Novated lease order to take 6 months

[andrew7]

Ditto, my rate 8.5% (cheaper than the big banks!)

[brad]

This is very true, I've spent most of my career in finance and have a swag of stories. My rule of thumb if something is marketed as a tax deduction, then you automatically go on high alert. Basically these companies know that people's common sense goes out the window when they believe that the tax department will pay for it. Anybody who has ever done the number on one of "rent a computer for the cost of a cup of coffee a day and write it off against tax" would be able to work out that the interest rate is typically higher than 25%.

When i got my lease papers from MacMillan Shakespeare Company with the finance provided by Maquarie Leasing there was no mention of interest rate (which I thought was illegal but apparently not). I did the sums & it was ~16% when a personal loan could have been had for ~12% & a car loan for 8%. Even when asked to verify my figures, MSC avoided giving a straight answer.

Yes, I still went ahead with the lease because the positives outweighed the negatives and my employer was locked in to MSC but it wasn't the huge money saver they make it out to be (in my case - everyones circumstances are different)

[WhiteJames]

Leasing as opposed to owning outright for me didn't seem too much different in cost on a Golf GTI. Seems, as others have stated, that any benefit to the owner is taken up by the interest rate & fees charged by MacBank on the novated lease agreement. I'd rather put the GTI on margin loan tax deductable on share income with interest of 9% minus 40% tax rate with no strings attached than lock myself into a long term lease. I ended up buying the GTI with cash.
Cheers.
WJ

[San Gimignano R]

When i got my lease papers from MacMillan Shakespeare Company with the finance provided by Maquarie Leasing there was no mention of interest rate (which I thought was illegal but apparently not). I did the sums & it was ~16% when a personal loan could have been had for ~12% & a car loan for 8%. Even when asked to verify my figures, MSC avoided giving a straight answer.

Yes, I still went ahead with the lease because the positives outweighed the negatives and my employer was locked in to MSC but it wasn't the huge money saver they make it out to be (in my case - everyones circumstances are different)

Your right. In the end you STILL end up paying for the vehicle. It's not free and it's not discounted. The benefit is your reduce your taxable income for the likes of other issues, Carbon Tax for one. But, the car will still cost you the same either way. I'd rather have the cash for the deposit or the outright cost sitting in my mortgage offset loan saving me bigger $ than a novation is costing me.

[andrew7]

Summary point, if you need to obtain finance to purchase your vehicle (most of the population) leasing still offers substantial savings v financing from after tax income. (14k in my case over 3 years, so a no brainier) Why not take adv of easy savings?. And WJ, caution with the effective financing of your vehicle- tax office traces the use to which margin loan funds are used, if go to private assets eg non business car then the proportionate interest expense is not tax deductible (was a tax lawyer in a previous career)

[WhiteJames]

See the above point of view. Another view is taking a cash advance on an asset. Hypothetically ... I had 50K cash burning a hole in my pocket. If certain stocks dropped by half in value (like in 2008 GFK with Bank/Financial stocks), then the 50K could be used to pay for cheap stocks at half price and a cash advance taken later on for purchase of a car due to arrive onshore in 6 mths time. ANZ Bank dropped from $24 to $12 then shot up to $24 for a time. Time your purchase right and your 50K becomes 100K, but you don't sell to avoid paying tax, and take cash advance of 50K on a margin loan for the Golf GTI ... you're still 50K in front come delivery time and earning dividends on that 50K, which helps paying down the margin loan on the GTI. Flexibility is the key.
Cheers.
WJ

[andrew7]

gotcha WJ, makes good sense.

[andrew7]

there are 2 in the country. both are white and both have Rear view camera.
would you be interested?

are these still available Serge?

[Finance_Analyst]

Summary point, if you need to obtain finance to purchase your vehicle (most of the population) leasing still offers substantial savings v financing from after tax income. (14k in my case over 3 years, so a no brainier) Why not take adv of easy savings?. And WJ, caution with the effective financing of your vehicle- tax office traces the use to which margin loan funds are used, if go to private assets eg non business car then the proportionate interest expense is not tax deductible (was a tax lawyer in a previous career)

Saving for tax though ,would only work if you were on a high marginal tax rate (e.g. 37.5% or 46.5%). Otherwise the savings are not there, especially for an expensive car. Same reason why negative gearing on shares/property does not work for low income earners.

[WhiteJames]

^Agreed. Negative Gearing for high tax rates ... even then ... you'd want majority of your years in capital growth (i.e. price of real estate/investment going up). No use in negative Gearing in a falling or flat market ... just buying yourself a tax deduction. May as well invest in Emu or Olive Farms.

When neighbour Ray had his Golf R on order, he was going to lease, but interest rates on leasing after GMAC went bust went up 2-3%, making money more expensive therefore the car more expensive. He was going to pay cash, but recinded on his purchase (He's test driving a 328i Sport BMW this week). Luxury car manufacturers have reduced prices to reflect this imo ... price of BMW, Merc and Audi mid sizers have come down in price over the last 1-2 years. The 1 and 3 series are starting to look to be better value.

Leasing could be an option if other assets fall substantially in value ... although leasing does tend to lock you in for 3 or more years and the interest repayments are geared towards the start of the loan (i.e. first year).

Cheers
WJ