Leasing a car for work

[jmillar]

Hi guys,

I did the calculations about a year ago and leasing a car wasn't viable but my income will be a lot higher shortly. Is there a sweet spot where leasing becomes more viable than owning a car? And does this affect borrowing capacity?

Is there some sort of calculator which shows the net effect that leasing a vehicle has?

My current car is only $10k but my next car (probably 9-12 months away) will be somewhere between $40-60k.

Cheers

 

[Rixter]

My current car is only $10k but my next car (probably 9-12 months away) will be somewhere between $40-60k.

Nice IP deposit..... or post tax holding costs on a multi-$million property portfolio for quite a few years.

 

[jmillar]

Nice IP deposit..... or post tax holding costs on a multi-$million property portfolio for quite a few years.

I've worked hard since I was 13 and lived like a tight *** and will be buying at least 2 more IPs this year (to bring the total to 6, maybe 7) so I'm going to treat myself for once.

I will be leaving a decent sized buffer, and won't buy it until I have more than enough to buy it in cash (even though I may lease it if it's a better option).

Cheers

 

[Gockie]

Buy a second hand, 3 year old car. Cars depreciate the most in the first three years. Save stacks of $$, but they look just as good as new.

 

[Rixter]

What Gockie said above ^^.

Its a balancing act in moderation also but still got a reward yourself for reaching milestones and smell the roses along the way too.

 

[Hodge]

Couldn't agree more! I done the same and saved a bucket load.

 

[Colin Rice]

Depends on your surplus income as they can severley effect your serviceability and cash flow.

Pay cash or use available equity to get the car.

I bought my first new car at the ripe old age of 43 but its tied into my business and not super expensive. I still sometimes think I should have went the three year option though

 

[Terry_w]

I'm going to treat myself for once.

Don't fall into this trap - it will put you back years. Buy yourself a tub of expensive ice cream instead.

 

[coastymike]

6 properties at age 22. Doing better than most on this forum and better than many of my clients. I think you understand finance, budgeting and how to get ahead without needing someone elses advice. Given your current track record you should hit 10m to 20m net worth by age 60 no issues and that will be sufficient for retirement.

Agreed re second hand. My brother just picked up a 2nd hand porsche boxtser for 40k

 

[westminster]

There are a lot of leasing calculators on the net

http://www.leaseplan.com.au/driver/calculator

There are some 'sweet spots' for novating:
- if you want to buy new
- if you want to buy a common/popular car
- if you want to take advantage of some corporate servicing discounts

I have leased and I have owned.

The one time I did lease worked for me at the time. I got a great fleet discount on the car which I wouldn't have done on a second hand car. I chose a black Mazda CX9 which has very very resale and ended up selling it at the end of the lease for more than the outstanding amount (profit fbt free) and servicing rates were much cheaper than what I pay as a standard Joe Blow

So if you do the calcs and it works for you then I say go for it. Yes it's a lot of money, yes it could be another IP deposit but if you have factored that in to your plan and understand that then have something fun to drive every day which will put a smile on your face.

If the calcs don't work then go buy a second hand variant of that smiley car and still have fun

 

[Paul@PFI]

Leasing a private use car is not tax effective and ties up credit for a vehicle you will never own.

 

[Colin Rice]

Leasing a private use car is not tax effective and ties up credit for a vehicle you will never own.

Have to agree and you will get away with it only if you have a decent income, say 200k plus. Assuming you are interested in accumulating leveraged assets.

 

[Paul@PFI]

Get away with it? No. Income levels won't change deductions. The impacts of fbt reduce above 180. The problem with use of financed vehicles remains you never own them despite the cost. The only cost effective vehicles are usually trade vehicles

 

[Colin Rice]

Get away with it?

Was referring to surplus income, in particular borrowing capacity.

You think deductions, I think borrowing capacity, perhaps?

 

[jmillar]

Thanks to everyone for the quick responses!

I should have mentioned that my job requires a car - I'm basically a sales rep and spend more than half of my time on the road. Does this make a difference to the tax benefits of leasing at all?

In my current job I don't get a separate car allowance, it is all packaged into my salary. I then earn commission on top.

I'm a tight *** at heart, so I will be buying a 2-3 year old car if paying cash. I will only be interested in a brand new car if tax benefits of leasing make it a better option...

Have to agree and you will get away with it only if you have a decent income, say 200k plus. Assuming you are interested in accumulating leveraged assets.

Next year I should hit $200k or come pretty close.

 

[Colin Rice]

Thanks to everyone for the quick responses!

I should have mentioned that my job requires a car - I'm basically a sales rep and spend more than half of my time on the road. Does this make a difference to the tax benefits of leasing at all?

In my current job I don't get a separate car allowance, it is all packaged into my salary. I then earn commission on top.

I'm a tight *** at heart, so I will be buying a 2-3 year old car if paying cash. I will only be interested in a brand new car if tax benefits of leasing make it a better option...


Next year I should hit $200k or come pretty close.

Just make sure you have the impact a lease v paying cash/using equity will have on your cash flow assessed so it doesn't interfere with your short, medium and longer term investing goals.

 

[S.T]

Head to the car auctions and buy a 2/3 year old car, pay cash. Something low km and comfortable spec would be my choice, lots of ex gov cars going cheaply plus ex lease/finance cars where people cant pay the loans anymore

 

[coastymike]

Do a financial analysis.

http://www.excelidea.com/cost-analysis-of-leasing-versus-buying-a-car-for-business-use.html

This one takes into account tax effects and quite cheap.

 

[Colin Rice]

Do a financial analysis.

http://www.excelidea.com/cost-analysis-of-leasing-versus-buying-a-car-for-business-use.html

This one takes into account tax effects and quite cheap.

Dont forget to incoporate/consider impact on future borrowing capacity. $1200 out the door per month on a typical novated lease v the intrest you will pay on cash from an offset or borrowed funds at mortgage rates is significant when it comes to borrowing capacity. More so the less surplus income you have.

 

[Rob G.]

There is actually two aspects to the OP title.

1) Leasing a car.

2) Using "for work".