Novated Lease, Hire Purchase or Lease

[Nada]

Hi All

Just bought a Kx-R 2wd 7 seater Silver Pearl Dec 09 with Tow bar, roof racks and mats from Sydney.

My husband is going to get a monthly car allowance and we are not sure which finance option to go with. Our accountant was really hopeless!!! When I tried to speak with him he basically said pick a car, buy it however which way you want and then we will work out the tax for you. Arrggghhh! very frustrating when you want someone to give a knowledgeable opinion.

My husband is going to get $1k per month car allowance, petrol and etag is on top of this. We have intentions of keeping the car for my use after the lease/hire purchase period. In saying that no residual at the end would be ideal. However, does a novated lease work out financially better with a residual, seeing that it is a pretax calcualation. I am so confused. Hoping someone in Toyota land can help me.

many thanks

Nada

PS I love the club, think its great and we are so excited about picking up our first ever brand new car. Klugers are such nice cars

[Kesawi]

Hi All

Just bought a Kx-R 2wd 7 seater Silver Pearl Dec 09 with Tow bar, roof racks and mats from Sydney.

My husband is going to get a monthly car allowance and we are not sure which finance option to go with. Our accountant was really hopeless!!! When I tried to speak with him he basically said pick a car, buy it however which way you want and then we will work out the tax for you. Arrggghhh! very frustrating when you want someone to give a knowledgeable opinion.

My husband is going to get $1k per month car allowance, petrol and etag is on top of this. We have intentions of keeping the car for my use after the lease/hire purchase period. In saying that no residual at the end would be ideal. However, does a novated lease work out financially better with a residual, seeing that it is a pretax calcualation. I am so confused. Hoping someone in Toyota land can help me.

many thanks

Nada

PS I love the club, think its great and we are so excited about picking up our first ever brand new car. Klugers are such nice cars

Welcome to the club Nada.

Unfortunately there is no generic answer as it depends on your exact situation such as what tax bracket you are in, how much of the vehicle use is business (remember you have to be able to justify it), how long you will keep the car for, what rate you can get for a loan, what the lease payments and residual will be. A buy vs lease analysis can be undertaken in excel using discounted cash flows (DCF), but unless you are familiar with doing DCF calculations it is easy to make an error, and it can become confusing when dealing with pre and post tax issues (I've completed a Masters of Applied Finance and it still takes me a while to get my head around an analysis).

There is plenty of information available on the web if you do a search for "lease vs buy car" which will discuss the advanatages of each finance method. In theory a lease can provide a lower cost under the following conditions:

• Where the lessor is able to tax deduct the costs of the vehicle at a higher rate than the leasee.
  
• The lessor can obtain a better price for the purchase of the vehicle than the leasee due to the fact they buy 1000s of vehicles each year.
  
• The lessor can obtain a better finance rate than the leasee, again due to the volume of capital they borrow.
  

I'd find another accountant who can provide better advice.

Sorry I can't be any more specific.

[Kluger Jedi]

Hi Guys,

I'm not sure what the best option is, but what are the best and most competive rates you have found?

E.g. I found a very competitive rate via Alphera Financial Services (i believe they are a subsidiary of BMW Fin Services)...

What are the cheapest rates others have found?

Are Toyota competitive with their rates? we are about to buy a Grande 2WD....

[Kesawi]

A good place to start is to go to Canstar Cannex web site which lists rates for vehicle loans from most lenders (http://www.canstar.com.au/interest-rate-co...loan-rates.html)

I don't know of a similar site which compares lease rates.

I found a really good 5 year fixed interest rate when I purchased the vehicle and the dealer reduced their rate from their original offer by 0.5% but couldn't match it. Always haggle over the finance rate as some institutions have flexibility in what they can offer.

[jordy]

if any one needs finance, i am a finance manager at a brisbane toyota dealership, pm me if you would like a quotation.

[shankdian]

Simply, a novated lease is an agreement between you, your employer and a lease provider. In the agreement, your employer agrees to take on the responsibility to make the lease payments on your behalf, with money you salary sacrifice to them.

Novated Lease

[Nidecker]

Simply, a novated lease is an agreement between you, your employer and a lease provider. In the agreement, your employer agrees to take on the responsibility to make the lease payments on your behalf, with money you salary sacrifice to them.

Novated Lease

This AND the fact that some novated lease companies get screaming good deals with Toyota :) of course you probably pay for this in the the fees they charge!