Novated Lease EV Vs Used Car - Advice Needed

LSicaaa on 18/12/2024 - 02:03
Last edited 18/12/2024 - 08:53 by 1 other user

Hi, I'm considering upgrading my car and would like some advice.

I work for the government as a permanent part time and my approximate annual income is $90K (pre-tax). I have a mortgage to pay monthly and all my savings is kept in the offset account like everyone else. I still drive my first car (Toyota Corolla 2003) that has done about 250,000km and from the last time I had it serviced, it requires a fair few works here and there including the entire windscreen replacement from it getting stone-chipped (the windscreen replacement is an extra cover that I didn't include in my comprehensive car insurance).

I know it'd be cheaper to fix bits and pieces on my current car and continue driving it rather than getting a new/used car, but I think it is time for an upgrade and I've been weighing 2 options that are;

1) Buying a used car outwrite with cash from the offset account,
2) Taking out a NL for Tesla

I have recently come across the "$3000 novated lease incentive on Tesla model 3 and Y promotion" and got quotes from a couple of NL companies. The repayment amount seems doable unless there's any hidden cost they haven't mentioned, but this way, I think I'll at least be able to keep my current savings in the offset while getting less take-home pay instead.

Although I have done some research and figured that buying a car outwrite with cash is the best option than taking out a NL or financing with dealers, I'm still unsure whether it's worth forking out the savings as the reduced amount of cash in the offset will affect my home loan repayment and I'll end up paying more interest than I used to.

Any recommendation/advice would be appreciated!

Poll Options expired

  • 19
    Buy a used car with savings from the offset
  • 9
    Taking out a NL for Tesla
Automotive Novated Lease

Comments

  • stirlo on 18/12/2024 - 05:45
    -1

    Insurance on Tesla is super expensive. Have you looked at non Tesla EVs?

    • Euphemistic on 18/12/2024 - 07:04

      Definitely consider some alternatives to tesla.

    • mboy on 18/12/2024 - 07:11
      +4

      super expensive

      No, it’s not. As someone who’s just recently insured a Tesla, I can assure you it’s not “super expensive”. This is one of those bs blanket statements that people keep parroting without context.

      Some insurers (such as Budget Direct, Youii) have a high risk profile for EV’s in general and will quote ridiculous annual premiums (sometimes $5k+).

      Most other insurers (in my case, I also got quotes from Allianz, RACV, AAMI, Zurich) will quote you similarly to any other car with the same agreed value.

      On a new Tesla Model 3, my annual premium for comprehensive insurance with Allianz is ~$1800, agreed value $60k and $1100 excess. I’m not going to say that’s “cheap”, but it’s certainly not “super expensive”.

    • jay889344 on 18/12/2024 - 07:34

      Insurance on my brand new Tesla model Y is $212 per month under my novated lease with Vero insurance. I pay nearly $150 for the other, non EV car each month, so not that big a difference when you consider the other savings on offer (petrol & servicing/repairs etc). I should also note that the Vero insurance for my Tesla vs the non EV car includes roadside assistance, towing for up to 100km, windshield/glass repair and loan car for up to 3 weeks a year, so if you factor all that in, pretty good

    • Fredfloresjr on 18/12/2024 - 09:15

      Hahaha Brodie where have you been lately. It is not expensive to tell you.

      I pay less now compared to what I pay with my Subary Forester 20'.

    • theHMASfriendship on 18/12/2024 - 11:25
      -1

      Will Leon Tesla be mad at them if they get an EV from a different manufacturer?

  • Euphemistic on 18/12/2024 - 07:10

    A windscreen for a camry wont be too expensive. What else is wrong? Of course, it is long in the tooth and if you have funds why not upgrade.

    IMO if you are paying a mortgage, then buy the cheapest car your ego can afford, but at this time i reckon youd be mad to buy anything other than a dirt cheap petrol car or an EV. Of course your use case might mean that an EV doesnt suit because you cant charge at home or do monthly 400km trips, but an EV is the sensible option if buying new or near new.

    Look at alternative EVs. There is an increasing number of models cheaper than a Tesla that will do the job just as well as a camry.

  • oscargamer on 18/12/2024 - 08:36
    +4

    Novate an MG4

    • klaw81 on 18/12/2024 - 10:48

      Totally agree.

      If a Corolla is doing the job, why are you moving to a car that's so much bigger and considerably more expensive than a comparably sized car like the MG4?

      You could also consider buying a lightly used MG4 outright, rather than a novated lease on a new one - I'm not sure how many are available, but you may be able to find a good deal. You should still get the benefits of having a long factory warranty, while getting some upfront savings.

      Actually, can't you get a novated lease on used cars up to 18 months old? Maybe you can get the best of both worlds

  • kk5487 on 18/12/2024 - 09:42

    Novated leases are best when you're in the highest tax bracket. Get a quote and plug the numbers in this calculator to see the breakdown:

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

  • Vish36 on 18/12/2024 - 09:52
    +3

    For those saying insurance is too expensive and all the negative comments usually gets floated, they either 1st have never owned an EV or lazy enough to negotiate or find the best deals, EVs have a use case for which no ICE cars is a match.

    I have owned Tesla Model Y, drove 30,000km and have not paid a single cent in service/charging etc. My insurance is $1200.

    I have owned Audi A3/ Merc GLC to BMWx4. By far Model Y is the best value car. In 3 years time all my ICE cars have depreciated 40-50%. My 2022 Model Y, I sold for $52,000k after buying it for 60k. Bought a 2025 Model Y now for 52k with novated lease 3k incentive/ Tesla referral $1400 incentive + no GST on purchase.

  • May4th on 18/12/2024 - 10:52
    +2

    where's option 3 - novated lease an used EV? not really worthwhile when there's so many incentives on a new vehicle however. you are really only better off using cash if you don't pay any income tax

    • changyang1230 on 18/12/2024 - 13:20

      I agree - an EV post July 2022 which can be had under novated lease is the best of both worlds - the car has already done a big part of the initial steep depreciation, and you still get to enjoy the saving.

  • JIMB0 on 18/12/2024 - 11:26

    Keep driving the corolla until the house is paid off and you have saved enough cash for a nice second hand car.

    • changyang1230 on 18/12/2024 - 13:21

      Depending on how much OP is truly spending on the 20-year old car, at some points the fuel + expensive repairs COULD actually be more expensive than having a lower maintenance newer / new-ish car, especially when combined with incentives e.g. FBT-exempt novated lease.

      • JIMB0 on 18/12/2024 - 15:50

        A 2003 Corolla is an extremely reliable car. 250,000km is nothing. The biggest expense is keeping the oil topped up to the 1zz engine.

        • changyang1230 on 18/12/2024 - 16:33

          The timing belt, spark plug, transmission etc, are they reasonably cheap and infrequent?

          • JIMB0 on 18/12/2024 - 17:33

            @changyang1230: 1ZZ has a chain and the spark plugs are super easy to change. Auto and manual transmissions are very reliable. We have a manual in the family that has 320,000km with only routine servicing. Since the warranty finished I've done most of the servicing, these are one of the easiest cars to work on, very simple with plenty of room.

            Like most cars it will eventually need new front control arm bushes and a radiator. These are both cheap and easy to change. Other than that not much goes wrong, these are peak Toyota.

  • wannagrababargain on 18/12/2024 - 12:16

    Financially speaking, a new $55K+ car on $90k is a stretch - with our without NL, financing, incentives etc.

    As others suggested, if you must get something new, NL a near-new EV (post 1 July 2022) or a cheap Chinese model is optimal. You'll get all the advantages of leasing and EVs and the FBT exemption without too much of a cashflow hit. I think the MG4 has a 10 year battery warranty? You seem like someone who keeps their cars a long time so a minimum 10 year proposition would suit and make the overall depreciation easier to swallow.

  • lgacb08 on 18/12/2024 - 12:39

    Using reduced savings in the offset account line is a lame excuse because unless without novated lease you will put more savings onto the account every time.

    • changyang1230 on 18/12/2024 - 13:23

      My spreadsheet on novated lease models this effect precisely - it considers the (say) 50,000 dollars that you didn't have to spend on day 1 if you use novated lease, but it also considers the fortnight-by-fortnight ongoing cash flow of cash option vs novated lease option on the offset account.

  • changyang1230 on 18/12/2024 - 13:18
    +1

    Use my spreadsheet to crunch all the numbers.

    https://www.reddit.com/r/AusFinance/s/VHJ25VpNKu

    It will tell you the exact figures of used car via cash, EV via novated lease, and even compare it to keeping old car.

    Overall I agree with others that at your income you probably should consider a cheaper EV e.g. BYD, MG4 etc. These are all reasonable cars and you will have much lower outlay compared to even the entry level Tesla.

    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.

  • Hugh G Rection on 18/12/2024 - 15:18

    get a tesla, i love mine and it's super cool. i can't drive any other car now, it is just packed with so many features that is a standard for me now.

  • dasher86 on 20/12/2024 - 20:45
    +1

    What about a second hand EV on novated lease?

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