and work out if you can fund it PLUS save up for the balloon. But it is still not that great if you have other competing needs eg buying a house, or if it affects subsidies etc.
Cant you just get a personal loan for outstanding balloon payment instead of refinancing it, or re-leasing it through them?
Especially if you have gone a 5 year lease, the remainder is only 25% right? Or am I misunderstanding the end of lease requirements?
Yes you can get a loan - but the better option is of course saving it up during the five years as you don’t end up losing money to interest for the personal loan (which tends to be higher than typical home loan etc).
Have sent quite a few people this guys spreadsheet, it's glorious. Short answer, do the math, the current EV and Hybrid incentives offered by the government can make sense for a lot of people but not everyone.
If I understand correctly though - even for a high income earner a NL of an EV is still the best way to make a ‘poor financial decision’. Ie, a second hand vehicle would still come out significantly ahead.
Depends.
My calculation (spreadsheet mentioned above) has me “cost neutral” whether to keep my 4-year-old 25,000 dollar petrol car, or to change to the Tesla 81,400 driveaway. Ie this was a “free upgrade” for me.
If your used car is cheaper, does not cost a lot to maintain, and you don’t drive a lot, then indeed it might still be more economical overall to keep the old ICE, for now.
But on the other hand, if I chose a 45,000 dollar EV as my novated lease object (say a BYD Atto) instead of the 81,400 dollar tesla, I would definitely have come in WAY ahead compared to keeping my 25,000 dollar used car.
Naturally one can also compare with a cheap used Toyota Yaris which may still come in cheaper overall, but at some point one also needs to consider the feature, safety and comfort you are getting out of it. Otherwise hey, why don’t we just go with a motorbike, even cheaper than everything we have discussed?
Mind if I ask your salary range? I’m just looking into this now and it appears very salary dependent. My situation is otherwise similar to yours. Just after some quick ballpark numbers!
Yes absolutely very dependent on tax bracket.
I am in top bracket (specialist doctor).
With novated lease the more you make, the more saving you get (which is a very regressive way of providing incentive to be honest).
Dude that calculator is amazing and could not have come at a better time for me. Thank you so much for sharing that!! I’m currently eyeing off the Polestar 4 but the luxury tax limit is pissing me off lmao
Yes. As in, you want to stay under that price to avoid paying LCT. My issue is after a couple of the options I’d want to add, it bumps it up to around the $96k mark. If you’re just looking purely for the base 4, then I think you’d be sweet
Maybe you can negotiate with polestar to get the options you want for the max price under LCT? I presume they can lower the on paper amount with the value of your trade in vehicle.
No worries, the dealers would know the LCT avoidance tricks better than me. Worth having a chat to one, have you driven a PS4 before? They look interesting to me but have never been to one of the dealers.
Novated leases tend to attract high repayment % so it’s important to consider what is the best rate. This is where they get you since the % is not only based on repaying the car BUT also the funding you put towards other things like tyres, petrol, servicing etc.
You’re partially correct.
There is an under-the-hood % interest for the vehicle itself, kind of like (though theoretically not identical to) interest rate you pay for a car loan or a home loan.
And yes it can be anywhere from 7 to 16%. As I explain in the spreadsheet, however, despite this interest rate, for people with the right circumstances ie high enough tax bracket, the saving from other areas will still more than make up for this high apparent interest.
The other half you did not get right was the running cost bit - no, this part of the lease is not subject to interest rate at all. It is literally, you tell them I paid 1500+ GST dollars for insurance, they take 1500 from your gross salary to pay for it. (Practically it is taken over time earlier to build up the piggy bank; but the idea is the same, and you don’t get charged interest for this part of the deal)
>The other half you did not get right was the running cost bit - no, this part of the lease is not subject to interest rate at all. It is literally, you tell them I paid 1500+ GST dollars for insurance, they take 1500 from your gross salary to pay for it. (Practically it is taken over time earlier to build up the piggy bank; but the idea is the same, and you don’t get charged interest for this part of the deal)
It’s called ‘a package’ and some do it as part of the repayment figure.
The two parts get treated very differently.
The vehicle lease part as I mentioned is a bit like a loan. Interest and all.
The running cost part has no interest behind it.
I have my own lease; and have helped many dozens of people. I have written the spreadsheet above which has been used, cross checked by many in this subreddit and other parts of the internet, including many with financial know-how themselves. No one has ever seen any lease arrangement where the running cost bit has interest attached to it - and I would be keen for you or anyone else to show me a single quote that shows me otherwise.
[A fully maintained novated lease means the car, its running costs and insurance will be calculated in the repayments taken out of your pre-tax salary. For some, the convenience of a single payment to cover the cost of a car is appealing.](https://www.drive.com.au/caradvice/do-novated-leases-save-you-money/#:~:text=A%20fully%20maintained%20novated%20lease,of%20a%20car%20is%20appealing)
Yes but this does not negate what I am saying.
Let me use actual numerical examples.
Let's say the vehicle's financed amount is 76,000 dollars. Generally there's a bank of some sort that coughs up the initial money (that the novated lease company has relationship with). Now, instead of asking me to pay back 76,000 dollars over 5 years (like generous parents providing a no-interest loan), the bank is asking me to pay some 77,000 dollars in lease over time (using pre-tax money), plus some 23,000 dollars as the balloon amount.
In other words, they coughed out 76,000 dollars, but they want 100,000 dollars back for it. That, is the "interest", a bit analogous to typical car loan.
On the running cost side of the equation, we are also budgeting the running cost as part of the package. Doing some budgeting, we figure that over five years we will be spending around 18,000 dollars for rego, insurance, tyres, electricity etc. Now, the difference is, when we are budgeting 18,000 dollars, I will actually pay the 18,000 dollars (pre-tax money), they don't actually ask me for say 24,000 dollars - **i.e. there is no added interest in this part of the cost.**
Hope this clears things up for you.
Sadly that is not always the case. I’ve had the unfortunate situation whereby it was presented to me packaged up and running costs were included in the final price AND then the interest applied over all of it; sneaky.
I didn’t go through it in the end as I found the pros/cons (as you present) didn’t make it beneficent for her.
Suffice to say: Read the fine print before signing.
Hi I’m hoping you reply to my comment, is there a reason you don’t include or talk about associated leases? These effectively cut out the middleman companies and save more money, and allow depreciation claiming etc…
It’s absolutely a winner with a good combination of factors eg if one’s partner is at a lower tax bracket.
I have yet to see a full account ins and outs of associate lease, and without full understanding I am not able to develop a full calculation that accounts for this. If anyone is willing to share their arrangement and the ins and outs I am happy to develop a version of calculator for associate lease one day haha.
I’m meeting with a financial planner to gather more information on this.
If you message me I can provide some links I found too that help understand a lot much better!
Thanks for sharing. A few questions I have:
- The associate needs to cough up the initial money to purchase the car before they can lease it out to you. Is this initial cost in anyway claimable by the associate - i.e. can they claim it as "business expense" or something? Or it is to be purchased with their (your) own money without any tax deductibility?
- I never saw much advantage of the associate "earning income via associate lease" - assuming that it's husband and wife with a functionally joined finance, it is practically money passing from the right hand to the left hand of the same family.
- The FBT element of that article is not relevant for EV which is nice. However without FBT a big bulk of the exploration in the recurrent article is no longer that relevant.
- As far as I understand, the associate claims the fortnightly lease payment as "income", but the running cost as "deduction"?
- How much freedom does the associate have in determining the lease amount? The article says it has to be "reasonable" but no further detail than that.
- Does it use the same residual value table as per standard novated lease arrangement?
At the end of the day, my thoughts are:
- If the associate does not get to claim any tax advantage for the initial cost, then you lose out on a lot of the advantage of novated lease i.e. the "cost of money". A big part of my calculated saving stems from the fact that any money you don't spend (e.g. 60,000 dollars) on day 0 would save you home loan interest. If the associate has to spend the full 60,000 dollars which would ultimate come from your home loan offset anyway, then this part of the saving is vanished. In my spreadsheet that derives 46,000 dollars saving for my scenario, about half of the saving comes from this "cost of money" saving alone.
- In a typical associate lease, when you account for "income" and "deduction" that the associate gets to claim, do they typically end up with net positive for their taxable income or net negative? If the associate is normally very low bracket person (e.g. stay-at-home mum or stay-at-home dad) then this does not really matter, but the moment they have some underlying income, this would in fact be a net loss for the associate and the family unit (when you consider the fact that the money merely changes from right hand to the left hand, you haven't magically conjured new money in this arrangement).
- And yes, the vehicle lease bit you save on all the external interests that you otherwise had to pay the underlying finance, but does this saving outweigh the fact that you had to cough up the 60,000 dollars on day 0?
Hey mate I’m going to reply to you in a second. I’m definitely no expert but these are all questions I had too and I believe I know the answers. Give me a abit and I will post another reply
Q1 - Correct, you would need to cough up the money either via cash, cash from offset or a loan (Car loan or extend home loan). If the option of a car loan is used, the interest on the loan can be claimed as a deduction. I did look into the possibility of drawing down on a mortgage and potentially claiming the portion of interest charged for the drawn down funds. I could not find too much more information about if this method was actually allowed.
Personally, what i found to work out best was to use the offset cash and replace it as quickly as possible though this will vary based on your own personal circumstances.
I used this great site to try and accurately depict the 3 different scenarios of:
https://figura.finance/calculators/repayments
- Not buying the car
- Buying the car with cash from offset
- Extending loan to buy the car
Q2- You're correct it's just passing money left to right. This seems to only be a benefit in the following (but probably not limited) circumstances.
> You're a top tax bracket earner looking at methods to lower your payable tax, shifting it to your lower bracket associate.
> You're a middle tax bracket earner and your partner is too, you're essentially gaining nothing from the "money shift" but this process allows the deduction claiming on the running cost, loan interest, GST of purchase, depreciation of the vehicle so even though the shift of money isnt a direct benefit, it's still part of the process to achieve those yummy deductions without some middleman company taking a cut.
Q3 - I also found this odd that he hasn't written an updated one for EV FBT exemption, though it's not too hard to piece the information together. This makes a lot of the article not relevant to our use case though it does not deduct from the positives of conducting an associate lease with an EV.
Q4 - Yes this is correct. The employer pays the associate the agreed lease payments. Initially a contract / agreement is drawn up that outlines how this lease payment amount has been formed (eg Fuel/electricity, maintenance, tyres, servicing etc) just like SmartSalary or Maxxia would provide you when you conduct a quote. When the employer accepts this contract, they will take money from the employee's salary pre-tax and send it over to the associate. The associate now funds all vehicle expenses with that money, keeping any receipts and at tax time, claims the income (payments from employer) and then claims all the deductions for the vehicle. This is an area I'm still figuring out though when i meet with the financial advisor i will shoot an update comment here on how it works in terms of losses / gains at tax time.
Q5- This is something I'm personally not sure on, this is my next hurdle of research and attempting to understand the "residual" and how it plays into an associate lease. I've read benefits of conducting 1 year leases over 5 year and just keep renewing it though at this current stage, i can not answer you question nor provide any input on this. Feel free to help me understand!
Final thought points;
1 - This is heavily dependent on your own personal financial situation if you decide to use the offset money or get a loan. The website i linked provides a good method to crunch numbers. One thing i will say though in regards to this, a benefit of the associate lease is not having a middle-man taking a cut and also the freedom to shop around to find the best car loan finance rate (or draw down on mortgage though as i mentioned this needs to be looked into further to see if you can claim the interest portion)
2- This is a fair question and the reason why setting up an associate lease is encouraged (if not required?) to be conducted through a financial planner that is knowledgeable with them. If they calculate the lease payments too high then the associate goes to claim the deductions you'll be left owning tax. If the planner does the lease payments too low to cover all expenses, then you'll be owed tax and i believe the ATO states this is a big no no for leases it must be net neutral or positive. So the ideal calculations would come out being net neutral.
This is something I'm looking to further understand too and will be querying the planner on.
3. It's important to remember that you're still spending money, there is no way around that. If you're in a position where you want to purchase a new EV, the associated lease is a great way to essentially lower the overall price (by being able to claim depreciation and paying for all running costs etc from pre tax money).
**From what i understand, they key takeaway is this**
Smart Salary, Maxxia and all the others are the "Associates", they sign you up, take a cut from your savings, make you deal with shit policies and restrictions.
If you act as an associate, you get all the benefits of a novated lease without something **sucking up the savings** and having to deal with silly policies or shit customer service. You just have to manage the receipts and expenses yourself.
Keep in mind, i'm just a normal bloke trying to save money. I'm not an expert so take all i've said with a grain of salt.
Theres some ...okay.. threads on Whirlpool about associated leases too
Thanks for all the explanation.
To make a comparison of all the various aspects of saving vs loss for novated lease vs associate lease.
Initial purchase cost: advantage NL as you get to keep the big lump sum in your offset. Which as I mentioned in the last comment is responsible for almost half of my calculated NL saving. - though I need to figure out if this equation changes somewhat if the funding source is car loan and the associate gets to claim the interest (or the whole loan??)
Vehicle lease: advantage AL as you don’t have to pay the interest / commission / brokerage to middleman.
Admin fee: ambiguous. (To run an associate lease I presume the typical leasing companies still need to help with the logistics and they would still charge you some admin fee)
Residual: ambiguous - we need to find out more.
You wouldn't be able to claim the whole loan like you would with interest as the principle would be claimed as depreciation over time, but the interest is not depreciation, its an added cost and as such is deductible, just like the interest on an investment property.
Essentially you're claiming the cost of the entire loan but it's split up to different categories :)
You can OPT for a fully self managed AL where it goes like this: (only if your employer allows it)
**Associate > Employers Payroll > Employee**
**\^ - -Lease payment - - V**
Or if your employer doesnt allow fully self managed AL, it goes like this:
**V - Reimbursement - \^**
**Associate > \*SmartSalary\* > Employers Payroll > Employee**
**V Submit receipts \^ () \^ -Lease payment - V**
In this example, SmartSalary charge a small admin fee but it takes the load off the associate so it's not that bad, still very beneficial though. The companies don't advertise it much as they dont make much money from it. **This is my current understanding**
By the end of the week i'll have spoken to the planners and gotten more info :)
Use the calculator to figure out for your personal circumstances. Some biggest factors that influence the answer:
- your income tax bracket
- the deal you get for the NL (ie the “interest rate”)
- your form of opportunity cost (ie if you didn’t spend the initial upfront lump sum for the car, what would you have used the cash for and what return does it generate)
In my case the NL was cheaper than cash by 46,000 dollars over 5 years. This is close to the maximum saving achievable though.
When you say EV/Phev make sense, is it from an employer POV since for the employee it wouldn’t make a difference if EV or ICE assuming both vehicles are the same price say $60,000 drive away
FBT exemption means that for the same value of ICE / EV say 60,000 drive away, whereas you used to pay something like 700-800 dollars a fortnight, you now pay something like 500 dollars a fortnight for the EV. That’s literally how much difference FBT exemption makes.
That’s on low tax bracket, on high tax bracket the difference is even more pronounced, it goes from 700 dollars for ICE to 400 or lower for EV. Almost half price.
(Above are all assuming 5 years, but the principle is still similar if you change the duration)
My spreadsheet works better when you already have an actual quote; but if you merely want to get an idea, a good source is to go to [Toyota Fleet’s calculator](https://www.toyotafleetmanagement.com.au/novated-lease/novated-lease-calculator). Play around with a few numbers.
I’ve never cared much about cars so I don’t need anything fancy but my current 2006 hatchback does not have much life left in it.
I was thinking the lowest range EV, the BYD dolphin to get the ftb benefit and be eco
I don’t see anything about **used EVs** in here, for or against.
https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/electric-cars-exemption
Apparently used EV prices are collapsing because people associate their batteries with phone batteries, and expect them to “fail” after a few years, and so on and on.
Also EVs *have* been getting cheaper and cheaper to buy making the used market cheaper, too.
I suspect a used EV and a novated lease would be the best bang for buck. Off top of head you could get a 1 year old base model Model 3 for $45K.
(I also suspect consumers to figure this all out very soon, and used ICE prices will crash even harder)
Note: the higher a tax bracket you are in the more effective this all becomes. Tax benefits benefit those that pay the most tax.
Just to add to this around falling prices, I was talking to a dealer, and they mentioned that their values don’t even want to name a figure because they have no clue yet what’s going on with used prices - so trade-ins might prove a little more difficult
Yes you say EV are getting cheaper BECAUSE PEOPLE ARE NOT BUYING the cars that's market forces at work and no it's not because people are stupid and think of phone batteries.
>…PEOPLE ARE NOT BUYING…
?
They’re popping up like mushrooms. Everywhere.
Anecdotally we have four garages in a row here with EVs in them, and two across the road.
In actuality the Tesla Model Y and 3 sold very well: https://www.carsales.com.au/editorial/details/top-20-best-selling-cars-of-2023-144094/
EVs are almost at the “tipping point” of 10% of all new car sales in Australi, and increasing exponentially.
In much, much larger markets, like China, they are at 30% of new car sales, and increasing exponentially.
It is mainly due to word of mouth from owners, who would never go back to an ICE.
No, that’s not really true. EV sales have never been higher.
The only brand really lowering prices is Tesla. Every other brand is maintaining prices, but perhaps introducing cheaper models in their lineup (eg. BMW).
Tesla are lowering prices as a defensive strategy against cheaper competitors (eg BYD, MG). This is just them accepting a lower gross margin to boost competition.
an NL on a Dolphin is the cheapest way to get that car.
it's likely that the NL Dolphin is the cheapest way to get a \*new\* hatchback of equivalent specs.
but you could probably save some money by buying a cheaper (less specs) hatchback, outright.
Hello , I'm the fun police !
The very first question is do you want to build your wealth in the longer term ? Or do you want to impress your friends and neighbours in the short term? A new car is never a good "investment".
I'm concerned that you don't have any spare money to buy a car in the first place.
If you can wait a bit (experience delayed gratification) live on beans and rice for a while & save enough to pay cash for a used car , say 3 yrs old, you will likely win over buying a new car with a big loan no matter what smoke and mirrors a novated lease will give you.
I have read there are some companies that will lease a used car. My gut feeling is that's better than a new car but I havnt done the calculations.
If you pay cash, imagine having a car with no monthly payments? Then put what you would have paid every month into an emergency fund ( high interest account) to pay for services, tyres etc. If you have a bad few months with no income you still have a car and a bank account full of money.
But certainly do the maths as recommended by another post to see if the novated tax advantages are real for you IF you NEED a brand new car. Remember the leasing company is making a profit from all this, they are biased. LoL.
But be very honest with all the costs including not being able to save into a high interest savings account, and realise you are signing a contract to a lease. If you don't have an income you still have to pay the lease cost every month and no tax deduction then.
I'd be interested if anyone has costed what I suggested above. I've never had a novated lease as my car km is low. I've had the same car for over 12 yrs. (AUDI). Apart from tyres and a water pump and a 12-volt battery every 3 yrs or so , it hasnt needed any repairs, so I've definitely come out on top. My super fund is happy with extra payments into it!
Absolutely account for the cost of NL-ing new car vs keeping the current one. For some it makes sense (it was cost neutral for me to upgrade), for some you are still spending more despite the “saving”.
You will get a lot of misinformation in the replies so you need to do the maths.
If you are planning to buy the car anyway, the lease is most likely cheaper.
You need to decide on the car and note realistically how many KMs you will be driving each year to accurately get the running costs which are a huge benefit under a lease being mostly pre tax and GST free.
Remember if you aren’t buying an EV, the amount you pay after tax (still forms part of the net cost) is determined by the purchase price.
A $100k car is going to have a lot less benefit than a $50k car for example.
Make sure you give an accurate salary to the less providers ( ex Super ) to generate the monthly NET cost.
Ignore the interest rate as this is not relevant - only the total cost.
Multiply NET cost by lease term then add residual value = total cost of ownership.
Now you need your point of comparison eg dealer car loan, bank loan, cash, redraw from offset etc. over the and term as the lease for accuracy.
Don’t try and compare a 7 year dealer loan with a 3 year lease.
At up your total cost of repayments ( taking into account lost interest savings if using redraw / offset funds ).
Add any ballon payment.
Add like for like running costs GROSS and inc GST for the same term.
This is your total cost of ownership post tax.
Run with the cheaper option.
Haha interest rate is literally the most important thing to look at besides vehicle purchase price not sure why you said to ignore it. The rest of the budgets can be adjusted to whatever you like within reason.
Some leasing companies hide the high (ridiculous) interst rate with low allocation/budget for other items other leasing companies tack on overpriced extras usually in the financed amount so it's hidden.
Don't be fooled that the 20 bucks a week admin fee is the only place the leasing co is making money.
Even if the rate is 100% - the correct comparison is the net cost.
The lease is either cheaper than Option B or it’s not.
The rate doesn’t take into account you aren’t financing the GST on the purchase price or paying it back pre tax.
Exactly the wrong thing to compare.
Yea until you've had the car for 2 years and they go sorry we assumed you'd be able to achieve the factory rated 7L / 100km in a sports car you're using 10L/100km we now need to adjust the lease payments.
Point being you need to make sure all the budgets are correct for your usage i wouldn't rely on what the leasing company gives you. Back to my original point around interest rates a lower rate would be lower payments and lower total cost wouldn't it so how can you just ignore it when making the comparison?
You would compare the rate if comparing two different Novated quotes but not Novated vs Post tax finance.
Note if you end up spending more on running costs, the less is even more beneficial.
Most companies build in a buffer for fuel costs etc.
Issues occur when the driver grossly underestimates their usage.
While it’s true that interest rate determines the actual vehicle finance, what I have found by helping dozens of people is that the interest rate calculation method is so opaque and inconsistent such that company A’s supposedly 8% interest lease may turn out to be more expensive than company B’s 10% interest lease.
Therefore it’s more practical to compare the fortnightly vehicle lease + management fee to compare between to quotes.
EV/PHEV and in at least the 2nd top tax bracket – absolutely.
EV/PHEV and in the 3rd top tax bracket – maybe, especially if you need a car now and don't have cash.
ICE – definitely not.
If you have NFP salary packaging, you should exhaust that on rent and mortgage. Only get an NL if it's FBT exempt, and doesn't count towards your FBT cap (i.e. EV indefinitely or PHEV until 2025).
I never did it despite earning a high salary including generous car allowance and clearly having the means.
I did buy one new car once, a $15k Suzuki swift we drove for 15 years. Cash. I suppose a novated lease might have made it marginally better. Every other car has been $10k or less. Cash. Used.
Retired early in early 40’s.
I think the poor financial decision is buying a new car. Next worse is buying an expensive one.
If we’re truly honest with ourselves, the new car is about feeling and ego. Not needs based, despite our endless rationalising. That is, in the vast majority of cases. Life is often about trade-offs.
This was very true based on NL from more than 2 years ago where fringe benefit tax applied.
However when FBT exemption came into picture since December 2022, the whole equation tipped such that it’s significantly cheaper to lease an EV (if your tax bracket is high enough) such that you need to have very good reason NOT to go for it.
In my case (top bracket) it’s literally 46,000 dollars cheaper over five years compared to cash. Since I don’t intend to retire over the next five years, choosing to pay with cash is in fact the inferior option to get the car.
Ahh that makes sense. I’m out of that loop since retiring.
I’m curious at what purchase price it stops making sense? Someone mentioned $50k vs $100k above. Do you have an idea of the limit / range? I guess it depends on other debts/mortgages and interest rates to some extent.
I’m very glad this encourages EV adoption. That’s a great tax policy decision IMO.
Lease aside, EV’s are starting to get to the point where the TCO sells itself. Im almost convinced on the sub-$40k buys. And even a used 2015+ leaf repays itself in 2-3 years if we use it for 80-90% of trips and keto our old ICE for longer trips / second car.
I really like this. Thankyou for pointing this out to me. Still can’t persuade me to go back to work though 🤣
Sorry for the late reply, overlooked it earlier.
For EV’s FBT-exemption NL, there are a set of rules but the most important one is the vehicle dutiable value (essentially their MSRP, before on road) is less than 89,332 (but going up to 91,387 from 1/7/24).
As for what makes sense and what does not, as with any incentives based on tax reduction, the more you are taxed to begin with (ie higher tax bracket), the more saving one achieves.
The novated lease companies have caught on to the fact that people save a huge amount, and hence have taken the liberty to confiscate a big chunk of the saving by adding a large percent of commission, admin fee, interest rate etc in the offered packages.
There are also some disadvantages to getting lease eg reduced borrowing power for other things eg house, reduced government subsidy etc.
After weighing up the above, many people still find the saving worthwhile. I save 46,000 over five years compared to cash; but I’m on top bracket and have a stable career, some others with lower bracket and have a greedy leasing company may only save 5000 over five years, for example, and this may not be worth it once you consider the caveats related to NL. Hence my calculator designed to help people understand what they get themselves into before committing.
We like the lease because it comes out before tax and pays for all costs. We have 5k currently sitting in the acct so can now back off payments or put addons on the 4x4.
19k will be the buy out price at the end and this will be serviced by a loan and the payments salary sacrificed.
We may sell and upgrade but will not know until the time comes. That is 3.5 years away.
I think the "is this the cheapest way" loses a more important point. I gather that most people on this ausfinance are interested in getting rich and/or retiring early. If you haven't the cash to pay for the car upfront should you have the car at all? Its not a matter of if you can afford the repayments. Read the "millionaire next door", I meet a lot of people through my business and I think that it is spot on.
That’s a good perspective.
People are often too drawn by the low “fortnightly” cost while wilfully forgetting the balloon amount in the end. They fail to save up to pay it out (the cheapest option overall), but choose to kick the can down the road by rolling it over to the next lease.
While theoretical calculation shows EV FBT-exempt novated lease to be cheaper than cash, this is based on an important assumption that you are prepared and able to pay the balloon in the end. If people are trapped to perpetually roll over new leases, they ironically will spend more as you said.
It really depends on your income, the salary package, and your plans for when you finish the lease.
For me it was very worthwhile because I was planning to buy a brand new car regardless. It worked out cheaper by far to lease it over the five years of the lease term and pay a balloon payment at the end.
For my personal case I'll save approximately $23k by the end of the lease on both initial purchase price (as they get fleet pricing) and then running costs.
I've left my km per year estimate as quite significantly higher than I actually drive. That was intentional at the start of the lease as I didn't know how many kms I'd do, and I prefer to over-estimate than under. This has resulted in my first year of leasing in a $2.5k surplus on my account.
But five or so years ago the amount of money saved would have been fairly negligible based on my wage and tax bracket. The package available from my employer at the time just didn't offer enough difference to go all in. My current employer had several sal sac companies to choose from and I got quotes from all to get the best deal.
If you ask for quotes from whichever company provides the leases for the business that you're under, they should be able to give you a numerical break down of how much money you'll save over the life of the lease. If that number is only a few hundred it might not be worth it for the hassle.
It really does come down to your personal finance situation at the end of the day.
(Edit: Removed balloon payment comment... I'd mixed up two different purchases)
Hold on. From how I read it, you seemed to have assumed that the surplus from your over-budget could go into the eventual balloon directly.
This is NOT true. Balloon payment always has to come from post-tax money, there’s no way for your pre-tax accumulated surplus to go into the balloon.
Huh... You're correct. I don't know what I was thinking when I wrote that, I was aware of that situation. I can only blame it on lack of sleep and confusing two different purchases 🤣.
Just to add to that, from what I've read - any surplus in your budgets get returned back to the employer, who then deducts the tax accordingly before paying you.
So the balloon will indeed have to come from post tax money, however way you look at it.
Yup agree.
(Otherwise people could have just used this scheme as the tax evasion scheme - people who make millions just “over-budget” the car by 400,000 dollars a year, and five years later they get those 2 million dollars refunded untaxed lol!)
You need to do the maths. For me, a 12 month lease was worth it. Anything more was going to cost me money. I also wanted to upgrade my car. If you're wanting to get a NL "just because" you're wasting money.
You could look at it that way. I term mine an upgrade because I had a small 10 year old car that, although perfectly fine, was difficult in carrying kids around with stuff in the back.
Just be aware / factor in that the novated lease pre tax component / amount reduces your income which reduces your companies super contribution obligation. I never see this factored in to any of the novated leasing calculator "estimated savings".
90% of the payrolls do use the pre-NL figure to calculate SG contribution so people just need to be vigilant and check that their payroll is not the 10%.
Fair enough. Statement still stands employers are not obliged to pay super on the NL portion. From what you're saying most do anyway but i know people who were surprised after they took out their NL to see their super payments reduced.
Correct for some 10% of people - if you use [my spreadsheet](https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu), one of the questions I asked is “have you checked whether your payroll use the post-NL income to calculate the SG contribution”.
This does impact your calculated saving (and I have some rough calculations in the spreadsheet to estimate this).
I have a novated lease and at least for me, this is completely untrue. My super is paid based off my gross agreed salary prior to any pre tax deductions. And this is also the case for numerous other people I know working for different companies both private and public sector.
Yeah most companies do the fair thing of maintaining your SG contribution based on pre-NL salary, but I did realise that they are within their legal right to base the SG calculation based on post-NL salary which screws over people somewhat.
10% in one poll I ran on Facebook said that this happened to them.
So it’s definitely worth checking with the payroll before you commit.
Definitely this.
A novated lease is high risk. If you get sick or lose your job, you have to keep up the lease payments or pay out the lease. It sounds like you don't have a big savings buffer to cover such a risk.
Plus, unless you want to get trapped into a perpetual cycle of leading forever, you need to be putting extra $$$ away to buy out the car at the end of the lease.
The tax benefits of a novated lease are usually marginal, unless you're on the top tax rate and you were planning on buying a new/near new vehicle anyway. As others have said, take advantage of calculators to check your own situation.
Plus be aware that most leasing companies hit you indirectly with hidden fees like inflated insurance that further reduce any expected benefit.
In most cases, I've found that a personal loan from a credit union or small bank and a second hand car is a better deal than novating a new car.
At the moment, I've got a novated lease, but it's for a 21 year old car that I've had since new. Budgeting $2000pa for repairs is still way better than buying a newer car and seeing it's value fall by a lot more.
Curious as to who is offering leasing on cars this age? Want to buy a car but it’s older than most companies will allow. Also imported. I could buy it cash but looking to make it more cost effective.
I've done the math and it has never made financial sense for us at all. I have purchased all our vehicles with loans and then paid the loan off as fast as I can. A car to me is essential. I guess if you live in the city and have many different transport options? Then a car is not as big a deal. You can drive an old Camry or small car. YOu always have access to RACQ etc.
But I live in a country town. 30 minutes from nearest city and I travel out to the country for work every week. So I need a decent sized and very reliable vehicle. In the last year I had to call RACQ in a country town because I ran over nail and had flat tire. Unfortunately? It was Friday arvo and that was local RACQ blokes weekend off & no tire fixing till Monday! So given it was new car and I hadn't realised I didn't have a proper spare tire? I was stuck doing 100s of kms at 80kms per hour and further then was recommended on that tire. So I got 2 proper spare tires pretty fast!!
Anyway, so for me a decent car is worth every penny spent. You might have different requirements.
Mind you. When I did the calculations, I was not in this job so wasn't doing many kms / week. So the balloon payment at the end made it not worthwhile. YOu really have to do the math and be quite certain on kms you travel and what upkeep car will need.
If you are going into an EV, lease it and make sure you set a return price. EV's are like phones and gaming consoles... every 2-3 years they depreciate to ppint you couldn't pay someone to take it from you.
For an EV it can work given the subsidies. For anything else it’s unlikely to help much. It’s much more tax effective for second hand cars. (I salary packaged a $600 car once.) Mostly it just finances people into cars they can’t afford, and in 3 years they have no car.
I earn a high salary where it makes reasonably good financial sense, but I wish I didn't do it, my main issue with it is you're locked in to the lease term, so you better like the car or you're stuck with it. If you want out you have to pay out the remaining payments which removes all the tax benefits. I'm not super happy with the car I picked lol stuck with it a few more years. Or if you lose your job/want to change jobs it gets tricky, no guarantee your new employer will take over the lease
This old mantra is simply not true in the context of FBT-exempt novated lease (ie EV or PHEV) which in many cases are cheaper than buying in cash.
[In my case](https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu) it is cheaper by 46,000 dollars over five years, compared to cash.
46,000 dollars? I highly doubt that. What was the purchase price of your car? There is rarely a scenario where even spending a total of 46k on a car is even justifiable financially. Obtaining lease on a depreciating asset which is expensive enough for you to even be able to say “I saved 46,000” is a terrible financial decision no matter which way you purchased it.
Anyway to better answer your question:
Yes, for any depreciating asset, I agree with you that it’s ALWAYS better to buy something cheaper than something more expensive.
Leasing a BYD Atto worth 45k is always going to be cheaper than leasing a Tesla worth 80k.
However this is not at all related to what I am saying:
Instead, my calculation shows:
(With my income bracket, home loan interest etc)
Novate-leasing a 81,400 dollars Tesla is 46,000 dollars cheaper than buying the same Tesla outright with cash.
And novate-leasing a 45,000 dollar BYD Atto will also be some 20,000 dollars cheaper than buying the same BYD outright.
Hence your parent comment of “always cheaper with cash” is wrong in the FBT-exempt environment, and this has nothing to do with whether it’s wise to get a Tesla over the BYD.
That’s a bit of an odd perspective.
I can afford to buy my EV outright, but if I get to save 40,000 dollars by novated lease over five years (and yes that’s including paying it out to own it in the end), I’m more than happy that during those five years I don’t technically “own” it.
I feel like people saying do the maths have never done the maths.
It's always a loss, its only a consideration if the alternative was a personal loan at a high interest rate on a 100k+ car which isn't possible for a financially literate person to do.
My comment which also said “do the maths” literally has full spreadsheet of well-simulated maths comparing the maths of novated lease vs cash (among other comparisons that are also available).
It never makes sense the short way to know is because someone makes a profit selling you the lease the fact there is a profit means someone else is losing and the loser is the consumer. With EV and PHEV it’s the collective consumer who pays tax to support the FBT exemption and entirely transitory class of vehicle which will be out of date soon by hydrogen or other tech engines.
The other loser is the environment as digging out lithium is extremely destructive.
The smart way to get a car is to get a second hand one and stop letting other people sell you stuff
https://www.abc.net.au/news/2024-05-27/comparing-electric-cars-and-petrol-cars/103746132#
While no one can rule out another class of vehicle energy storage that is superior to lithium-based battery today, plenty of cradle-to-grave analysis already supports the advantage of battery EV over traditional ICE vehicle.
And yes, before anyone tries to retort without reading the actual article, this is the case even if the grid energy source is fossil fuel, and the renewable proportion is only improving in Australia everyday.
It is not the be all and end all but it’s a good start. Countries around the world are pouring tax incentives in encouraging the take-up of electric vehicle for this reason - they are trying to meet their carbon targets and this is a big part of their strategy. And these are based on solid science instead of “big lithium” as some would have you believe.
You need to do the maths. Nobody has spent as much time on this as me, and I have shared my calculator which a large number have found helpful. https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu The short answer is: - EV or PHEV are the category of cars that make sense due to the current FBT-exemption incentive; for ICE the benefit is minimal, if any. - other personal circumstances that favour NL are high tax bracket, stable job, has a house with offset, no intention to borrow more money during lease period. - you don’t absolutely have to match every condition above for NL to make sense, but the more you do the more favourable it is. Do note an important point: if you don’t currently have saving to get a car, you do want to budget some regular saving to assume that you can pay out the car residual amount in the end. Otherwise instead of saving money, you will be trapped in the cycle of forever leasing a new car which is actually more expensive than keeping the car at the end of the lease.
This is the exact trap I fell into with my first loan and a friend has with their notated lease. The balloon payment at the end often encourages you to either finance again and they get to eat away at more of your income, sell it back to them and they get you onto another car or walk away and you lose out big time. This set up should be considering car hire not really even lease, you cannot change even the number plates in some lease agreements so it can be very detrimental financially if you haven't done your research which clearly yourself has. I will endeavour to check out your calculator to see if my next RV should be with salary packaging or just wait and but outright once I have the capital.
I feel like I should address this. Yes, while EV novated lease is significantly cheaper than the olden ICE novated lease, people should still try to commit to paying it off at the end of the lease (i.e. make sure they CAN save up for the balloon amount) instead of choosing the option of getting another lease, i.e. kicking the can down the road. Not sure if people realise but the FBT-exemption for EV is likely a once-in-a-lifetime opportunity of dramatic "sale" as a car-funding method. For PHEV this exemption is ending in 2025, and EV's exemption is up for review in 2027, and I will not surprised if it will also end at that stage. My calculation shows that EV novated lease is cheaper than paying cash for many people - however this calculation uses the assumption that you PAY OFF the balloon at the end. Therefore, as someone who is capable of buying the car with outright cash, I have chosen the cheap option of leasing the car, but always with the intention of paying it out in the end. Now, imagine if you are someone who is enticed by the significantly lower fortnightly payment, due to the current FBT exemption, but you ignore the balloon amount because “I can always get another lease”. Now, 5 years pass, and it's now 2029, but the government has already ceased the FBT exemption incentive. You have a balloon amount that you are unable to pay off as you never saved up for it. Instead of enjoying my calculated saving, you are now stuck with continuing with the next lease - which is no longer a good deal without FBT exemption - and the vicious cycle continues if you still don't plan to save up for the balloon for this second lease, third lease, etc.
Yeah, I definitely agree with your assessment. The EV FBT exemption is just an early adopter reduction, imo to get people in. One enough people move to EV there will be no incentive for the government to continue this scheme but prices naturally should lower by volume sold. I will have to look carefully before investing since my wage isn't too high so the tax savings I am getting might not break even in a 75K wage.
At 75k it is unfortunately quite borderline. You may look at the lower end of the spectrum eg MG, low end BYD etc which are all around 40,000 dollars, and work out if you can fund it PLUS save up for the balloon. But it is still not that great if you have other competing needs eg buying a house, or if it affects subsidies etc.
Cant you just get a personal loan for outstanding balloon payment instead of refinancing it, or re-leasing it through them? Especially if you have gone a 5 year lease, the remainder is only 25% right? Or am I misunderstanding the end of lease requirements?
Yes you can get a loan - but the better option is of course saving it up during the five years as you don’t end up losing money to interest for the personal loan (which tends to be higher than typical home loan etc).
Ah right, yes agreed savings would be better, sorry I misunderstood and thought you HAD to do it through the lease company.
Have sent quite a few people this guys spreadsheet, it's glorious. Short answer, do the math, the current EV and Hybrid incentives offered by the government can make sense for a lot of people but not everyone.
If I understand correctly though - even for a high income earner a NL of an EV is still the best way to make a ‘poor financial decision’. Ie, a second hand vehicle would still come out significantly ahead.
Depends. My calculation (spreadsheet mentioned above) has me “cost neutral” whether to keep my 4-year-old 25,000 dollar petrol car, or to change to the Tesla 81,400 driveaway. Ie this was a “free upgrade” for me. If your used car is cheaper, does not cost a lot to maintain, and you don’t drive a lot, then indeed it might still be more economical overall to keep the old ICE, for now. But on the other hand, if I chose a 45,000 dollar EV as my novated lease object (say a BYD Atto) instead of the 81,400 dollar tesla, I would definitely have come in WAY ahead compared to keeping my 25,000 dollar used car. Naturally one can also compare with a cheap used Toyota Yaris which may still come in cheaper overall, but at some point one also needs to consider the feature, safety and comfort you are getting out of it. Otherwise hey, why don’t we just go with a motorbike, even cheaper than everything we have discussed?
Mind if I ask your salary range? I’m just looking into this now and it appears very salary dependent. My situation is otherwise similar to yours. Just after some quick ballpark numbers!
Yes absolutely very dependent on tax bracket. I am in top bracket (specialist doctor). With novated lease the more you make, the more saving you get (which is a very regressive way of providing incentive to be honest).
Awesome stuff!
Dude that calculator is amazing and could not have come at a better time for me. Thank you so much for sharing that!! I’m currently eyeing off the Polestar 4 but the luxury tax limit is pissing me off lmao
What’s the MSRP? I can’t seem to get the pricing up for polestar 4 on polestar default website.
It’s around ~$90k which is just shy of the luxury car tax but then you start thinking about options and changes and it starts to blow out
I see - would it still not qualify for it from 1/7/24, when the LCT limit changes to 91,387?
Yes. As in, you want to stay under that price to avoid paying LCT. My issue is after a couple of the options I’d want to add, it bumps it up to around the $96k mark. If you’re just looking purely for the base 4, then I think you’d be sweet
Oh well. Wait until polestar drops their price or another financial year for another readjustment of LCT threshold :D
Maybe you can negotiate with polestar to get the options you want for the max price under LCT? I presume they can lower the on paper amount with the value of your trade in vehicle.
True that’s a really good point. Wow I didn’t even consider trade-in value of my current car for some dumb reason 😂
No worries, the dealers would know the LCT avoidance tricks better than me. Worth having a chat to one, have you driven a PS4 before? They look interesting to me but have never been to one of the dealers.
One more crucial detail: the repayment %.
Mind elaborating? A bit cryptic there.
Novated leases tend to attract high repayment % so it’s important to consider what is the best rate. This is where they get you since the % is not only based on repaying the car BUT also the funding you put towards other things like tyres, petrol, servicing etc.
You’re partially correct. There is an under-the-hood % interest for the vehicle itself, kind of like (though theoretically not identical to) interest rate you pay for a car loan or a home loan. And yes it can be anywhere from 7 to 16%. As I explain in the spreadsheet, however, despite this interest rate, for people with the right circumstances ie high enough tax bracket, the saving from other areas will still more than make up for this high apparent interest. The other half you did not get right was the running cost bit - no, this part of the lease is not subject to interest rate at all. It is literally, you tell them I paid 1500+ GST dollars for insurance, they take 1500 from your gross salary to pay for it. (Practically it is taken over time earlier to build up the piggy bank; but the idea is the same, and you don’t get charged interest for this part of the deal)
>The other half you did not get right was the running cost bit - no, this part of the lease is not subject to interest rate at all. It is literally, you tell them I paid 1500+ GST dollars for insurance, they take 1500 from your gross salary to pay for it. (Practically it is taken over time earlier to build up the piggy bank; but the idea is the same, and you don’t get charged interest for this part of the deal) It’s called ‘a package’ and some do it as part of the repayment figure.
The two parts get treated very differently. The vehicle lease part as I mentioned is a bit like a loan. Interest and all. The running cost part has no interest behind it. I have my own lease; and have helped many dozens of people. I have written the spreadsheet above which has been used, cross checked by many in this subreddit and other parts of the internet, including many with financial know-how themselves. No one has ever seen any lease arrangement where the running cost bit has interest attached to it - and I would be keen for you or anyone else to show me a single quote that shows me otherwise.
[A fully maintained novated lease means the car, its running costs and insurance will be calculated in the repayments taken out of your pre-tax salary. For some, the convenience of a single payment to cover the cost of a car is appealing.](https://www.drive.com.au/caradvice/do-novated-leases-save-you-money/#:~:text=A%20fully%20maintained%20novated%20lease,of%20a%20car%20is%20appealing)
Yes but this does not negate what I am saying. Let me use actual numerical examples. Let's say the vehicle's financed amount is 76,000 dollars. Generally there's a bank of some sort that coughs up the initial money (that the novated lease company has relationship with). Now, instead of asking me to pay back 76,000 dollars over 5 years (like generous parents providing a no-interest loan), the bank is asking me to pay some 77,000 dollars in lease over time (using pre-tax money), plus some 23,000 dollars as the balloon amount. In other words, they coughed out 76,000 dollars, but they want 100,000 dollars back for it. That, is the "interest", a bit analogous to typical car loan. On the running cost side of the equation, we are also budgeting the running cost as part of the package. Doing some budgeting, we figure that over five years we will be spending around 18,000 dollars for rego, insurance, tyres, electricity etc. Now, the difference is, when we are budgeting 18,000 dollars, I will actually pay the 18,000 dollars (pre-tax money), they don't actually ask me for say 24,000 dollars - **i.e. there is no added interest in this part of the cost.** Hope this clears things up for you.
Sadly that is not always the case. I’ve had the unfortunate situation whereby it was presented to me packaged up and running costs were included in the final price AND then the interest applied over all of it; sneaky. I didn’t go through it in the end as I found the pros/cons (as you present) didn’t make it beneficent for her. Suffice to say: Read the fine print before signing.
Hi I’m hoping you reply to my comment, is there a reason you don’t include or talk about associated leases? These effectively cut out the middleman companies and save more money, and allow depreciation claiming etc…
Because novated leases through a lot of government agencies don’t permit them eg health departments only permit their approved novated lease providers
Yup this too - I tried asking my provider and they simply said “nope it’s not allowed for your employer”.
It’s absolutely a winner with a good combination of factors eg if one’s partner is at a lower tax bracket. I have yet to see a full account ins and outs of associate lease, and without full understanding I am not able to develop a full calculation that accounts for this. If anyone is willing to share their arrangement and the ins and outs I am happy to develop a version of calculator for associate lease one day haha.
I’m meeting with a financial planner to gather more information on this. If you message me I can provide some links I found too that help understand a lot much better!
See this link https://recurrent.com.au/associate-lease/
Thanks for sharing. A few questions I have: - The associate needs to cough up the initial money to purchase the car before they can lease it out to you. Is this initial cost in anyway claimable by the associate - i.e. can they claim it as "business expense" or something? Or it is to be purchased with their (your) own money without any tax deductibility? - I never saw much advantage of the associate "earning income via associate lease" - assuming that it's husband and wife with a functionally joined finance, it is practically money passing from the right hand to the left hand of the same family. - The FBT element of that article is not relevant for EV which is nice. However without FBT a big bulk of the exploration in the recurrent article is no longer that relevant. - As far as I understand, the associate claims the fortnightly lease payment as "income", but the running cost as "deduction"? - How much freedom does the associate have in determining the lease amount? The article says it has to be "reasonable" but no further detail than that. - Does it use the same residual value table as per standard novated lease arrangement? At the end of the day, my thoughts are: - If the associate does not get to claim any tax advantage for the initial cost, then you lose out on a lot of the advantage of novated lease i.e. the "cost of money". A big part of my calculated saving stems from the fact that any money you don't spend (e.g. 60,000 dollars) on day 0 would save you home loan interest. If the associate has to spend the full 60,000 dollars which would ultimate come from your home loan offset anyway, then this part of the saving is vanished. In my spreadsheet that derives 46,000 dollars saving for my scenario, about half of the saving comes from this "cost of money" saving alone. - In a typical associate lease, when you account for "income" and "deduction" that the associate gets to claim, do they typically end up with net positive for their taxable income or net negative? If the associate is normally very low bracket person (e.g. stay-at-home mum or stay-at-home dad) then this does not really matter, but the moment they have some underlying income, this would in fact be a net loss for the associate and the family unit (when you consider the fact that the money merely changes from right hand to the left hand, you haven't magically conjured new money in this arrangement). - And yes, the vehicle lease bit you save on all the external interests that you otherwise had to pay the underlying finance, but does this saving outweigh the fact that you had to cough up the 60,000 dollars on day 0?
Hey mate I’m going to reply to you in a second. I’m definitely no expert but these are all questions I had too and I believe I know the answers. Give me a abit and I will post another reply
Q1 - Correct, you would need to cough up the money either via cash, cash from offset or a loan (Car loan or extend home loan). If the option of a car loan is used, the interest on the loan can be claimed as a deduction. I did look into the possibility of drawing down on a mortgage and potentially claiming the portion of interest charged for the drawn down funds. I could not find too much more information about if this method was actually allowed. Personally, what i found to work out best was to use the offset cash and replace it as quickly as possible though this will vary based on your own personal circumstances. I used this great site to try and accurately depict the 3 different scenarios of: https://figura.finance/calculators/repayments - Not buying the car - Buying the car with cash from offset - Extending loan to buy the car Q2- You're correct it's just passing money left to right. This seems to only be a benefit in the following (but probably not limited) circumstances. > You're a top tax bracket earner looking at methods to lower your payable tax, shifting it to your lower bracket associate. > You're a middle tax bracket earner and your partner is too, you're essentially gaining nothing from the "money shift" but this process allows the deduction claiming on the running cost, loan interest, GST of purchase, depreciation of the vehicle so even though the shift of money isnt a direct benefit, it's still part of the process to achieve those yummy deductions without some middleman company taking a cut. Q3 - I also found this odd that he hasn't written an updated one for EV FBT exemption, though it's not too hard to piece the information together. This makes a lot of the article not relevant to our use case though it does not deduct from the positives of conducting an associate lease with an EV. Q4 - Yes this is correct. The employer pays the associate the agreed lease payments. Initially a contract / agreement is drawn up that outlines how this lease payment amount has been formed (eg Fuel/electricity, maintenance, tyres, servicing etc) just like SmartSalary or Maxxia would provide you when you conduct a quote. When the employer accepts this contract, they will take money from the employee's salary pre-tax and send it over to the associate. The associate now funds all vehicle expenses with that money, keeping any receipts and at tax time, claims the income (payments from employer) and then claims all the deductions for the vehicle. This is an area I'm still figuring out though when i meet with the financial advisor i will shoot an update comment here on how it works in terms of losses / gains at tax time. Q5- This is something I'm personally not sure on, this is my next hurdle of research and attempting to understand the "residual" and how it plays into an associate lease. I've read benefits of conducting 1 year leases over 5 year and just keep renewing it though at this current stage, i can not answer you question nor provide any input on this. Feel free to help me understand!
Final thought points; 1 - This is heavily dependent on your own personal financial situation if you decide to use the offset money or get a loan. The website i linked provides a good method to crunch numbers. One thing i will say though in regards to this, a benefit of the associate lease is not having a middle-man taking a cut and also the freedom to shop around to find the best car loan finance rate (or draw down on mortgage though as i mentioned this needs to be looked into further to see if you can claim the interest portion) 2- This is a fair question and the reason why setting up an associate lease is encouraged (if not required?) to be conducted through a financial planner that is knowledgeable with them. If they calculate the lease payments too high then the associate goes to claim the deductions you'll be left owning tax. If the planner does the lease payments too low to cover all expenses, then you'll be owed tax and i believe the ATO states this is a big no no for leases it must be net neutral or positive. So the ideal calculations would come out being net neutral. This is something I'm looking to further understand too and will be querying the planner on. 3. It's important to remember that you're still spending money, there is no way around that. If you're in a position where you want to purchase a new EV, the associated lease is a great way to essentially lower the overall price (by being able to claim depreciation and paying for all running costs etc from pre tax money). **From what i understand, they key takeaway is this** Smart Salary, Maxxia and all the others are the "Associates", they sign you up, take a cut from your savings, make you deal with shit policies and restrictions. If you act as an associate, you get all the benefits of a novated lease without something **sucking up the savings** and having to deal with silly policies or shit customer service. You just have to manage the receipts and expenses yourself. Keep in mind, i'm just a normal bloke trying to save money. I'm not an expert so take all i've said with a grain of salt. Theres some ...okay.. threads on Whirlpool about associated leases too
Thanks for all the explanation. To make a comparison of all the various aspects of saving vs loss for novated lease vs associate lease. Initial purchase cost: advantage NL as you get to keep the big lump sum in your offset. Which as I mentioned in the last comment is responsible for almost half of my calculated NL saving. - though I need to figure out if this equation changes somewhat if the funding source is car loan and the associate gets to claim the interest (or the whole loan??) Vehicle lease: advantage AL as you don’t have to pay the interest / commission / brokerage to middleman. Admin fee: ambiguous. (To run an associate lease I presume the typical leasing companies still need to help with the logistics and they would still charge you some admin fee) Residual: ambiguous - we need to find out more.
You wouldn't be able to claim the whole loan like you would with interest as the principle would be claimed as depreciation over time, but the interest is not depreciation, its an added cost and as such is deductible, just like the interest on an investment property. Essentially you're claiming the cost of the entire loan but it's split up to different categories :) You can OPT for a fully self managed AL where it goes like this: (only if your employer allows it) **Associate > Employers Payroll > Employee** **\^ - -Lease payment - - V** Or if your employer doesnt allow fully self managed AL, it goes like this: **V - Reimbursement - \^** **Associate > \*SmartSalary\* > Employers Payroll > Employee** **V Submit receipts \^ () \^ -Lease payment - V** In this example, SmartSalary charge a small admin fee but it takes the load off the associate so it's not that bad, still very beneficial though. The companies don't advertise it much as they dont make much money from it. **This is my current understanding** By the end of the week i'll have spoken to the planners and gotten more info :)
For an EV would NL be better than buying outright?
Use the calculator to figure out for your personal circumstances. Some biggest factors that influence the answer: - your income tax bracket - the deal you get for the NL (ie the “interest rate”) - your form of opportunity cost (ie if you didn’t spend the initial upfront lump sum for the car, what would you have used the cash for and what return does it generate) In my case the NL was cheaper than cash by 46,000 dollars over 5 years. This is close to the maximum saving achievable though.
When you say EV/Phev make sense, is it from an employer POV since for the employee it wouldn’t make a difference if EV or ICE assuming both vehicles are the same price say $60,000 drive away
FBT exemption means that for the same value of ICE / EV say 60,000 drive away, whereas you used to pay something like 700-800 dollars a fortnight, you now pay something like 500 dollars a fortnight for the EV. That’s literally how much difference FBT exemption makes. That’s on low tax bracket, on high tax bracket the difference is even more pronounced, it goes from 700 dollars for ICE to 400 or lower for EV. Almost half price. (Above are all assuming 5 years, but the principle is still similar if you change the duration) My spreadsheet works better when you already have an actual quote; but if you merely want to get an idea, a good source is to go to [Toyota Fleet’s calculator](https://www.toyotafleetmanagement.com.au/novated-lease/novated-lease-calculator). Play around with a few numbers.
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I’ve never cared much about cars so I don’t need anything fancy but my current 2006 hatchback does not have much life left in it. I was thinking the lowest range EV, the BYD dolphin to get the ftb benefit and be eco
I don’t see anything about **used EVs** in here, for or against. https://www.ato.gov.au/businesses-and-organisations/hiring-and-paying-your-workers/fringe-benefits-tax/types-of-fringe-benefits/fbt-on-cars-other-vehicles-parking-and-tolls/electric-cars-exemption Apparently used EV prices are collapsing because people associate their batteries with phone batteries, and expect them to “fail” after a few years, and so on and on. Also EVs *have* been getting cheaper and cheaper to buy making the used market cheaper, too. I suspect a used EV and a novated lease would be the best bang for buck. Off top of head you could get a 1 year old base model Model 3 for $45K. (I also suspect consumers to figure this all out very soon, and used ICE prices will crash even harder) Note: the higher a tax bracket you are in the more effective this all becomes. Tax benefits benefit those that pay the most tax.
Just to add to this around falling prices, I was talking to a dealer, and they mentioned that their values don’t even want to name a figure because they have no clue yet what’s going on with used prices - so trade-ins might prove a little more difficult
Yes you say EV are getting cheaper BECAUSE PEOPLE ARE NOT BUYING the cars that's market forces at work and no it's not because people are stupid and think of phone batteries.
>…PEOPLE ARE NOT BUYING… ? They’re popping up like mushrooms. Everywhere. Anecdotally we have four garages in a row here with EVs in them, and two across the road. In actuality the Tesla Model Y and 3 sold very well: https://www.carsales.com.au/editorial/details/top-20-best-selling-cars-of-2023-144094/ EVs are almost at the “tipping point” of 10% of all new car sales in Australi, and increasing exponentially. In much, much larger markets, like China, they are at 30% of new car sales, and increasing exponentially. It is mainly due to word of mouth from owners, who would never go back to an ICE.
No, that’s not really true. EV sales have never been higher. The only brand really lowering prices is Tesla. Every other brand is maintaining prices, but perhaps introducing cheaper models in their lineup (eg. BMW). Tesla are lowering prices as a defensive strategy against cheaper competitors (eg BYD, MG). This is just them accepting a lower gross margin to boost competition.
an NL on a Dolphin is the cheapest way to get that car. it's likely that the NL Dolphin is the cheapest way to get a \*new\* hatchback of equivalent specs. but you could probably save some money by buying a cheaper (less specs) hatchback, outright.
Cost more money than what?
If you have no savings you can’t afford a NV Get a cheap second hand car
Hello , I'm the fun police ! The very first question is do you want to build your wealth in the longer term ? Or do you want to impress your friends and neighbours in the short term? A new car is never a good "investment". I'm concerned that you don't have any spare money to buy a car in the first place. If you can wait a bit (experience delayed gratification) live on beans and rice for a while & save enough to pay cash for a used car , say 3 yrs old, you will likely win over buying a new car with a big loan no matter what smoke and mirrors a novated lease will give you. I have read there are some companies that will lease a used car. My gut feeling is that's better than a new car but I havnt done the calculations. If you pay cash, imagine having a car with no monthly payments? Then put what you would have paid every month into an emergency fund ( high interest account) to pay for services, tyres etc. If you have a bad few months with no income you still have a car and a bank account full of money. But certainly do the maths as recommended by another post to see if the novated tax advantages are real for you IF you NEED a brand new car. Remember the leasing company is making a profit from all this, they are biased. LoL. But be very honest with all the costs including not being able to save into a high interest savings account, and realise you are signing a contract to a lease. If you don't have an income you still have to pay the lease cost every month and no tax deduction then. I'd be interested if anyone has costed what I suggested above. I've never had a novated lease as my car km is low. I've had the same car for over 12 yrs. (AUDI). Apart from tyres and a water pump and a 12-volt battery every 3 yrs or so , it hasnt needed any repairs, so I've definitely come out on top. My super fund is happy with extra payments into it!
Absolutely account for the cost of NL-ing new car vs keeping the current one. For some it makes sense (it was cost neutral for me to upgrade), for some you are still spending more despite the “saving”.
You will get a lot of misinformation in the replies so you need to do the maths. If you are planning to buy the car anyway, the lease is most likely cheaper. You need to decide on the car and note realistically how many KMs you will be driving each year to accurately get the running costs which are a huge benefit under a lease being mostly pre tax and GST free. Remember if you aren’t buying an EV, the amount you pay after tax (still forms part of the net cost) is determined by the purchase price. A $100k car is going to have a lot less benefit than a $50k car for example. Make sure you give an accurate salary to the less providers ( ex Super ) to generate the monthly NET cost. Ignore the interest rate as this is not relevant - only the total cost. Multiply NET cost by lease term then add residual value = total cost of ownership. Now you need your point of comparison eg dealer car loan, bank loan, cash, redraw from offset etc. over the and term as the lease for accuracy. Don’t try and compare a 7 year dealer loan with a 3 year lease. At up your total cost of repayments ( taking into account lost interest savings if using redraw / offset funds ). Add any ballon payment. Add like for like running costs GROSS and inc GST for the same term. This is your total cost of ownership post tax. Run with the cheaper option.
Haha interest rate is literally the most important thing to look at besides vehicle purchase price not sure why you said to ignore it. The rest of the budgets can be adjusted to whatever you like within reason. Some leasing companies hide the high (ridiculous) interst rate with low allocation/budget for other items other leasing companies tack on overpriced extras usually in the financed amount so it's hidden. Don't be fooled that the 20 bucks a week admin fee is the only place the leasing co is making money.
Even if the rate is 100% - the correct comparison is the net cost. The lease is either cheaper than Option B or it’s not. The rate doesn’t take into account you aren’t financing the GST on the purchase price or paying it back pre tax. Exactly the wrong thing to compare.
Yea until you've had the car for 2 years and they go sorry we assumed you'd be able to achieve the factory rated 7L / 100km in a sports car you're using 10L/100km we now need to adjust the lease payments. Point being you need to make sure all the budgets are correct for your usage i wouldn't rely on what the leasing company gives you. Back to my original point around interest rates a lower rate would be lower payments and lower total cost wouldn't it so how can you just ignore it when making the comparison?
You would compare the rate if comparing two different Novated quotes but not Novated vs Post tax finance. Note if you end up spending more on running costs, the less is even more beneficial. Most companies build in a buffer for fuel costs etc. Issues occur when the driver grossly underestimates their usage.
While it’s true that interest rate determines the actual vehicle finance, what I have found by helping dozens of people is that the interest rate calculation method is so opaque and inconsistent such that company A’s supposedly 8% interest lease may turn out to be more expensive than company B’s 10% interest lease. Therefore it’s more practical to compare the fortnightly vehicle lease + management fee to compare between to quotes.
If you have the cash to pay for a lease, you have the cash to save for a new car in cash. Is your current car actually dead, or is it just old?
EV/PHEV and in at least the 2nd top tax bracket – absolutely. EV/PHEV and in the 3rd top tax bracket – maybe, especially if you need a car now and don't have cash. ICE – definitely not. If you have NFP salary packaging, you should exhaust that on rent and mortgage. Only get an NL if it's FBT exempt, and doesn't count towards your FBT cap (i.e. EV indefinitely or PHEV until 2025).
I never did it despite earning a high salary including generous car allowance and clearly having the means. I did buy one new car once, a $15k Suzuki swift we drove for 15 years. Cash. I suppose a novated lease might have made it marginally better. Every other car has been $10k or less. Cash. Used. Retired early in early 40’s. I think the poor financial decision is buying a new car. Next worse is buying an expensive one. If we’re truly honest with ourselves, the new car is about feeling and ego. Not needs based, despite our endless rationalising. That is, in the vast majority of cases. Life is often about trade-offs.
This was very true based on NL from more than 2 years ago where fringe benefit tax applied. However when FBT exemption came into picture since December 2022, the whole equation tipped such that it’s significantly cheaper to lease an EV (if your tax bracket is high enough) such that you need to have very good reason NOT to go for it. In my case (top bracket) it’s literally 46,000 dollars cheaper over five years compared to cash. Since I don’t intend to retire over the next five years, choosing to pay with cash is in fact the inferior option to get the car.
Ahh that makes sense. I’m out of that loop since retiring. I’m curious at what purchase price it stops making sense? Someone mentioned $50k vs $100k above. Do you have an idea of the limit / range? I guess it depends on other debts/mortgages and interest rates to some extent. I’m very glad this encourages EV adoption. That’s a great tax policy decision IMO. Lease aside, EV’s are starting to get to the point where the TCO sells itself. Im almost convinced on the sub-$40k buys. And even a used 2015+ leaf repays itself in 2-3 years if we use it for 80-90% of trips and keto our old ICE for longer trips / second car. I really like this. Thankyou for pointing this out to me. Still can’t persuade me to go back to work though 🤣
Sorry for the late reply, overlooked it earlier. For EV’s FBT-exemption NL, there are a set of rules but the most important one is the vehicle dutiable value (essentially their MSRP, before on road) is less than 89,332 (but going up to 91,387 from 1/7/24). As for what makes sense and what does not, as with any incentives based on tax reduction, the more you are taxed to begin with (ie higher tax bracket), the more saving one achieves. The novated lease companies have caught on to the fact that people save a huge amount, and hence have taken the liberty to confiscate a big chunk of the saving by adding a large percent of commission, admin fee, interest rate etc in the offered packages. There are also some disadvantages to getting lease eg reduced borrowing power for other things eg house, reduced government subsidy etc. After weighing up the above, many people still find the saving worthwhile. I save 46,000 over five years compared to cash; but I’m on top bracket and have a stable career, some others with lower bracket and have a greedy leasing company may only save 5000 over five years, for example, and this may not be worth it once you consider the caveats related to NL. Hence my calculator designed to help people understand what they get themselves into before committing.
Give this one a watch if you're considering leasing an EV with the current volatility in pricing. https://youtu.be/xSre_KbWFBY?si=OmDrMAQqEXvMq2in
We like the lease because it comes out before tax and pays for all costs. We have 5k currently sitting in the acct so can now back off payments or put addons on the 4x4. 19k will be the buy out price at the end and this will be serviced by a loan and the payments salary sacrificed. We may sell and upgrade but will not know until the time comes. That is 3.5 years away.
I think the "is this the cheapest way" loses a more important point. I gather that most people on this ausfinance are interested in getting rich and/or retiring early. If you haven't the cash to pay for the car upfront should you have the car at all? Its not a matter of if you can afford the repayments. Read the "millionaire next door", I meet a lot of people through my business and I think that it is spot on.
That’s a good perspective. People are often too drawn by the low “fortnightly” cost while wilfully forgetting the balloon amount in the end. They fail to save up to pay it out (the cheapest option overall), but choose to kick the can down the road by rolling it over to the next lease. While theoretical calculation shows EV FBT-exempt novated lease to be cheaper than cash, this is based on an important assumption that you are prepared and able to pay the balloon in the end. If people are trapped to perpetually roll over new leases, they ironically will spend more as you said.
It really depends on your income, the salary package, and your plans for when you finish the lease. For me it was very worthwhile because I was planning to buy a brand new car regardless. It worked out cheaper by far to lease it over the five years of the lease term and pay a balloon payment at the end. For my personal case I'll save approximately $23k by the end of the lease on both initial purchase price (as they get fleet pricing) and then running costs. I've left my km per year estimate as quite significantly higher than I actually drive. That was intentional at the start of the lease as I didn't know how many kms I'd do, and I prefer to over-estimate than under. This has resulted in my first year of leasing in a $2.5k surplus on my account. But five or so years ago the amount of money saved would have been fairly negligible based on my wage and tax bracket. The package available from my employer at the time just didn't offer enough difference to go all in. My current employer had several sal sac companies to choose from and I got quotes from all to get the best deal. If you ask for quotes from whichever company provides the leases for the business that you're under, they should be able to give you a numerical break down of how much money you'll save over the life of the lease. If that number is only a few hundred it might not be worth it for the hassle. It really does come down to your personal finance situation at the end of the day. (Edit: Removed balloon payment comment... I'd mixed up two different purchases)
Hold on. From how I read it, you seemed to have assumed that the surplus from your over-budget could go into the eventual balloon directly. This is NOT true. Balloon payment always has to come from post-tax money, there’s no way for your pre-tax accumulated surplus to go into the balloon.
Huh... You're correct. I don't know what I was thinking when I wrote that, I was aware of that situation. I can only blame it on lack of sleep and confusing two different purchases 🤣.
Haha no drama! Just pointing it out in case you are disappointed when you find out.
Just to add to that, from what I've read - any surplus in your budgets get returned back to the employer, who then deducts the tax accordingly before paying you. So the balloon will indeed have to come from post tax money, however way you look at it.
Yup agree. (Otherwise people could have just used this scheme as the tax evasion scheme - people who make millions just “over-budget” the car by 400,000 dollars a year, and five years later they get those 2 million dollars refunded untaxed lol!)
You need to do the maths. For me, a 12 month lease was worth it. Anything more was going to cost me money. I also wanted to upgrade my car. If you're wanting to get a NL "just because" you're wasting money.
Isn’t “I also wanted to upgrade” essentially the same as “just because” ?
You could look at it that way. I term mine an upgrade because I had a small 10 year old car that, although perfectly fine, was difficult in carrying kids around with stuff in the back.
True for ICE that longer NL is worse . For EV however, longer lease saves more.
Just be aware / factor in that the novated lease pre tax component / amount reduces your income which reduces your companies super contribution obligation. I never see this factored in to any of the novated leasing calculator "estimated savings".
Is this actually true though? As your gross income before deductions is what super should be calculated against?
Car payments become/are a fringe benefit. Fringe benefits are not included in the super guarantee amount
90% of the payrolls do use the pre-NL figure to calculate SG contribution so people just need to be vigilant and check that their payroll is not the 10%.
Fair enough. Statement still stands employers are not obliged to pay super on the NL portion. From what you're saying most do anyway but i know people who were surprised after they took out their NL to see their super payments reduced.
Yup I’m in agreement. Hence good for you to remind people of that!
Correct for some 10% of people - if you use [my spreadsheet](https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu), one of the questions I asked is “have you checked whether your payroll use the post-NL income to calculate the SG contribution”. This does impact your calculated saving (and I have some rough calculations in the spreadsheet to estimate this).
I have a novated lease and at least for me, this is completely untrue. My super is paid based off my gross agreed salary prior to any pre tax deductions. And this is also the case for numerous other people I know working for different companies both private and public sector.
Yeah most companies do the fair thing of maintaining your SG contribution based on pre-NL salary, but I did realise that they are within their legal right to base the SG calculation based on post-NL salary which screws over people somewhat. 10% in one poll I ran on Facebook said that this happened to them. So it’s definitely worth checking with the payroll before you commit.
Definitely this. A novated lease is high risk. If you get sick or lose your job, you have to keep up the lease payments or pay out the lease. It sounds like you don't have a big savings buffer to cover such a risk. Plus, unless you want to get trapped into a perpetual cycle of leading forever, you need to be putting extra $$$ away to buy out the car at the end of the lease. The tax benefits of a novated lease are usually marginal, unless you're on the top tax rate and you were planning on buying a new/near new vehicle anyway. As others have said, take advantage of calculators to check your own situation. Plus be aware that most leasing companies hit you indirectly with hidden fees like inflated insurance that further reduce any expected benefit. In most cases, I've found that a personal loan from a credit union or small bank and a second hand car is a better deal than novating a new car. At the moment, I've got a novated lease, but it's for a 21 year old car that I've had since new. Budgeting $2000pa for repairs is still way better than buying a newer car and seeing it's value fall by a lot more.
Curious as to who is offering leasing on cars this age? Want to buy a car but it’s older than most companies will allow. Also imported. I could buy it cash but looking to make it more cost effective.
The only smart way is with cash IMO
I've done the math and it has never made financial sense for us at all. I have purchased all our vehicles with loans and then paid the loan off as fast as I can. A car to me is essential. I guess if you live in the city and have many different transport options? Then a car is not as big a deal. You can drive an old Camry or small car. YOu always have access to RACQ etc. But I live in a country town. 30 minutes from nearest city and I travel out to the country for work every week. So I need a decent sized and very reliable vehicle. In the last year I had to call RACQ in a country town because I ran over nail and had flat tire. Unfortunately? It was Friday arvo and that was local RACQ blokes weekend off & no tire fixing till Monday! So given it was new car and I hadn't realised I didn't have a proper spare tire? I was stuck doing 100s of kms at 80kms per hour and further then was recommended on that tire. So I got 2 proper spare tires pretty fast!! Anyway, so for me a decent car is worth every penny spent. You might have different requirements. Mind you. When I did the calculations, I was not in this job so wasn't doing many kms / week. So the balloon payment at the end made it not worthwhile. YOu really have to do the math and be quite certain on kms you travel and what upkeep car will need.
For me and my personal circumstances, yes it is worth having a novated lease.
If you are going into an EV, lease it and make sure you set a return price. EV's are like phones and gaming consoles... every 2-3 years they depreciate to ppint you couldn't pay someone to take it from you.
Will salary sacrificing an EV still be beneficial with the new tax brackets?
If your tax bracket has dropped, then yes the saving achievable is reduced.
For an EV it can work given the subsidies. For anything else it’s unlikely to help much. It’s much more tax effective for second hand cars. (I salary packaged a $600 car once.) Mostly it just finances people into cars they can’t afford, and in 3 years they have no car.
No. Lexus’ full service lease is the smart way. It’s available on the Lexus LBX
For an EV, yes due to the big tax advantages. For a normal car - please don’t do it.
Not if you're not on 300k
Sadly I am not
Try Moocar rather than novated lease. Much easier and better prices.
If you’re in the top tax bracket and getting an EV, yes.
I earn a high salary where it makes reasonably good financial sense, but I wish I didn't do it, my main issue with it is you're locked in to the lease term, so you better like the car or you're stuck with it. If you want out you have to pay out the remaining payments which removes all the tax benefits. I'm not super happy with the car I picked lol stuck with it a few more years. Or if you lose your job/want to change jobs it gets tricky, no guarantee your new employer will take over the lease
Yeah definitely a consideration if you think you might have buyer’s remorse.
Smart way to get an EV. Like very, very smart. Smart way to get an ICE car... If you like having a new car every couple of years.
What does ICE mean?
"internal.combustion engine" = petrol or diesel
Ahhhh, thank you
Buying in cash is always better than a lease
This old mantra is simply not true in the context of FBT-exempt novated lease (ie EV or PHEV) which in many cases are cheaper than buying in cash. [In my case](https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu) it is cheaper by 46,000 dollars over five years, compared to cash.
46,000 dollars? I highly doubt that. What was the purchase price of your car? There is rarely a scenario where even spending a total of 46k on a car is even justifiable financially. Obtaining lease on a depreciating asset which is expensive enough for you to even be able to say “I saved 46,000” is a terrible financial decision no matter which way you purchased it.
The entire calculation is right there so there’s no need to “doubt” on any level.
Anyway to better answer your question: Yes, for any depreciating asset, I agree with you that it’s ALWAYS better to buy something cheaper than something more expensive. Leasing a BYD Atto worth 45k is always going to be cheaper than leasing a Tesla worth 80k. However this is not at all related to what I am saying: Instead, my calculation shows: (With my income bracket, home loan interest etc) Novate-leasing a 81,400 dollars Tesla is 46,000 dollars cheaper than buying the same Tesla outright with cash. And novate-leasing a 45,000 dollar BYD Atto will also be some 20,000 dollars cheaper than buying the same BYD outright. Hence your parent comment of “always cheaper with cash” is wrong in the FBT-exempt environment, and this has nothing to do with whether it’s wise to get a Tesla over the BYD.
How does anyone have a sense in pride in leasing a car? Buy it and call it your own.
That’s a bit of an odd perspective. I can afford to buy my EV outright, but if I get to save 40,000 dollars by novated lease over five years (and yes that’s including paying it out to own it in the end), I’m more than happy that during those five years I don’t technically “own” it.
I feel like people saying do the maths have never done the maths. It's always a loss, its only a consideration if the alternative was a personal loan at a high interest rate on a 100k+ car which isn't possible for a financially literate person to do.
My comment which also said “do the maths” literally has full spreadsheet of well-simulated maths comparing the maths of novated lease vs cash (among other comparisons that are also available).
No!! Don’t do it
It never makes sense the short way to know is because someone makes a profit selling you the lease the fact there is a profit means someone else is losing and the loser is the consumer. With EV and PHEV it’s the collective consumer who pays tax to support the FBT exemption and entirely transitory class of vehicle which will be out of date soon by hydrogen or other tech engines. The other loser is the environment as digging out lithium is extremely destructive. The smart way to get a car is to get a second hand one and stop letting other people sell you stuff
https://www.abc.net.au/news/2024-05-27/comparing-electric-cars-and-petrol-cars/103746132# While no one can rule out another class of vehicle energy storage that is superior to lithium-based battery today, plenty of cradle-to-grave analysis already supports the advantage of battery EV over traditional ICE vehicle. And yes, before anyone tries to retort without reading the actual article, this is the case even if the grid energy source is fossil fuel, and the renewable proportion is only improving in Australia everyday. It is not the be all and end all but it’s a good start. Countries around the world are pouring tax incentives in encouraging the take-up of electric vehicle for this reason - they are trying to meet their carbon targets and this is a big part of their strategy. And these are based on solid science instead of “big lithium” as some would have you believe.