Buying a car using an IP.

T

The_Bludger

I'm thinking I can use the equity in one of my IP's to get a loan for a new car so that I can pay IP interest rates, instead of new car interest rates which are about 3 or 4% more, as well as conserving my cash. The only thing I am not sure about is can I use this new loan as a deduction against the IP itself, or do I have to seperate it from my investments?

Is this a sound plan? Does anybody have any other ideas or improvements on the above on how I can use an IP to buy a car? Or any complete alternatives?

Also, any reason I shouldn't do this?
 
You will have to keep it seperate. The interest on this loan is not deductable as it is not for investment purposes, but rather personal.
 
rugrat said:
You will have to keep it seperate. The interest on this loan is not deductable as it is not for investment purposes, but rather personal.
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So best if I use cash then? Don't do enough km's to lease, but will be using the Log Book method which I can recover a lot of the expenses.

Wanting to spend around $40k. Seems like a waste handing over post tax dollars. Has to be another way.
 
Wanting to spend around $40k. Seems like a waste handing over post tax dollars. Has to be another way.
Click to expand...

There is another way......buy a good second hand car for $5k and use the remaining $35k for a deposit on another IP:cool:

Regards

Regrow
 
The_Bludger said:
So best if I use cash then? Don't do enough km's to lease, but will be using the Log Book method which I can recover a lot of the expenses.

Wanting to spend around $40k. Seems like a waste handing over post tax dollars. Has to be another way.
Click to expand...

Only if you are able to salary package the car. I take it you are set on a particular car - 40k is alot of money.
 
Accountants nightmare, people who mix their loans! It can be done, but I would suggest you have some basis for breaking up the interest between the car and your investment property. If the loan is say $300K and you take it to $340K to buy the car, then I'd just say 88% of the interest is for the investment property and 12% is for the car. Then how you break up the interest on the car portion of the loan will be based on your log book. So if the car is 50% work, then claim half that 12% for your motor vehicle, resulting in 6% of the loan interest being non-deductible. However it generally isn't recommended that you mix private loans with investment loans as it becomes a mess, but if you are organised and don't mind working it out (to save you $$ rather than your accountant spending time sorting it out) then as far as I can see, there's no reason you can't do it.
 
regrow said:
There is another way......buy a good second hand car for $5k and use the remaining $35k for a deposit on another IP:cool:

Regards

Regrow
Click to expand...

You know of any good 4WD's that can tow a 20 foot boat? Unfortunately, a 2004-2005 Toyota Prado with low km's will set you back $35-40k...

Could buy something cheaper, but just fearful of all the problems that will come with it!
 
why do you need to get a 4WD to tow a boat?

Get an old automatic V8 falcon with a 9inch diff, stick gas on it, and use that to tow the boat. the car doesn't need to be that old. a model from the 90s will be ok and if it has computer assisted gearbox then towing will be a breeze.

I'm really puzzled as to why people insist on getting a huge 4WD just to tow things.
 
Bludger,

Do you have a business i.e. a company entity you can use? If you had part business / part private use? You can avoid FBT by making an employee contribution for the private use component.

Investigate also some 4WD are FBT free (I think??)
Also investigate a Chattel Mortgage - if you are registered for GST you could get that back in one lump sum on your next BAS. Also you might qualify for the Feds investment allowance.

Lots to consider - why not have a chat to your Accountant - they're usually right up with all of the options you could utilise.
 
Because it's the IN thing to do, so an absolute neccessity. I agree, they drive me INSANE... mothers dropping off their one child in the inner suburbs of Melbourne. It makes them feel worthy and they think they own the road, but it gives me great pleasure to cut in front of them and not let them in, in my little economical Mazda 2 which fits anywhere. Equally annoying are cyclists on Beach Road, everyone should be made to drive little hatch backs. A nice medium between cyclists and 4WD's. :)
 
Not so recent or the 'in' thing!

Leikela said:
Because it's the IN thing to do...
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If that's the case, its been in for the past 20 years. I recall picking up my sister from school (many years ago now) and remember plenty of large European vehicles being driven by mothers picking up their daughters.

And some of them looked damn fine too, but that's another story.
 
gg1965 said:
why do you need to get a 4WD to tow a boat?
Click to expand...

The ramps that I launch off are pretty slippery and have gotten stuck a few times. Also, towing in a 4WD is a lot safer than the traditional Falcodore. The family is getting bigger and we just need the extra room, so lot's of reasons.
 
Propertunity said:
Bludger,

Do you have a business i.e. a company entity you can use? If you had part business / part private use? You can avoid FBT by making an employee contribution for the private use component.

Investigate also some 4WD are FBT free (I think??)
Also investigate a Chattel Mortgage - if you are registered for GST you could get that back in one lump sum on your next BAS. Also you might qualify for the Feds investment allowance.

Lots to consider - why not have a chat to your Accountant - they're usually right up with all of the options you could utilise.
Click to expand...

Lot's of options there, thanks!
 
I see everyones point on the 4WD topic, they drive me nuts too at times.

However, try seeing how far a 90's Falcon on gas will get you along the beach. Point being, is theres more than one reason for owning a 4WD.

And no, I don't own one.
 
Bludger - Of course you can do it. If you can pay the $ back at 5% it's cheap money and your cash may be better spent elsewhere. Only you know. You'll just need to always account for it at tax time.

BTW, you should buy whatever car you want. It's a motor vehicle, not a moral dilemma.

Oh, except if it's a Prius. Those things annoy the hell out of me! :D
 
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