Hi, I don't have the money to buy a car outright. But looking to upgrade car for family reasons.
Which type of finance is the best? Novated loan through salary sacrifice or car companies car loans usually low rates or loan through a home loan?
Cheers
The value of novated leasing depends on so many factors related to your income and finances that it is impossible to provide any advice but generally you will want to be in a higher tax bracket to make it better than consumer credit.
They cram all the extra costs into the lease so you end up paying through the nose for it. Double crunch the numbers before signing any lease BS IMO.
Yes, it only appears to be worth it if you are at the top tax bracket and even then only for electric vehicles with the FBT exemption
Taking out less finance/debt and getting a reliable older vehicle will save you more money than shopping around for the best loan on an expensive new vehicle.
As with all risks in life, driving risks can never be fully eliminated, only reduced, using technology and other methods.
I believe high level driving skills and a maintaining good spatial awareness are key to safe driving.
Often people trust technology too much, and can put themselves and others at more risk by always assuming technological safety features will overcome their bad driving practises. Spending more money won't always result in a better outcome.
But I suppose if someone knows they have poor driving skills, and is accident prone, a newer vehicle would be a better choice.
I believe high level driving skills and a maintaining good spatial awareness are key to safe driving.
They do play an important part, and until automation can deliver truly consistent driving, not subject to emotional and irrational decisions, impairment and distractions, we have a long way to go.
Modern safety features don’t just protect the occupants. Newer cars enhance the safety for pedestrians with pre collision braking and research and design into reducing injury, for example.
Some newer cars also provide vastly superior lighting at night with high beams that can dip around an oncoming vehicle, allowing the sides of the road to remain fully lit in high beam while the oncoming car isn’t being blasted with light.
There are a multitude of small advances with modern cars, which all add up, and yes it is all about managing risk, whether to one’s financial well being or physical well being.
there was a thread on ausfinance from a paramedic who said that most of the time, the people who were involved in crashes who drove older cars were more likely to be seriously hurt while the drivers in newer cars usually got out with little to no injury. Take that how you will…
@skidexa: It’s obvious to me - safety isn’t going backwards.
People are free to chose to invest in their bank account or invest in a better chance of survival for their family.
I wonder why a Logical comment gets downvoted over here?
Clearly it’s ozbargain and not ozlogic
Newer cars means, less stress, more comfortable and smoother driving and more safety features. All this adds up to the overall Quality of life.
I wonder why people go for older cars just to save some money and compromise on Quality of life.
Because they can't afford them?
If you need a loan - you can't afford it.
U renting ur home or mortgage? Or did you pay cash?
@2025: Given that most cars loans have terms around the 5 year mark, the mortgage is an unfair comparison.
In 2022 for Australia:
https://www.aihw.gov.au/reports/life-expectancy-deaths/death…
- land transport accidents were the most common cause of death among males aged 1–14 (12%)
- land transport accidents and accidental poisoning were either the 2nd or 3rd leading causes of death for males aged 15–44
And this is a bit of an older study
https://www.nrspp.org.au/resources/how-vehicle-age-and-model…
the model estimates that the driver of a vehicle that was 18+ years old at the time of the crash was 71 percent more likely to be fatally injured than the driver of a vehicle that was 3 years old or less. The model also produces an estimate for the driver of a vehicle 4 to 7 years old, being 10 percent more likely to be fatally injured than the driver of a vehicle that was 3 years old or newer; a driver of a vehicle 8 to 11 years old (19% more likely); a driver of a vehicle 12 to 14 years old (32% more likely); a driver of a vehicle 15 to 17 years old (50% more likely); and a driver of a vehicle 18 or older
(71% more likely). Each estimate represents a comparison to the baseline vehicle age category of 3 years old or newer.
I do everything I can to reduce the risk to me and my fam from the leading causes of death in Australia, and if that involves spending big on a new car rather than a trip to the pub every week, or heaven forbid paying interest on a loan, so be it.
We are lucky our airlines don’t share the same views as some people around here towards modern vehicles and safety…
I wonder why people go for older cars just to save some money and compromise on Quality of life
Because I'm not trying to impress anyone with the car I drive.
Quality of Life, Did you read and comprehend these 3 words?
Or
Is your life a constant shit show?
@SirLaughsAlot: My quality of life is fantastic. I want for nothing. A fancy shiny car wouldn't make me any happier.
do you have a mortgage?
perhaps.
The finance from the car dealer is always best. Especially when they throw in free floor mats. That is the best deal.
And a full tank of petrol
And discount paint protection.
Would love to know what the real price of that is
window tinting is the one which gets my $ every time….
Not sure if anyone actually took my comment seriously lol
was it serious
My mum always felt like she was getting a deal with the car mats. It is nice to have car mats made for your car tho.
How much does floor mats usually cost
Depends what brand. But typically, they're around $100-200.
Especially when they only charge a small snow protection fee up here in Queensland.
Buy a second hand car that you can afford.
None.
if it's an EV and you're on say more than $150k then go for a novated lease
most recent car I purchased …
$12,000 cash/upfront - rest I did through a loan.
used Plenti Loans.
Only downside - no APP - everything is done through website (guess they had to cut corners/costs somewhere.)
But they offered me the best rates I could get.
When I got a loan during Covid it was cheaper than the current mortgage rates. Glad I paid it off already though.
Worse than no app was no website or log in. For everything I had to call or email.
Only downside - no APP - everything is done through website
Honestly thats a dream. I refuse to deal with companies that require i install an app.
Banks hate this guy! He is the one the comes into their last open branch every day!
Not at all. I have no issues with websites, but apps are so often painful.
Until recently Boost had no website portal at all. I needed pdf invoices for my company. Using an app for things like that is tedious.
op's next post: "what second hand car should I get with $xxxxx budget?"
If you are Gen Y/Z then Bank of mum and dad is the usual way.
We usually call it BoP, Bank of Parents.
Nobody calls it that. Everyone calls it the bank of mum and dad
Heteronormative much?
Just sell what you have and try to buy something as close in price but with the necessary upgrades needed.
Back in my day mum, dad and the three kids crammed into a small sedan. If we went on holiday we took a trailer. Builds character! I still wonder how much we traumatised my youngest brother who was stuck in the middle of the back seat for hours on end.
brother who was stuck in the middle
seven kids under 11yo in the back seat and a bassinette with baby on the bench front seat in between mum and dad.
1958 Chev. kids in the back sat "one forward, one back" so they would fit.
4 years later. baby is now 4. hat is getting thrown around the back seat.
dad "whose hat is that?"
kids "baby's name"
dad "well put it on his head"
kids "he's not here"
they had left him at the park.
Dad to mum: "why do we always forget the baby?"
One time i drove my corolla from Dandenong to Frankston carrying 6 adults. 1 was in the boot, one sitting in a toddler seat. Surely you can make do with what you've got until you can afford another car.
I bet you could fit three babies and toddlers in a boot, easily.
I prefer them in someone else's boot to save on cleaning costs.
I like to call it the "childcare centre"
take the bus
In BrisVegas only $0.50 a ride
Car Finance? Literally your mileage may vary….
Yes, you need to crunch the numbers. Novatec Lease con for me is the penalty you need to pay if you move company before the lease ends. I prefer a car loan with an extra repayment feature, so if you have some extra money, you can pay faster, hence less interest to be paid. Also, personally, the car has to be less than 35% of gross annual income. Also, use a 20% down payment, no more than 4 years loan, and the repayment of no more than 10% of your gross monthly income.
Loan on a depreciating asset? Just don't do it. If you go with regular auto finance, you're charged through the nose for interest (which is font-loaded in car loans, so you can't even pay it off faster to save on costs). If you go with capitalising it into your mortgage, you end up paying a ton more interest over remaining life of the loan. In some cases it would cheaper to just rent a car ala goget and save up for a more affordable option. Of all of your listed options, a novated lease has the most potential, but even then it's highly dependent on your circumstances and would only work out if you buy an EV, which then opens another can of worms…
I bought a new car this year and chose to redraw my extra repayments from the home loan. I was parking extra funds in the mortgage while saving up for the car. No one offers a fee free car loan for 6% or less, so the decision to redraw from the home loan was simple.
Of course, I am building that buffer back up as quickly as I can. Just blowing out a mortgage and making minimum repayments would see me paying more than a shorter duration higher interest loan.
The best is probably through redraw on home loan and getting a second hand car.
Lowish rates and you don't get the depreciation of a new car.
Be careful, you may end up paying it off over 20 years instead of 5
Recently used IMB Bank for a new car loan up to four year old so can buy a lightly used vehicle. Rates in the low 6% which is better than most property loans and no penalty for early repayments, application fee $250. If you want Ozbargain cred like the helpful people here just buy a 2007 Camry with 250,000k for 6k.
Most PPOR loans start with a 5
Be weary that even a cheap car on finance can hit your cashflow pretty hard because you're paying it off over a short period of 2-5 years. You need to figure out what you can actually afford.
If money's tight then signing up to a lease/finance isn't going to make things any easier. Like others have said, you're better off selling your car and upsizing to something of similar vintage but bigger and not much more expensive.
E.g. if you're currently driving a 20 year old corolla worth 5k, then you might be best selling that and buying a 20 year old camry for not much more.
If you do insist on getting something newish e.g. for safety reasons (perfectly valid) and can afford the monthly expense of a new car. then the only time it makes sense to get a lease at the moment is for a EV/PHEV due to the FBT benefits.
But you have to crunch the numbers because the equivalent EV/PHEV versions of similar cars are often at a premium to the petrol versions and will have worse depreciation, and long term you may not save anything at all - even worse end up spending more.
E.g. a phev mazda cx-60 starts at around 60k, a mazda petrol cx-5 starts at around 40k, though the equivalent trim level of the cx-5 would probably be in the 50s. And after 8 years of ownership the cx-5 will probably have higher resale value.
If you want a PHEV/EV try looking at Novated Leasing, if ICE do outright used 2-3 year old car.
Personally if I went PHEV/EV route and had the money for it I would go Cupra Leon VZx or Formentor VZx they have 2% IR, if I didn't I would go BYD Sealion 6 or SEAL novated lease (price drops and cashbacks) but you might have different criteria or opinion based on test drives. Use this calculator made by @changyang1230 https://www.reddit.com/r/AusFinance/comments/1c5b9xx/ev_and_…
For used ICE I would go for i30N, prices have depreciated by ~30% now. I think an 8%+ loan is not worth it on brand new ICE so I wouldn't even think about it.
The advice I offer my friends is:
Buying outright > Novated lease (SS) > Not buying a car > Financing
Commence the barrage of negs but I don't care; I know this advice is good for 95% peeps out there
The rate is novated car loan is 10% is that right or consumer finance is cheaper through car finance companies
Novated lease on an EV will save you relative to paying cash if you get one eligible for the FBT waiver.
Peoples choice I've found are generally the cheapest. Novated leases could work or for EVs only but it's a scam that just funnels tax payer money into dodgy leasing companies, and they're all crooks that will screw you over one way or the other.
Don't listen to people who say "just buy an older car". There are so many lemons even that people consider "bullet proof" (Toyota V6 oil smudging for example) and people die. Get something with modern features and construction could well save ya life or prevent serious injury. Yeah life is risk but for 10k a year or so, I'll take the safest option for the most dangerous activity we participate in on an almost daily basis. Even though I've never had an accident in my 20 years of driving
If you are cost conscious and need finance to buy a car, probably buy a safe 2nd hand car is a better option.
Yeah just get second hand car like Honda CRV is the best family option out there…
Toyota Camry sedan
Financing a car in a personal capacity is unlikely to be good value. Pay cash for a car you can afford. The only relatively "good deal", if you're definitely keen on an EV, is the option to fully salary sacrifice the lease payments subject to certain criteria - and the benefit is highly dependent on your tax bracket. But rather pay cash for a car you can afford.
If your looking at a hybrid/PHEV/EV, quite a few of them second hand would comply with some lending providers as green secured loans. Many offer around 5.5-6% for fixed rate for a PHEV via a green secured loan so I would look at that category if your interested in a lower rate loan (less choice though). I looked at novated lease for a new EV for the FBT exemption but was scared off by the potential loss in super (was around $10k - this is only if your employer pays super based on post NL income). Didn't get around to looking at depreciation of NL EV after that. @daniesaurs linked the exact calculator I used as well to work out in my situation that a second hand yet modern PHEV was better. I worked out that the finance paid via NL would be close to 11.5% (all the quotes claim how much you save, so you have to work essentially backwards to get the numbers). Ended up looking around the 2018-2022MY for second hand PHEV vehicles and wasn't disappointed in the selection.
Another thing to consider with a NL or a car loan is that if you have HECS debt. For NL, you need to consider if enough is being taken out of your income for HECS (end of year tax return might not be a return as my understanding is HECS/Medicare Levy is calculated on reportable FBT amount, so while the vehicle is FBT exempt, the calculation method for HECS isn't). For loans (I haven't levelled up in Ozbargain and purchased a house), just a reminder that if you have HECS debt will potentially effect your borrowing capacity for any form of credit, potentially impacting your borrowing capacity for a loan.
The bit about the HECS/Medicare Levy info is linked in a post here when I was looking at it:
[Reddit] (https://www.reddit.com/r/AusFinance/comments/12ih5jk/salary_…)
I couldn't trust novated leasing companies.
They are extremely opaque as to what you are saving and just come up with some random figure, "you'll save X over 3 years" or something.
There is no real justification to back up their figures and you have to get blood out of a stone in terms of what is being paid each month and what is saved.
All these people saying a new car will protect you better etc- yes that's likely true when you consider a 2024 or 2022 vs a 2005 or 2010 model vehicle. But how much better will a 2024 car be to a 2018 vehicle that has already had (theoretically) most of its depreciation run its course?
I think a good second hand car is going to be better than finance or novated leasing.
But how much better will a 2024 car be to a 2018 vehicle that has already had (theoretically) most of its depreciation run its course?
Luckily that question has been answered already - 10% less likely
https://www.ozbargain.com.au/comment/15715493/redir
The model also produces an estimate for the driver of a vehicle 4 to 7 years old, being 10 percent more likely to be fatally injured than the driver of a vehicle that was 3 years old or newer;
Time to get rid of the 2001 corolla!
I think a good second hand car is going to be better than finance or novated leasing.
FYI : Some novated lease providers allow leasing used cars.
Novated leases can work out to be the best if you do it right, even for non-EVs. However, as mentioned by some others, it all depends on your circumstances (e.g., your salary, the NL provider and their terms, how much you drive, the type of car, how and where you buy, and what you do at the end of the lease) but more importantly how much effort you are willing to put (e.g., whether you negotiate the car yourself, say no to all the extras your NL provider pushes on you including their high priced insurance and protection products, maintain your car as you would if you bought the car with your own cash, and buy back the car at the end of the lease to sell it privately).
But if you call your NL provider and tell them I want a particular make and model and let them do everything and sign all the paper work they give you blindly then I can guarantee you’ll be financially worse off than using any other means to buy the car.
If you decide to go down this path make sure you ask for a detailed breakdown of all the costs involved, including the finance figures, residual value at the end of the term, pre and post tax contributions, individual expense allowances etc.. Then do your own research and calculations to see the benefit, DO NOT rely on any marketing material or comparisons the NL provider offers you, because those figures are inflated to make the lease more attractive.
I’ve leased a few non-EVs this way, and each time it worked out to be cheaper than buying the cars outright and paying for expenses post-tax out of pocket. Novated leases are a lot more flexible than most people here are making them out to be; you can buy used cars, source your own new car, and negotiate pretty much everything, including the interest rates. I have done all of those with my cars, However, your mileage may vary depending on the lease provider.
Crunch the numbers and find out what works for you. There's pros and cons to each approach, no one size fits all.