New car for work purpose, car loan or to pay off outright?

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  chumlee on 26/05/2017 - 06:56

  I have a chattel mortgage for my car which like you i use for work and receive a car allowance. It works for me as i can spread the cost over a few years and work to pay down my mortgage quickly rather than direct my money into a car upfront.

  You can only claim the interest on portion of car use for work eg if the car is used 85% for work then you claim 85% of the interest as well as 85% of running costs etc.

  If i was in your shoes i would finance the car and use a bigger deposit for the house as you are in a position where the interest on the car loan can be tax deductible as per above

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    Lucyinthesky on 26/05/2017 - 08:16

    Hi Chumlee,

    Thank you for your comment, that was what I was contemplating on doing until I was told I may also be able to claim interest if I paired the car off outright. Not too sure how it all works though…

    • 

      chumlee on 26/05/2017 - 08:18

      You can claim depreciation which is 25% of value each year. This can be done with or without finance on the vehicle

    • 

      Lucyinthesky on 26/05/2017 - 08:20

      Paid*

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  altomic on 26/05/2017 - 07:18

  I have received some conflicting advice from my accountant/financial advisor/lender

  So you've come to ozbargain…..

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    Lucyinthesky on 26/05/2017 - 08:17

    +2

    Hi altomic,

    Absolutely! I have a lot of respect for the Ozbargain community, afterall we all share the common goal of being money savvy.

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  TakaHas on 26/05/2017 - 07:29

  Wouldn't novated lease from the start be a better option? Maybe not too late to ask work to do the lease.

  A smaller deposit with no other personal loans?
  A larger deposit with a car loan of 25K?

  I think having a personal loan will be worst off financially as you are paying higher interest compared to a home loan. On the other hand, would you have sufficient funds for a deposit if you use the $25k?

  As it will divulge into your financial position, I would suggest speak with a financial adviser to see what's best for you.

  • 

    Lucyinthesky on 26/05/2017 - 08:19

    Thank you TakaHas, novated lease isn't offered as an option with work. You raised a few really good points. I will get a fourth advice.

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  apple2016 on 26/05/2017 - 07:33

  +2

  the car loan vs buying outright if used for work purpose

  You can only claim tax on interest which is about 30% (depending on you income). You can save 100% interest if you don't take a loan. It's a different story if you want the money to buy a house.

  • 

    Lucyinthesky on 26/05/2017 - 08:19

    Hi apple2016,
    That's a great way of putting it into perspective.
    Thank you

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  [Deactivated] on 26/05/2017 - 08:34

  work car, and youre paying for it?
  ask work to pay!!!!!!!!!!!!!!!!!!!!

  • 

    chumlee on 26/05/2017 - 08:40

    A lot of companies have moved away from supplying company cars and instead give a car allowance and you run your own car.

    • 

      plmko on 26/05/2017 - 14:46

      +1

      Huge fringe tax problems if businesses give cars to employees to use with personal usage mixed in. It will never happen in Australia anymore because of that.

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    captobvious on 26/05/2017 - 18:00

    BYOC like BYOD. Saves a company thousands

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  Troposa on 27/05/2017 - 19:56

  I've been on a care allowance for over 10 years and here is what I think.
  Many people get hung up on saving tax rather than saving money. As one accountant said "A loss is a loss even if it's tax deductible".
  Therefore I pay for the car outright and take the depreciation tax deduction. As I have a home loan I claim the interest that I could have saved if the value of the car was in offset.

  If you do the log book method hopefully your work/private balance is a beneficial as possible during the 12 weeks you keep the record.

  My last car was 10 years old and completely depreciated after expenses I paid tax on $9k and put the rest in my pocket and I followed all the rules.