Looking at Novated Leasing a Cupra Born - Any "Gotchas" or Questions I Should Ask before Committing?

trankillity on 29/01/2024 - 13:30

Went for a test drive in the Born on the weekend and liked it a lot. Have only ever really owned small, cheap ICEs (Camry, Corolla, Accent) and this would be my first new car, first novated lease, and first EV.

Going for the Born because I need the extra range as I often do longer day trips (300+km) and my parents live 350km away. Another reason is the size; I live in a townhouse so larger EVs don't fit (originally wanted a BYD Seal). Will most likely just use a granny charger as I have a small (5kW) solar array and work from home - so don't really want it drawing from the grid, just the roof. Leasing seems like a good idea because I earn a little north of $100k and the FBT exclusion + ex-GST + reduced taxable income seems like a good idea, but can be swayed if it's a bad deal.

As this is my first time getting either, I'm seeking feedback on any potential "gotchas" or issues I'm likely to experience with either an EV or a Novated Lease.

Automotive Cupra Novated Lease

Comments

  • boomramada on 29/01/2024 - 13:37
    -6

    There is a story for you https://www.news.com.au/finance/money/costs/womans-80000-sal…

    • uncompressed on 29/01/2024 - 13:41
      +14

      Sure, novated leases might not be for everyone but that article is such bullshit. The signed off quote should show exactly how much the lease will affect her take home pay so I don't understand why she's going on about hidden costs. The salary deduction and post tax payment is fixed and shouldn't deviate unless you go above the budgeted costs.

    • MS Paint on 29/01/2024 - 13:42
      +15

      Ahhhh, the old "I did sweet FA research before signing a contract and it's not my fault" chestnut. FFS.

      • boomramada on 29/01/2024 - 13:45
        +3

        We should offer her the OZB gold membership, she would fit in here nicely ;)

      • DarkOz on 30/01/2024 - 09:03

        You are exactly right. I pretty much saved $10k (on a $30K car) for the wife (who doesn't know anything about cars except to pay for it and drive it) on our last Novated Leasing car. $2K on the car price. $0.5K on car insurance. About $5K on 2 other loan/repayment insurances. $2.5K on rust and leather protections. I tried to get the 10% interest lowered down to 8% but they won't budge on that.

    • Drakesy on 29/01/2024 - 14:15
      +6

      I do like how back in the day you were responsible for your decisions.

      Now you can seemingly make irresponsible decisions willy nilly and blame everyone but yourself.

      Admittedly getting into a $49k car on a $60k salary is outright stupid.

      • Gunnar on 30/01/2024 - 16:18

        I bought a $44k car on a $46k salary. I was also in my early 29’s, single, living with my parents, and had saved a bit before hand.

        Seems completely daft now!

    • coffeeinmyveins on 29/01/2024 - 14:52
      +3

      A story of an idiot who got a car on a lease that's the same as her annual salary and doesn't understand novated leasing? yep.

    • freefall101 on 29/01/2024 - 15:41
      +2

      A closer examination of Ms Van De Heuvel’s lease, seen by news.com.au, showed that while the fortnightly repayments on the vehicle were initially set out at $430 before GST, that figure increased to $639 before GST when extras like insurances, fees, fuel, and ‘incidentals’ were included.

      I should be surprised that she didn't recognise her car would involve things like fuel or insurance, but considering the number of "I crashed my uninsured car" and "I've been driving on the same tyres since 1962, is this safe?" posts on ozbargain I'm not longer surprised by much.

      Anyway, nice ad for GetMyRefund, I wonder how much they paid that woman to make it clear to the universe she's an idiot or if she did that for free as well.

      • deme on 30/01/2024 - 09:22
        +1

        You realise those things are included in novated leases?

        • freefall101 on 30/01/2024 - 11:30

          Yes, especially since I have one. The lease agreement sets out the fortnightly payments for the vehicle itself and explains those additional costs. That she read it and didn't make it past the specific vehicle repayment parts to those "extras" means she didn't even read the contract properly nor understood that vehicle repayments meant just the vehicle.

    • brendanm on 29/01/2024 - 18:37

      Stupid people win stupid prizes, more news at 7.

      • Gunnar on 30/01/2024 - 18:07

        On 7 too

  • sumyungguy on 29/01/2024 - 13:47
    +3

    One of the few remaining unregulated finance products which means providers can offer attractive packages against highly imaginative scenarios. Just need to be able to do run your own numbers and not rely on the lessor. You appear to be significantly increasing the amount you normally allocate to transportation but I get that's a personal lifestyle choice.

    • trankillity on 29/01/2024 - 15:26
      +3

      My salary has more than doubled since the last time I bought a car - figure I should probably treat myself :P

      • deme on 30/01/2024 - 09:23

        lol

  • Drakesy on 29/01/2024 - 13:51
    +3

    Ozbargain - Search - Novated Lease.

    Just look
    Here,
    Here &
    Here

    You'll quickly realised Novated leases aren't actually all the cracked up to be.
    1. Don't take out a loan on a car.
    2. Try to avoid buying a new car - the first 3 years is where the majority of the depreciation occurs.
    3. Novated leases only really work for EV's atm due to the tax dodges
    4. Novated leases will hide their real interest rates, it's not until you scrutinise them that you realise they're charging 10-12%.

    • trankillity on 29/01/2024 - 15:27
      +1

      The hidden rates thing is definitely a trap. I have received a lease quote already and the finance cost + balloon payment didn't work out to actual cost, so that's obviously where they hide it.

      • Gunnar on 30/01/2024 - 18:11
        +1

        Back when I looked at novated leases - last one was 10 years ago - Every one ended with me being worse off than buying the car off my own bat

        It’s individualized yes (and my quote from before was pre tax breaks for EV and PHEV) but also at the end of the day you need to do your own sums - pull out the details on the quote (like you are) and the compare the final figure with what it would be for you buying and maintain the car from your own pocket.

        I found that a lot of the maintenance factors in a novated lease were higher than I’d actually spend

  • seannami on 29/01/2024 - 14:00
    +8

    This is the rundown for my NVL experience for a ZSEV: https://www.ozbargain.com.au/node/760061

    In terms of owning an EV, the main things you need to remember are that this is not an ICE car with alternative fuel- you need to plan a bit differently when you long drive, it will quite happily charge for hours or 10 minutes, so don't assume you always need to get it to 'full' (or 80%)- don't think about it as "if I need to fill up", just plug her in when you get a chance, for example. If you WFH and have solar, the you can pretty much just leave her plugged. Also look into companies that have super off peak overnight prices as a granny will take a while if you need a higher capacity quickly (and EV gives you that eligibility to run your dishwasher/washing machine/dryer etc at cheaper night rates in winter too! If you own, I would also consider an AC wallbox.

    Range anxiety disappears after about 1 round of charging (give or take the first time you do a long drive). You start to get a feel for how much charge your regular trips take and you can work from there. Generally a good idea to plan based on battery percentage rather than estimate range- that can wobble, the percentage seems to be a bit more stable. My commute to work and back is 28% of my tiny battery, but according to range estimates it's all over the place. So if I see I have 45% battery (like this morning), I know I can get to work, then need to plug in for the night, no stress.

    I think the thing that got me at first was that EVs are responsive as heck- skidded slightly coming out of the dealer when i picked mine up cause it just moved, while previous car (Prius) needed a good 3 seconds to realise you'd started to accelerate. The regen might take some getting used to, but once you settle into it it's great. Don't read those EV newbie articles (especially road trip EV/ICE comparisons, they tend to discount the whole "completely different vehicle" issue.

    Get plugshare and always have a target and a backup charger on the planned route, just in case. Also get an RFID card for Evie, Chargefox and maybe BP, they make life a lot easier.

    Double check how work travel claims work with your particular employer's NVL policy. I can get the same as ICE cars since my NVL doesn't include charging cost, but it may not be available to you.

    Otherwise, prepare to laugh at petrol stations? ;). That's all I have off the top of my head.

    • Kongzi on 29/01/2024 - 14:24
      +2

      Sounds like too much work

      • seannami on 29/01/2024 - 15:41
        +1

        The NVL or the EV? Cause honestly the EV is less work than the ICE and the NVL is a lot initially then set and forget

    • trankillity on 29/01/2024 - 15:46
      +3

      Thanks very much for your in-depth experience and tips with both!

  • dasher86 on 29/01/2024 - 15:25
    +3

    The real gotcha for your scenario is
    ~ $100k income
    $60k + car
    ~10% interest on NL

    you pay GST on residual value.

    what your the purpose of getting an EV?

    ensure to check out electricity rates and insurance costs.
    Also rebates for QLD if applicable / available

    • trankillity on 29/01/2024 - 15:44
      +1

      Some fantastic little bullet points here thank you! Didn't realise the balloon payment would be inc. Definitely best to push for the full 5 years then for the smallest balloon.

      I actually have enough liquid assets right now to buy one outright, but assumed the reduction in taxable income and offset account would make it more worthwhile.

      The purpose is that I'm fairly environmentally conscious and have solar, so wanted to combine the two for zero emission transport.

      Don't believe you can get rebates on novated leases as it's not a personal purchase (unless you're saying see if the rebates makes up for the lease difference?).

      • dasher86 on 29/01/2024 - 15:46

        another gotcha is if you get terminated / want to look for a new job and your new employer doesn't want to take on the NL you need to pay out the residual + future value of lease rental

        re: rebate i think $6k is upfront so a great benefit you are only looking at a shorter NL but i don't know the hoops around QLD.

      • Rally Dave on 30/01/2024 - 08:34

        Although set by the ATO, some companies vary slightly within their limits of the size of the balloon payment. Always tell them you want the smallest balloon payment possible and compare different lease quotes (get them to remove their estimated running costs etc to inflate how good it is), so you just compare finance packages (total payments plus total balloon payout—gst included) so you can compare apples with apples.

  • JSki on 29/01/2024 - 15:54
    +1

    Honestly there is a few tricks (or at least my view) on leasing a car, and there is really only a few occasions where it makes the most sense. Although the FBT exemption on EVs does really help the case. But see below my tricks for when a novated lease works:
    - Your on a high tax bracket. Usually 37% bracket at a minimum.
    - Aim for a 24 month lease only, which means you have right to buy residual at end of period for 56% of value (determined by ATO)
    - Select a car that depreciates very little to none in those first 2 years. I'd argue the Born could be alright, but more of a risk as its a new car.

    The payment on a 24 month lease is obviously higher than 60 months, but if you can handle comfortably that lease payment (which is 100% pre-tax), then at end of lease buy out residual (trick is you need to pay GST on that too), then resell the car on market privately (which has had minimal depreciation) and you can pocket the difference in cash tax free. Then rinse and repeat a new 24 month lease.

    Honestly I would overall argue buying a new car is never a great financial choice, but if you meet the above it makes most sense in my eyes if you feel comfortable with it. I'd argue if you can only afford a 60 month lease don't bother.

  • AngusD on 29/01/2024 - 16:08

    I'm looking at buying a new car, just got a quote for a novated lease last week. To be honest, it didn't really look like it would give much (any?) benefit. Ran it by my financial adviser / accountant and they agreed, too. Said that since I have the cash available to buy the car outright, I might as well do that rather than lease. It really came down to the fact that I don't use the car for business purposes. If I did then there would be additional tax benefits, but without that it doesn't really help to lease.

    The quote for the lease outlined a bunch of savings in terms of income tax savings from the salary sacrifice part, GST savings from the running costs over the term of the lease and savings off the purchase price of the car, which I assume means how much they are able to negotiate it below the RRP. That last one was about 5% of the value of the car - I'd be reasonably confident of being able to haggle that myself, so it's not really a saving from the lease. As far as the other tax savings went, it was significant, but gets cancelled out almost exactly by the residual payment at the end of the lease, so the total cost after 5 years was roughly the same whether I lease or buy.

    I guess if you're the kind of person who likes to turn their car over every 3 - 5 years (or whatever your lease period is) then it may be worth it to just lease and give the car back at the end and go straight into a new leased car.

    • trankillity on 29/01/2024 - 16:20

      Thanks for your thoughts! I'm in a similar position where I can pretty much buy outright too, and good to know that the advice was to avoid the NVL too. Was thinking the tax benefits + having everything covered would outweigh the cost of financing otherwise, but definitely starting to lean more towards buying outright/on a short 2 year loan.

      • AngusD on 29/01/2024 - 18:19

        I would run it by your own accountant (if you have one) as circumstances may differ from mine. There certainly wasn't any real disadvantage to the lease, either. Part of me is tempted to do it just so I can avoid the unpleasantness of having to deal with car salesmen, haggling over price etc :P

        But I like owning my own stuff, so unless there's a significant benefit to the lease then I'd prefer to buy it.

    • skid on 29/01/2024 - 16:57

      This was pretty much what I found out too, but it was for an ICE. Were your calculations for an EV? How does the FBT factor stack in terms of dollars or percentages?

      • AngusD on 29/01/2024 - 18:16

        No, I'm looking at ICE. I'm actively trying to avoid an EV - I want to get in now for one more good petrol powered car before they're gone forever.

      • trankillity on 30/01/2024 - 07:47
        +1

        I think many people are confused about how FBT works. FBT is an additional tax paid on stuff that is provided via employment (i.e. Novated Leases). You don't actually save anything over standard commercial prices with FBT. You just don't have to pay more taxes on a NL if you get an EV over an ICE.

  • Nugs on 29/01/2024 - 17:34

    Any "Gotchas"
    Its a $65k Golf?
    .

    • skillet on 31/01/2024 - 08:50

      It's still a few years before the ev Golf gets released so I assume you mean the ICE golf. It has a direct injected engine which means carbon buildup. If it doesn't get maintained properly that means lost of performance. Although they are under the same VW umbrella, the Born is a BEV so it will not have such issue or any other issues that is related to ICE.

      • Nugs on 31/01/2024 - 15:47
        +1

        "they are under the same VW umbrella"
        Yep, still effectively a $65k Golf
        .

  • freefall101 on 29/01/2024 - 18:15
    +1

    Will most likely just use a granny charger as I have a small (5kW) solar array and work from home - so don't really want it drawing from the grid, just the roof

    I put in a 7kw charger despite having a 5kw solar and there's a setting to pull whatever excess is coming off the roof. So usually on a sunny but not too hot day it's sucking down 3-5kw instead of the 1.3kw with a granny charger, makes a big difference.

    Also means I can just run it flat out overnight to fully charge it for the next morning if needed. I've done that a couple of times because I always forget to charge it, after 9pm I pay less than 20c/kwh anyway so it's usually less than $10 drawing it all off the grid.

    • seannami on 29/01/2024 - 22:10
      +1

      Definitely look into Powershop and similar places- if you own an EV you become eligible for super off peak overnight (11c in Vic atm). I set my car on the 7kw wall box to start at midnight and keep going til it's done. I can go from about 7% to 100% in 5 hours (4 at super off peak rates) including a balance for about $4. I have one of the smaller ranged cars, so ymmv, but when you also get various appliances on timers it's worth a look (I also don't have solar yet).

  • AShoeAffair on 30/01/2024 - 08:15
    +1

    I'll share my experience having been in your exact position - collected my Born just before Christmas and currently on a 3 year Novated Lease.
    Some background: I'm not a "buy brand new car" person (the depreciation seems stupid) and would never have done brand new if not for the novated lease pre-tax benefits , GST savings, FBT savings (and I also got in just before they reinstated stamp duty being in NSW, not sure if that applies in your state). I've always owned Golfs (old ones which I don't care about, run arounds) but my car was starting to cost too much to maintain so was in the market for a "newer" car (thinking a $30-40k second hand european to buy outright) and given I'm not a enviro crusader the EV thing was not a priority.

    Novated lease just made financial sense. I had the exact same concerns as you , what's the catch? But spoke to numerous people at work who all have Teslas and said the novated lease on EV are a no-brainer compared with novated lease on ICE. I wil acknowledge I'm on a high tax bracket, and the maths worked out that after my 3 year lease and paying out the residual (incl GST) I'd have paid exactly the same amount as I would've on Day 1 had I paid cash to the dealer (in my case, with all the options it was $67k which includes the premium colour, seat package, and the 5 year service package). EVen if tax rates/situation changes and there's a few thousand extra to be paid, I figured it was worth the benefit of also being able to say after 3 years "hey this EV thing doesn't work for me, this Cupra born was a mistake i shouldv'e bought an ICE but i can walk away and you keep the car". See my further comment about this in "my concerns" section below.

    My concerns:
    - Everyone buys Teslas but not Cupras. Teslas are the "Tried and tested option". I hated the tesla on the test drive. plus similar to you, I need a small car (i'm a city driver) and not a giant sedan. Tesla financially made more sense at the time as they had significant discounts on their demo 2023 models (right before the new 2024 model, which I hate, came out).
    - Cupra isn't that well known in Australia. As a VW brand I have no qualms about its heritage, but what's its resale-ability in the future if Cupra doesn't take off with the Australian consumer? This is still to be seen but we weighed up whether it would be a good competitive advantage compared with Teslas which will soon flood the second hand market. Our hope is that at least for now second hand EVs seem to retain value and we'll assess at the end of the lease whether the car is worth more than the residual.
    - I looked into a 2nd hand BOrn - the discounts were measly ($2000) and so it seemed stupid to consider when I could get a brand new car/battery for immaterial financial difference.
    - Cupras get mixed reviews. Don't stress about it. Work out what matters to you - the things that annoy people aren't things I use (e.g. lack of apple car play etc). I love my Born and how it drives (it feels so much more luxurious and "real car" feel than a Tesla which was important to me. I appreciate it doesn't drive like a typical EV but buy a Tesla if that's what you want).
    - In all honesty, I still balk at the price I paid for essentially a EV golf. It's absurd that costs $65k+ but hey, Australia. But, I didn't think it was worth waiting for the VW version to drop in Aus (slated for August 2024 or later, and also with mixed reviews, plus lower range, but not actually that much cheaper). I figured by that stage I'd almost be one year down on my novated lease and be ahead of the "second hand market flood"

    My tips
    - See if your workplace lets you pick your novated lease company. And ask what current interest rate is used in the estimated calcs. If you do the maths you can backsolve it anyway. There is HUGE variability in the interest rates and fees of some of the Novated lease companies, many of which fleece you. My workplace uses a reasonable one (fortunately) but my partner's workplace provider sounded more expensive
    - My research said it financially makes more sense where you can save maximum GST (without exceeding thresholds for luxury car tax, FBT exemption etc) so package everything with every add on in the lease (whereas normally I would've just paid them myself in cash). I should've even packaged the $1000 graphene coating but by that stage I was too lazy to restart the paperwork over $100 gst saving.
    - Internet research seems to say to get your own insurance, don't use the novated lease company as they add fees. In any case i like picking my insurer and haggling on price so this part was no brainer for me.

    tl;dr - Love the Born so far (it has only been 6 weeks). Range is AMAZING (noting I did not add the extra performance tyres to maintain range). You rarely see Cupras around, let alone Borns so it's like a secret little club. Every week we get people stop and admire our car, ask us questions. The first payment was exactly as calculated so no surprises there. Will have to wait until tax time to see any other impacts.

    Sorry if that was too long but happy to answer any qustions!

    • trankillity on 31/01/2024 - 12:54

      Thanks for the thorough comment friend!

      It's good to know that I wasn't the only one that found that the final cost would be the same if I bought outright as if I went on a lease. It was a little eye opening to me for that to be the case. The point about being able to give the car back if it's not working out is definitely a lucrative idea - especially with the rate EVs are improving.

      I don't really have any of your specific concerns. I've never really been a "resell" person. I tend to buy cars to drive until they die, but again - knowing there's the option at the end of lease to return it to the lease provider is comforting. The reason there's very little second hand discount is because they're all just ex-demo Borns when I looked with generally under 1000km on the ODO.

      Re: your tips:
      - Unfortunately my workplace doesn't let us choose the provider. I will definitely be back-calculating the interest rate for the finance (I work in analytics, so I already have many spreadsheets weighing my options).
      - Saving max GST makes sense. What "extras" are you claiming as part of the budget here? I had a hard time coming up with additional costs because they're so self-sufficient.
      - Will definitely look into the insurance, because I'm sure that the lease company will just budget the generic maximum.

      • AShoeAffair on 01/02/2024 - 20:08

        In terms of extras that i considered:
        - we chose the interior package and premium paint, add in the performance package wheels and this whole lot would be another $5k+
        - Cupra/VW also later offered window tinting options and graphene coating. I appreciate a lot of car experts say you can get better quality coating with external specialists rather than going with the dealer but I wasn't that fussed and happy for the convenience.
        - cupra 3 or 5 year service package
        - I think some novated lease companies offer tyre packages?

        A few extra comments re: range - I don't drive very far each time but I've found the car quite battery efficient which exceeded my expectations. We only just completed our first charge after 5 weeks of owning the car (I don't have home charging options so I'm a unique EV owner) and even with aircon usage high its equated to about 450km = 85% of the battery.

  • Rally Dave on 30/01/2024 - 08:26

    One point I do not think has been raised is to make sure that if the lease is paid out early (leave your job, write the car off in an accident, etc), the payout figure is calculated on money owing plus interest at the time of payout. There are dodgy leases around that will make you pay the sum of all remaining payments, hence interest is calculated for the total time that should have been remaining. Salary Sacrificing an EV makes great sense. It's 50-50 with ICE and very dependent on your situation but definitely benefits in an EV.

  • JIMB0 on 30/01/2024 - 08:41
    +2

    Isn't Cupra just another Volkswagen brand? I'd avoid it just for that reason. Whilst it doesn't have an engine or DSG transmission to blow up I'm sure they've worked out an alternative.

  • 343 on 30/01/2024 - 08:56
    +1

    I did the calculations and it works out really well.
    I got a Tesla Model Y in July 2023 on a one year lease as that has the max tax benefit. I will get a new lease in July this year.
    Not my first ev, I got the Ioniq5 in Jun 2022 and sold it after a year. It was great on performance but was missing all the lazy options that Tesla has. Plus I had a bad experience with the dealership and service.
    I charge the Tesla at home 12am to 6am using the granny charger , gives around 15kw - 23% top up in 6 hours. I am on the AGL EV plan, 8cents per KWH 12am to 6am. Other times it is around 38cents. In simple terms, I get 100km for $1.10

  • changyang1230 on 31/01/2024 - 17:41
    +3

    All the calculations you ever need for EV novated lease.

    https://docs.google.com/spreadsheets/d/1CtpBXmuhRW3HrBjqJqnP…

    Don’t go with any blanket statements that people like to throw out eg “it’s huge tax saving” or “it’s never worth it”.

    Whether it works depends on your pay, your current car, the deal you get from the NL company. Do the calculations and decide for yourself, don’t just follow the blanket statements.

    Personally my deal is “a free upgrade from 25,000 dollar worth of 4-year-old Mazda 6 to a 81,400 dollar worth of EV”.

    Your deal is likely different. Find out yourself. Don’t believe in blanket statements.

    • trankillity on 01/02/2024 - 09:17

      What a great little spreadsheet! I was just starting to put something together to almost this exact effect, so thank you very much for sharing!

    • trankillity on 01/02/2024 - 15:23
      +2

      Just wanted to report back that this tool is absolutely incredible. It should be the "/thread" of every single NVL question that gets asked. It's so flexible and shows all the possible scenarios you could want, with quite detailed breakdowns of the costs/savings involved. Thank you very much for pointing me to this tool, and if you are the one who built it - bloody great job!

      • changyang1230 on 01/02/2024 - 17:48
        +1

        Yes it’s my baby :) thanks for the glowing review.

        • trankillity on 01/02/2024 - 17:50

          You got a "Buy me a Beer/Coffee" link? You definitely deserve it!

          • changyang1230 on 01/02/2024 - 18:28

            @trankillity: Haha! I only have the Tesla referral link which I do get some constant stream of thankfully.

            What sort of other “buy me coffee” options would be practical? 🤔

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