Hi Team, I'm sussing out the world of novated leasing as the recent FBT saving seems to make this no longer a stupid decision.
Can anyone help me understand the pros and cons of this of someone in private education earning $120k a year?
I've seen interest rates of 7.3% thrown around which isn't bad compared to the cash I'd be taking out of my offset to purchase this car outright.
Thank you!
yeah - but its a write-off, Jerry
I like to say don't NL anything you wouldn't buy with cash, the added savings are just icing on the cake.
I've test driven the Sea Lion 6 it's actually quite a nice car, but like any new vehicle expect massive depreciation as soon as you drive home from dealer
….and watch the price of the new version to fall off a cliff as China floods AU with their surpus production which they cannot sell in Europe or North America. The price would need to be very low before you get your cheque book out.
how are they planning on dumping left hand drive EVs in aust?
Yes, EVs will depreciate like no tomorrow because the technology is new and it will only get better and cheaper. However, it has nothing to do with not being able to sell the LH drive car stock in China lol. People are happy to buy them but only if they make financial sense. At the moment, you can't recoup your savings in petrol vs an EV unless you drive about 45,000km/year. Once that drops down to 10,000km/year to break even, most people will switch over. Toyota plans to release solid state EVs in 2028 with 1200km of range, once those cars become affordable, the petrol car will go the way of the horse and cart.
@supersabroso: 'Everyone' is planning solid state batteries and 1200km of range. virtually noone needs 1200km of range for a vehicle you can charge while you do something else. Not many people drive for more than 4 or 5 hours without a half hour stop for food and stretch the legs.
Solid atate batteires will liekly be better but current battery tech is working pretty well amd lasting long enough.
@Euphemistic: Yep good lucky relying on Toyota's promisses they are pairing up byd to try to keep up with technology. People forget that byd is primarily a battery maker has the software and knowledge to deal with it. But I guess people prefer to live in the illusion that is 2010 and they make the best cars in the world and will revolutionised the industry.
Had a novated lease estimate drawn up recently and they snuck in a 17.5% interest rate. No transparency at all so I would avoid personally.
what lease company was this?
Maxxia
robbers and pirates
I am sure there are better sharks swimming around in the pond than Maxxia
A novated lease is definitely the way to go since this is a PHEV but you need to do it correctly. Try and nominate your own finance so you don't get slugged with Maxiaa's 14% interest rate. A one year lease gets you the most savings/year, after that, it drops more and more until you end up losing money if you go with their rip off finance. When I pointed out that other companies are offering it cheaper, they dropped their rate to 11% right away. Still way more than SWSCU's 4.99% which is lower than your mortgage rate and splits it over 3 years, much better than paying outright from your offset account. Don't pay in cash!
Do you have a hecs debt?
Yes ive got a hecs debt
Then definitely research how salary sacrifice arrangements may alter your hecs repayments.
It’s demonstrated on my spreadsheet.
The FBT exemption incentivises employers to offer novated EV leases. I don't think it's really a saving. This is just one of many ways to finance a motor vehicle purchase. Whether it's a cost effective one comes down to your own assessment.
Some are gonna tell you its brilliant. So much savings. Fixed cost. Others will tell you the only way to do to save money is to do half the work yourself, your own insurance and manage the changeover at end of lease etc. Others will say it lock you in to a contract thatll make life difficult if you need to change circumstances. Othwrs will say theres a reason NL companies make money so if you really carefully do the sums it breaks even with owner purchase.
Theres a hundred threads here on leasing pros and cons. Go read them and come back with a more specific question.
this comes up every week it feels like.
There's a spreadsheet someone made that you can easily find that allows you to work this out.
I think the benefits really come in when you're in the higher tax brackets, not at 120, but YMMV.
you may find it ends up being a zero sum game.
as the recent FBT saving seems to make this no longer a stupid decision.
you'd be stupid in thinking that it's a slam dunk. you may end up in a worse off position.
There's a spreadsheet someone made that you can easily find that allows you to work this out.
I certainly wouldn't say 'easily' because it's a very comprehensive spreadsheet, and it relies on an actual quote from a Novated Lease provider. But here it is:
https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu
this comes up every week it feels like.
It does, and the reality is OP; whether it's worth it for you is going to depend on more than just how much you earn, although it's true that those in higher tax brackets will benefit the most, due to payments coming out of your pre-tax pay.
You're not going to get answers to your questions on Ozb. Try to be getting some quotes from NL providers and plug them into the calculator above, alongside all your other financials.
you'd be stupid in thinking that it's a slam dunk. you may end up in a worse off position.
If it was a slam dunk it'd be a lot easier to work out. The lease companies deliberately obfuscate the quotes so you cant compare easily. Plus theyre in it to make money not to provide you with a cheap car. Its on them to MAXIMISE their profit, nothing more.
Still, it works for some because they can spread the payments out and buy new without a big payment up front.
TBH you're better off buying an older used car.
Look, as someone who's just gone through this recently…
If it was a slam dunk it'd be a lot easier to work out. The lease companies deliberately obfuscate the quotes so you cant compare easily.
Yes and no; Novated Leases are complicated before a Novated Lease provider even gets involved. You have to work out the benefit against implications to tax payable, residual/balloon payment post-tax, inclusion of running expenses, etc. It's a headache to get your head around simply because of how it's structured; it's a three-way agreement between employee, employer and lease company (financier).
I dealt with two novated lease companies (Fingo & Novated Lease Australia). I had the benefit of picking one, instead of having to go with whatever one my employer was already partnered with and found them both to be quite transparent. I also played their quotes off each other and managed to negotiate down the financing component quite a bit.
Plus theyre in it to make money not to provide you with a cheap car. Its on them to MAXIMISE their profit, nothing more.
Yes, but you've just described every for-profit business in existence.
Still, it works for some because they can spread the payments out and buy new without a big payment up front.
Yes, but it's not only that. For me, the salary sacrificing and FBT exemption means that on a 2-year term, I save $10k on a $60k car going down the Novated Lease route, compared to paying cash upfront - and that doesn't include the opportunity cost savings (ie. implications to offset) for spreading the payments out. If I went a 5-year term, my savings would be even higher, but therein lies another risk; if I want to change jobs, it complicates things, so I decided to hedge my bets on a 2-year term.
TBH you're better off buying an older used car.
Yes, probably true.
i was looking into this also and someone here posted a link to this which was useful
https://www.reddit.com/r/AusFinance/comments/1c5b9xx/ev_and_…
The reddit calculator author here.
Outside working out the figures for the savings, I would encourage people to hold a more holistic view about whether they are an appropriate candidate. EV novated lease is a great deal and gives you great discount even over paying cash (I was 46,000 dollars better than cash!), and are more favourable the more criteria you meet below:
• high tax bracket (the higher you are, the more saving you get)
• stable job (moving job or losing job are at best troublesome, at worst huge financial loss)
• have a home loan offset account (the idea is that avoiding paying cash from day 0 saves you plenty of home loan interest with the current interest rate)
• not needing to borrow money (for own house, investment property etc) during the lease term (having NL greatly decreases your borrowing capacity - I once heard that getting a 70k car on NL would reduce your borrowing capacity by 200k or more)
• considered the impact on government subsidies (many people would receive less childcare subsidy etc due to the way reportable fringe benefit is used to assess your eligibility and amount receivable)
• considered the potential impact of super guarantee (a small percentage of payroll very naughtily use the post-NL salary to calculate your super contribution - if they do, then you may lose some 1000+ per year in loss in super contribution by your employer)
• considered your exit strategy at the end of the lease i.e. are you prepared and have the money to pay out the residual. If you don't, you might be stuck with perpetually leasing a car - which may no longer be such a good deal if the government removes the FBT exemption. If you pay out the car then you will own the car and continue to enjoy the low running cost of EV (assuming that it doesn't otherwise give you too much costly trouble - and it looks like most EV will do okay)
My spreadsheet on novated lease has been well received and does a comprehensive simulation of all the financial impacts - I am quite confident that it considers more aspects than an average accountant's back-of-envelope calculations. I still recommend speaking to an experienced accountant / financial advisor, however, do try out my calculator and perhaps even bring it to them as a starting point.
https://www.reddit.com/r/AusFinance/comments/1c5b9xx/ev_and_…
and there we have it. /end thread
thanks for all your work on this
Thanks for your service.
This ought to be pinned to the top of every thread asking whether a novated lease is worth it.
Agreed.
Consider the holistic viewof taking out an NL for an EV. Can you charge at home? If you can how much will it cost to so do. Solar Cells? Upgrade to 3 phase?
You might want to consider if you even want a BYD Sealion 6 as you have to plug it in all the time (PHEVs are pointless if you don't keep that mini battery charged up all the time). You'll never re-coup the cost savings over a GWM Haval H6 Ultra hybrid which is basically the same car with 1,100km of range, 500kg lighter, $10k cheaper and you never need to plug it in. Go with SWSCU for 3 years and you'll pay 4.99% interest which is lower than your mortgage offset account.
It's only worth it if you are happy to pay a premium for a longer EV mode but you're not willing for fork out another $10k to get the Sealion 7 that is coming out in a few months time.
You really want to lease one of the most quickly depreciating vehicles? (Chinese EV)