Novated Leasing on Low Salary with Not for Profit

LRosieGlows on 03/10/2018 - 18:26

Hi everyone,

I've never had any kind of loan, car or proper job before and suddenly I find myself working for The Salvation Army and there are all these perks that sound amazing but in reality it is all way over my head and I don't want to get myself into something really stupid. I wondered if ya'll could help.

Looking at novated leasing. Wanting to buy a used van, probs something a bit long in the tooth (though I realise can only be 8 years old max at end of lease) to convert into camper for weekend trips out of the city.

Annual salary: $54,000
Vehicle: Ford transit, Sprinter, Renault Master etc maybe a 2011 model
Lease length: 1 year I was thinking so can go for older vehicle but maybe thats unwise?
Cost: Looking to spend 9-15k on the van

I cannot afford to buy outright yet, though I will be able to in a few months which is an option or else am wondering if there is someway I can salary pack a good loan?

I don't quite understand this term of 'balloon' that you pay for at end of lease if you want to keep vehicle? Difference in what you haven't yet paid to own vehicle?

Also, might be a while before I actually use the van much as will need to convert it first, don't know if that makes any difference to anything.

I really appreciate any help, I have tried reading about it and speaking with Smartleasing about it but its all quite a lot to get my head around.

Thanks again :)

Automotive

Comments

  • TheBilly on 03/10/2018 - 18:56
    +3

    I cannot afford to buy outright yet, though I will be able to in a few months which is an option or else am wondering if there is someway I can salary pack a good loan?

    I would just wait and go outright. Its all very complex to explain and you will not really have any big financial benefit.

  • enigma48 on 03/10/2018 - 19:04
    +1

    Novated leasing has two big benefits - no upfront payment and reduced tax paid. In your case you're likely paying a low amount of tax, so you won't get much benefit here. There are a lot of drawbacks: it's mega complicated to not get screwed over (they all have different 'styles' of quotes, hidden inclusions/exclusions, etc).

    The balloon is basically the 'left over' part of the car you haven't paid for. If you have a 1 year lease, you've had to pay 35% of it (the novated leasing company gets a loan for you and charges you interest on that) - so on a $30,000 car you've covered about $10,000 of it through the lease and you've got $20,000 left (the 'balloon').

    "A lot to get my head around" is an understatement. "Converting" it is probably an issue too - I imagine there are some rules around "you haven't paid for 100% of it yet and we're technically obliged to accept it back at the end of the year, so don't mess it up".

    Save your money and buy it outright, or find a low interest/promot rate balance transfer/purchase credit card and buy it on that. (Don't let them add CC fees, tell them you'll think about it… oh wow, you'll wave them now? How kind.)

  • Quantumcat on 03/10/2018 - 19:06
    +4

    Use the benefit of working for a charitable organisation to salary package your home loan. I don't think it is worthwhile doing for a used car (main benefit is paying the running costs pre-tax but you said you won't be using it much)

  • RosieGlows on 03/10/2018 - 20:05

    Thank you all so much! So appreciate all your advice, so helpful!

    Credit card is a great idea and thanks for the hot tip re fees! Definitely going to look into that.

    Not sure about a home loan? I just rent a tiny place…

    Thanks again everyone, would love to hear if anyone has any opinions contrary to these??

    • Gandalf the Thrifty on 04/10/2018 - 08:52

      You may be able to salary sacrifice part of a credit card use, which may be more benefit if don't have home loan.

  • tsunamisurfer on 03/10/2018 - 20:06

    Not worth in in OP's tax bracket.

  • Randxyz123 on 03/10/2018 - 20:34

    Agree with buy it with cash.

    With the lease, you a basically borrowing the van. You can't change it or make it a camper.

    You probably want to have $10-15K for the van and the conversion could be anywhere from $2-4K. Should be a fun project though.

  • Oz8argain on 04/10/2018 - 09:03

    though I will be able to in a few months

    Why get into debt when you can just be a little more patient? I've been waiting for over 2 years now to get my own car, and probably won't happen for another 2 more years.

  • Bargain80 on 05/10/2018 - 15:10

    The only other benefit, apart from reducing tax which you won't get, is the lower balloon value compared the market value of the car.
    This depends on how long the lease is and the model of the car.
    Last time I used the novated lease, I sold the car to the dealer for 15K and paid 10K balloon amount to the leasing company so it's 5K profit.
    I also got free GST on fuel purchase.

    But as other mentioned, it's lot of work and paper work, especially at the beginning and at the end. It's also a lot of work if you change your employer and made redundant while still on lease.

  • RosieGlows on 09/10/2018 - 14:45

    Thanks all you're amazing!

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