Do I Upgrade The Car Now or Later? Used for Work/Private

berger on 05/04/2015 - 09:33

Hi guys,

My wife currently has a 3 year old Toyota RAV4, very low km, current value is approx 20k, payout figure is 18k we are looking at a Jeep Cherokee for around 37k

now we claim tax benefits with the current Rav, and would continue to do so with the Jeep, we claim 20% in depreciation and work/private use is around 80:20 so we get quite a bit back on this at tax time. The private use is low because I have my own company car too. The monthly repayments won't change much and that's no concern to us either.

I'm looking for the pros and cons to this and the following thoughts I've had are below

In 2 more years, the Rav is paid out in full and we have a car, which is worth around 13-15k, free up $600/month
We pay around $600/month which we get a percentage back in tax, which would stop with the Rav at 5 years old
Get the jeep now, and get rid of Rav at current value, and get the tax benefits of a higher value car with similar repayments
if it wasn't for work, we would just keep the car.

I'm looking for people's opinions in this, and what you would think is the best option is

Thanks!

Automotive

Comments

  • t_c on 05/04/2015 - 12:15

    ….

  • toristo on 05/04/2015 - 12:19
    +19

    If the tax benefits disappeared today, would you still be happy driving the Rav 4?

    I'd be considering what else you could do with the $600/month (plus whatever you save from presumably higher running costs on the Jeep) and asking whether that $7200+ could be put to better use elsewhere.

    I was in a similar situation and went to upgrade my car when my accountant was kind enough to smack me across the head and say "stop trying to keep up with everyone else". He was right. I wanted to upgrade because my car wasn't cool. Amazingly, it's still not cool, but then again, a new car bought 5 years ago probably wouldn't be any cooler either, but this way, I've saved tens of thousands and still have the same old Mazda 323 that costs me nothing to run. Sure, I get no tax benefits any more, but for what they were, I'm still ahead.

    If you need a bigger 4WD (growing family and you live in the country where a 4WD is required) go for it. If you live in the city, don't be a douchebag and think about why you need a 4WD. They are impractical, expensive and do little more than make you feel smug for 6 months until the new car buzz wears off.

    • Mad Max on 05/04/2015 - 12:23

      Love your assessment. Completely agree.

    • berger on 06/04/2015 - 19:36

      Thanks for the feedback, like you said, I needed a 'smack across the head. It's nice to have new things, and the wife is getting tired of the Rav, there was a list of safety options on the jeep that made it appealing too.

      It's not a 4wd drive, but need the wagon space for work, the wife

      If we were not claiming tax, we would be happy with the Rav.

      I only asked the question as it gets a little confusing from my end, saves me getting the same response from an accountant.

      • toristo on 08/04/2015 - 18:29

        This might sound stupid, but why not spend $200 and get the Rav4 detailed?
        You might find that the "refresh" kills the need for a new vehicle for a while.

        Cheap things can revive the new - if it's not tinted, tint the windows. If the stereo sound is lousy, upgrade your speakers. If the seats are a bit ordinary, maybe some good quality seat covers and new floor mats.

        The beauty of an old car that you've held for a while is you know it's in good shape mechanically and you've looked after it. Maybe a bit of TLC will make it an easier pill to swallow for her.

        • berger on 08/04/2015 - 19:05

          Thanks for the suggestions, I have the car detailed every few months, it's still brand new condition and we clock up less than 8000km/year. It's extremely well cared for.

          I'm not really tired of the car, but needed a clearer mind on whether it's better to keep updating the car, or stick to it for a bit longer,

          I guess by the 5th year it's paid off, it should be worth a good percentage of its new price, then can always trade against a new car and have less repayments if we choose to go down that path.

  • dylanando on 05/04/2015 - 12:26
    +6

    great choice going with the jeep … rolls eyes

  • Shadowsfury on 05/04/2015 - 16:31
    +2

    Don't go buy a new car just for higher tax benefits - you're only getting back a fraction of what you put in.

    Similarly, its amazing how many people don't realise negative gearing still means you're making an ongoing loss and only want to get into property for the tax benefits…

  • Davo1111 on 06/04/2015 - 03:10
    +6

    Jeep? seriously?

    The last good model they made was in WWII

    It's going to be a money pit.

  • Peace Maker on 06/04/2015 - 08:41

    If you select a suitable car for your needs that is a reputable brand (Jeep definitely not in this category) with cheap consumables and follow regular maintenance you will get great value for money and safety from it.

    There are no new advancements or tech that makes sense doing an upgrade now, other than for 'keeping up with the Jones's'.

  • ATTS on 06/04/2015 - 14:05

    Just wondering where do you go to learn more about "tax benefits" and stuff

  • [Deactivated] on 19/04/2016 - 19:12

    Last 'Checkout' series a new Jeep buyer dismantled his lemon IIRC - rather shocking ;-)

    At least Toyota have a good rep - & you appear happy with yours. No lemon there :-)

    Cheers!

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