Hi , I am looking at leasing a car for 3 year period. This is the first time, what should I be looking out for and are there any deals around with different lenders? thanks in advance
Help! I want to lease a car for the first time
mrtempeh on 14/01/2014 - 18:13
Comments
Thanks for the great effort and helpful information in your post!
Thanks - that really helped me, appreciate the info and your effort.
Excellent post dude, i logged in just to upvote this. I have no interest in a lease car but i occasionally stumble into the forums just to see the comments. Would rep again.
Plus vote for the effort, in your experience what has been the best brands to lease? Thanks.
Thanks for all the votes guys! The best cars to lease for me have nearly always been those with the lowest depreciation. Depreciation is normally the biggest cost in owning a car despite what you read about servicing etc. The best performing cars are obviously those that retain appeal for buyers in the 2nd hand market.
I have tried niche sports models but I often find that you are searching for a very rare car-nut to sell it to at the end of the lease. The Red Book price might say you are going to sell for a profit but finding that obsessed car-nut to sell to can be like the proverbial needle in the haystack. The Renault Sport I mentioned before fit that category, I found the needed car-nut literally a day before I had to payout the lease at my own cost and just broke even on the sale because I rolled over on price negotiations just to get the deal over the line! I knew the alternative was me having to draw $15K out of my mortgage on Monday or re-lease the same car if i didn't get the deal done!
Ironically though, I once had an old Porsche that I leased and I actually managed to sell it for $2K more than I bought it for 3 years earlier. At a point in a car's life the depreciation slows. It was tough initially to get the lease company to let me lease a 1989 model Porsche but they eventually went for it. Because the lease assumed the car would be depreciating over the 3 years and in fact I sold it for $2K more than I bought it for, I walked away with $15K or more I think. Downside was that I spent a fortune (pre-tax $$ though) keeping the thing going over the 3 years.
I have had pretty good experience with Subarus, there are plenty of WRX fanboys out there keen to buy ex lease cars. I have a Diesel VW Passat at the moment that I'll be moving on in the 2nd half of this year. I was looking for a hot hatch to get me around and the car I was surprised by and looked very interesting was the BMW hatchbacks. Not a budget car but not crazy expensive either, looks like they hold their value reasonably well.
The other point that I made earlier about % and real cost is that although a Merc might only lose 40% of its value and a Kia might lose 60%, in $$ terms the real loss might still be much less for the Kia since 60% of $20K is still less than 40% of $100K.
Not sure what kind of car you are after but have a look at some of these articles:
http://news.drive.com.au/drive/motor-news/resale-heroes-cars…
http://www.carsguide.com.au/news-and-reviews/car-news/whats_…
http://www.afr.com/p/keep_ahead_of_the_curve_on_second_bEmoP…
Thanks for the useful info 2ndeffort, much appreciated, I realize that I forgot to mention that I am self employed and run a small food production business.So no salary sacrifice etc, my thinking is to use the car and pay less tax at the end of the year???….. I am able to afford the lease payments.Looking at Nissan Juke or Madza 3 hatch back, cheers
Try a chattel mortgage.
It's pretty much like a standard loan except all the depreciation and interest are deductible and you can claim back the GST upfront.
http://www.businessmoney.com.au/experts-chattel-mortgage.php
Most lenders offer them, even the dealers, shop around for the best rate, watch out for establishment fees.
I am self employed and that is how I do it.
You really should talk to your accountant or financial advisor.
PS buy a log book and keep a record of your work mileage and all your expenses to get maximum deduction.Spot on!
Re tax it depends if you are sole trader or run out of structure (company, trust).
If sole trader from the vehicles you specified you would claim a mv deduction in the business as you would per 4 methods for work related car expenses. (Log book prob best as may be able to factor in accellerated depn rules)
If structure it becomes a bit tricky as fbt may come into it, you will need an accountant to overcome any fbt consequences.
some general comments re car leases:
-many employers deal only with one lease company so no choice for employees. At least people can choose super.
-sometimes lease companies try to find out who is your employer with before offering any services.
-many people(customers) just do not want to understand the conditions of lease and become really frustrated or angry when they change a job (as mentioned earlier) or at the end of FBT year.
-many tax savings often go to the lease company 'pockets' via number of different fees. The important is not what they say they save for you from taxes but what you get as net in your personal financial circumstances.@mrtempeh - check with your accountant whether he/she can 'do' car leases and can give a good advice for your circumstances - in that case you might just need the finance from finance company/bank and you may save sometimes much more than was offered by a full-service lease company.
has anyone had any experience (and/or potentially recommend someone in Perth) with car brokers to buy a new car/sell an existing car?
What kind of deal does your work have with the leasing company? Is this for a salary sacrifice deal through your employer?
I ask because I've done this several times in the past (6 or 7). There are loads of things that often get 'bundled up' by the leasing company under the very dangerous and normally always expensive 'convenience' justification.
Most of the leasing companies are fronts for specific financiers. Often they don't let you source your own finance but instead force you to use their supplier. For example, I worked for a company that used 'McMillan Shakespeare' to do the company lease cars. These guys are a front for Macquarie finance. The car I was interested in had a finance deal for leases which was 2% better than what they offered but they insisted I use their finance because…well…that is what they do!
Often also, under the guise of 'convenience' leasing companies tell you they can source exclusive commercial fleet rates for cars that you cannot. I have managed to beat the lease companies on pricing with every one of the 7 cars I have leased. When I leased my WRX I inadvertently went to the same dealer that the lease company used. They offered the same car to me minus the $750 commission they normally pay to the lease company!!! I told the lease company I had found my own deal and sent them the dealership's quote. The lease guy wasn't happy but $750 is a lot of $$ (well not much really after tax spread across a 3 yr lease but I'm not a charity for greedy lease companies).
Just on the WRX, in case you are thinking about buying a Subaru, know that a company called Inchcape owns the rights to every Subaru dealership within 30Kms of Capital cities across Aust. All the dealerships are part of the same company. You cant play one off against each other for a better deal, they are all drawing from the same online pool of cars etc. When Inchcape bought the rights some of the former dealerships moved to locations 31Kms from the CBD. I know in Melbourne this equates to the Frankston and Lilydale dealerships. My experience is that you will get a much better deal from these guys than you will with the 'suburban monopoly' disguised as dealerships created by Inchcape. If that is too far away from where you live just ring them, get a better price and make a trip out to collect the car, still get it serviced at your local Inchcape dealer.
Check the insurances, often there are 4 or 5 policies bundled up under 'convenience'. Some are OK, in fact I often wondered about the value of the 'redundancy' insurance and even refused it for a couple of leases. Luckily I included it for my current car and when I was made redundant a year ago the insurance paid my lease payments for 6 months until I found a new job!! I'll never leave redundancy insurance off the list again.
Probably of most importance is to understand how a lease works. I once had a senior exec come to me and ask me about leases. He had bought a $200K+ Merc on a lease and driven it for 6 months. He had been headhunted by another employer and was moving on. He 'assumed' that he could just hand the car back and was a bit miffed when the lease folks laughed down the phone. He came and asked me if this was right. How somebody commits to something as expensive as that without understanding it I'll never know, perhaps he had so much $$ it didn't matter. Anyhoo when I told him he would either have to pay the lease out, sell the car and pay the lease out or 'novate' the car across to his new employer, he was quite angry. Obviously the excitement at getting the new wheels had helped him skip past all of these trivialities when signing up for the lease.
When you lease the car for 3 or 4 or 5 years you'll have a residual amount that needs to be payed at the end of the lease. Like a loan, at any time you can normally ring up and find out how much residual you still have owing. It changes each payment but most lease companies take their cut out of the payments in the first months meaning that, for many leases you can actually end up owing more than the car cost for the first 6 months etc. Many people (myself included) normally sell the car in the last 6 months of the lease and use the proceeds from the sale to payout the remainder of the lease. Any $$ left over you get to keep tax free. If there is a shortfall between the residual and what you sell it for you have to pay this money yourself.
As a result clever people buy car brands and models that hold their value. I used to assume that the overpriced German cars were just for yuppy wannabes that liked to pose. I found myself a few months ago running a spreadsheet across 5 or so hatchbacks that I was thinking about for my next lease car. When I factored in the depreciation rate to my formulas the BMW suddenly shot ahead of some of the cheaper cars (yes I know about the comparison between % depreciation and real $$ depreciation as a factor of original purchase price!).
The formulas for calculating what a lease residual should be are well known (limits set by the Tax Dept I think). If you buy smart up-front and buy a car that depreciates slower than what the tax department has estimated you can walk away with thousands at the end of the lease. I'll have a look for the link but one of the car research websites has details on depreciation per model. Suffice to say your poverty pack Falcadores and Camrys normally don't fare well. I reckon many/most people don't work this out until they are 3 years into their lease trying to sell their Falcon for $10K more than it is worth so they can pay off their lease residual. I know I had a few nervous months trying to sell a Renault once, watching the lease end date creep closer with no nibbles on my adverts that barely covered the residual payout figure. Sad thing is it was the best car I've ever owned, whereas some of the worst cars I've had have returned me the best lease outcomes.
Despite all of this, salary sacrifice is an excellent way to get a new car as long as it makes sense tax-wise. Luckily I earn enough to justify it but aside from the obvious $$ benefits I also find that my wife and kids are normally driving around in a modern, safe car. The car is always impeccably maintained through the lease and I get a cash bonus every 3 or so years when I sell. KRudd's keen-ness to get rid of the plan last year just highlights how good a deal it must be for car buyers.