Hey JIT,
Yes, it's much cheaper using resi finance.
However, I've just bought a $60k car. Would prefer to finance that and have my 60k back for a deposit on a nice IP.
I've done novated lease before and understand how they work.
After all your research, what is the main difference between these and Chattel Mortgages? It's very hard to get a straight answer on the net, thought it would be easy.
Regards,
David.
David,
This thread then continued on to this one:
http://www.somersoft.com/forums/showthread.php?t=54788&highlight=business+cars
But, after finding out that cars could in fact be purchased CF+ve, I have since lost my enthusiasm for cars, and am still driving around in my old Toyota!
I'm just going to wait until I can afford the Gallardo
!
But from memory, my understanding was that Chattel Mortgages were basically P+I loans for cars, with a ''residual value'' payment you set upfront. Eg. Car purchase price 55k, residual value 35k, 5 year term, means you pay P+I the 20k difference over 5 years, then at the end of the 5 years you have to pay the remaining 30k loan amount to take full ownership of the car, if you want to. You can adjust the residual value to increase or decrease your monthly repayments over the 5 years.
The GST refund is a one off refund of the 5k GST amount on a 55k car you get if you are self-employed or a business owner, on the first BAS you do during the car purchase period.
Being P+I, it's not cheap to service, and that's my main problem with it. And only the interest is tax-deductible (if used for business use, and it depends on the % you use it for) of course. But, you can depreciate the car, and this non-cash tax-deduction is the major benefit. The now obsolete 50% investment allowance made this especially so, and hence you got CF+ve cars.
As for fuel cards, I am not sure about this, but I don't believe Chattel Mortgages are available for employees, so not sure about taking it out of your pre-tax income. A contractor/business owner would just pay all car expenses on a credit card and then claim the % of business use as a tax deduction.
So... I much prefer IO loans via residential equity LOCs for this sort of thing. It's way cheaper, but at the expense of using up highly leveragable equity.
If you have plenty of LOCs sitting around doing nothing, and the car purchase price is only a small portion of this, then I would consider it. I probably would even do this over using cash savings upfront.
As for Novated Leases, to be honest, I don't know much about these. I thought you had to be an PAYE employee for this, and as I am self-employed now I have not looked into this.
Maybe you could explain how Novated Leases work?
Hope this helps.