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leasing a car..advice needed


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hey guys..looking for advice on leasing a car through work..have been looking at leasing but scratching my head a bit

 

looking at a 5 year lease that will see me through until i retire..ready to pull the trigger now and keep holding off

 

my wife is an accountant and she is saying it's the way to go..

 

so what experiences have you had?

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I'm leasing a car .. on the old scheme with the tiered FBT rates based on kms.

 

I've had a positive so far... my taxable income is reduced, tax free fuel, cheap servicing (dealer fleet rates are about half RRP). On the old scheme, it was crucial for you to make your nominated km bracket, otherwise you would get a decent FBT bill at the end .. on the new scheme (is it in action yet?) the rates are flat, so it doesn't matter what kms you do, your FBT is the same.

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I leased a Grand Vitara Jeep, which I bought s/hand with 20,000ks on the clock, for $40,000 over 5 years.

I eventually bought the car outright for $14,000 at the end of the lease, from the leasing company.

 

It worked out great for tax and having a card to pay for everything (petrol,servicing,tyres), that meant I never needed cash or used my own money, was a benefit.

The downside was having to ensure I did at least 15,000Ks a year (lest I be charged extra for inadequate use), which saw me doing a few pointless long trips down the Great Ocean Road and back just before the end of the financial year. Stupid.... but that's the rules.

 

Overall, a positive experience I would consider repeating as long as your income remained above $80K odd annually, and you can actually use the kms, and not have the car sitting in the garage too often.

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I'm not right up with it all, but this is my take on it .

We have no cash flow problems, You probably don't either.

We have always purchased outright, because we can afford it.

You own the vehicle, but can only claim a set depreciation amount each year, and takes 5 years or so to "write" it off, and you still have the vehicle at whatever cost it is worth. If I then sell, and make a profit, I pay capital gains tax on the profit. My accountant somehow rolls this profit into the next purchase, so we don't really pay the capital gain. It works for us, but we have a lot of money invested in vehicles.

With a lease what you pay in the lease instalments are 100% tax deductable, as you don't actually own the car, and when your lease finishes, you can give the car back, get into anther lease, or buy the car at a residual price. I think the lease payments might be a bit dearer somehow, but the full deduction makes it attractive to some businesses. If you need a lot of vehicles, it probably makes sense to lease them, because of the lesser outlay, and the business retains it's cash and it can be used elswhere.

We did a little exersize on the pro's and con's of HP vs Lease vs Outright purchase of an excavator years ago at Uni.

Over a 3 year contract you ended up way ahead with the puchase, but you have to have the readie's to buy in the first place.

For just one vehicle, if I could afford it, I'd just buy it.

Cheers

K

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I leased a car 7 years ago, I did the 4 door 1 tonne ute as that was FBT free back then, I leased for 5 years so the servicing/petrol etc.. was all pre-tax dollars and I mad the residual low so when I bought the car it was a 5 year old car with about 50 K's on the clock.

 

 

Kenny - As I don't need a car for my job I can't depreciate etc.. So the lease was the best option to get a new car "cheaper"

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For just one vehicle, if I could afford it, I'd just buy it.

 

Not so clear cut, for those with mortgages and offset. It may be more attractive to keep funds in offset, lease a car, reduce taxable income (thus not paying medicare levy etc), get cheaper maintenance costs (both in terms of dollar value and the fact it's out of pre-tax dollars) etc. Sure you have a balloon figure at the end, but if you have chosen the car well (i.e. not a Falcodore), then the value of the car *should* be more than the balloon, to which, sell the car and start over again.

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The best strategy financially is to buy a second hand car outright. We have never financed a car and buy within our means. To me, you can get a nice car (say 4-5 yr old Nissan maxima) for well under 20k. If you look around you can easily get a low km falcon or commodore for 10-15k.

 

Use it, hock it off for prob a $5-7k loss after 6 years or so with minimal repairs along the way.

 

I have no desire to own a new car but appreciate that others like the experience - just realise it comes at a decent cost! I've had new cars for work, and honestly the novelty wore off within a week.

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I leased a car 7 years ago, I did the 4 door 1 tonne ute as that was FBT free back then, I leased for 5 years so the servicing/petrol etc.. was all pre-tax dollars and I mad the residual low so when I bought the car it was a 5 year old car with about 50 K's on the clock.

 

 

Kenny - As I don't need a car for my job I can't depreciate etc.. So the lease was the best option to get a new car "cheaper"

 

The original query was about the lease of a car for work.

That's all I know about.

I have never considered that anyone would lease a private vehicle.

Cheers

K

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It's leasing a car through work .. not *for* work.

 

Meaning, you have to arrange with your employer to set up a salary sacrifice arrangement.

 

yes..through my employer ..my mistake ;)

 

appreciate all the help guys..the thing that really threw me yesterday was a few thousand dollars extra of what the car sells for..was ready to go then when i started asking questions wasn't really getting the answers i wanted

 

have just contacted another mob and they are doing the sums now..

 

should of maybe read leasing to drag pinball machines around :)

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leasing a car..advice needed

 

yes..through my employer ..my mistake ;)

 

appreciate all the help guys..the thing that really threw me yesterday was a few thousand dollars extra of what the car sells for..was ready to go then when i started asking questions wasn't really getting the answers i wanted

 

have just contacted another mob and they are doing the sums now..

 

should of maybe read leasing to drag pinball machines around :)

 

the extra of top is the interest. another thing to consider is if you decide to get rid of the car before the term is out you will probably get surprised as I did. that you pay for all the interest first. then it starts coming off the principle not a bit of interest and principle each week like a normal loan.

 

so trying to sell the car for whatever reason before the end of the term can almost be impossible because you will still owe more then it's worth.

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You very much need to get your financial people to run the calculations based on your own position.

That being said, every time I've asked my financial guys about novated leasing (via salary packaging), they've pointed out that cash is king with motor vehicles and you can make more out of salary packaging other expenses e.g. power bills etc.

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Salary sacrifice?

Put it into Super. I'm allowed 25k per year voluntary employer contribution.

Buy the car. What car do you want,(50K?) vs 5 years contributions into your super fund (125K)

Consider all options above, and do what will work for you.

There is some good advice in the previous posts.

What works for one, will not always work for another.

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