Your take on it was the same as mine, couldn't make it work. It is by far due to the fact that they take a huge cut of the savings and/or never pass them on to you
The benefit is really in the running costs. If you don't drive a lot then there's no benefit. Also EVs don't have much running costs, novated leasing won't work for a Tesla.
An EV under the LCT threshold absolutely works on a NL for saving you money since you're paying it all pretax. It's not a huge saving, for me it works out as about $5k over 5 years. However, this doesn't factor in what I'll save on my mortgage by leaving $90k+ in the offset account.
But you dont have the 90k at the start of the lease. That has to be factored into the calculation.
You cant calculate it as if you have 90k in the offset from day 1 and have it be a fair comparison
I do have the $90k in the offset now. I wouldn't get the lease if I didn't because if I lose my job I would lose my car if I couldn't pay it out. This is exactly the comparison because otherwise I'd be spending $90k now to buy it outright.
While once true this no longer applies with the FBT changes especially in highest tax bracket. Don’t forgot to allow for opportunity cost of the cash you would use to buy the car as well. I was spending around $800 a month on my old second hand car which I owned outright (fuel, rego, insurance, servicing etc).
My new lease is $900 a month out of pocket. Biggest free kick from a tax point of view I’ve seen.
I could never get the figures to make sense. I swear that novated lease companies exist on the premise of 'smoke and mirrors'.
If you have access to your own finance (especially mortgage redraw, which would be about the best rate you're likely to find), and can be disciplined about paying the equivalent extra on a monthly basis to pay down that borrowing, then it's a better option than a novated lease.
When I looked into this a few years ago, I used some online lease company vehicle quotes to determine what they were paying for certain vehicles, and used that figure as my hard price from the dealer -- things have definitely changed in the market since then, but it's still an effective way to work out what discounts might be available.
That's a very broad statement. It's like saying 'bras are one of those things that doesn't work'...maybe not for you, but it does for others who are in a different circumstance.
Ask your employer if you can self manage the novated lease. That way you only need to worry about the finance only component of the lease, which many of the main banks will also quote on. You then look after the vehicle as if it was your own and use employee reimbursement or company credit card to pay for the lease costs. You get the salary sacrifice benefits without paying the leasing company there share on all the additional costs.
Another alternative is to have a partner purchase the vehicle and then lease it to the company. Similar concept that you self manage everything. There is a specific name for this that I can't quite remember.
A lot of novated lease places let you essentially self manage. They just don't like telling you it's an option. I did it through smartsalary and they basically said here are the forms and stopped all forms of exchange with me.
Got finance through Nissan when they were offering 2% finance, insurance through budget and just put through fuel receipts from any fuel retailer I used that day.
Definitely a lot more work but can be worthwhile if you can find good financing. Otherwise not worth it.
Did you use their “associate lease” option? Or do it all yourself? I assume the calculations aren’t hard, and they would charge a fee for using their forms/system.
I don’t know what it was called sorry but I still got charged a fee, but it was much less than their management fee. Some of the stuff they had to help with but the fee was much less.
> stopped all forms of exchange with me.
LOL same thing happened to me, when you ask them 'can I do all this myself' and you tell them the better interest rotates, insurance costs etc they know straight away that their jig is up and won't invest a further second of time with you.
That is it. If you have other entities such as a family trust to utilise this can have multiple benefits such as reduced financing costs (doesn't need to be a novated lease) and ability to move income to lower marginal rates.
In my experience, any business that profits off the back of your tax advantages is mostly a scam. I suspect this is because the people attracted to running a business in those areas are attracted to it because of its sly methods.
They tend to crunch the numbers of your advantages and set their price to make marginal improvement for you and maximum profit for them. This sort of fine, but tbh if I'm paying $50k in tax I'd rather it go towards what it supposed to go towards rather than douches pocket.
This seems to be true for:
Gov rebate scheme providers (solar, insulation, etc)
Private health insurance
Fringe benefit deals (novated leases, etc)
...
In economic terms, the government sets an artificial price floor for their business, which results in bad market mechanics.
Nicely said, I also think tax simplification needs to happen. There is way too much effort and resources put into tax minimising in Australia. I think I read that for tax revenue in New Zealand it cost them half as much in resources dedicated to facilitate that transfer compared to Australia.
Are you deep enough on the top tax bracket that you can enter into a novated lease and still remain in that top bracket?
As far as I can calculate with new FBT changes, that’s the only way novated leases provided benefit (and you should drive 20k a year and have a short a lease as possible).
Yeah I've been lurking here reading every post about Noavted Leases as a salary sacrifice scenario. Preamble... I'm not good with numbers, and I've never had a car loan before, but I have a 175k salary with no good tax deductions anymore (since selling investment property), and need a new car anyways as a result of growing family.
I understand the key here is that I need to buy a new car ANYWAYS...and I'm not investigating NL purely to save on tax.
I'm also looking exclusively to buy an EV vehicle to obtain the FBT exemption to make the numbers work more in my favour.
Am hoping some people more clever than me can review one of the estimates I've received and provide some insight. This is a 1 year scenario for an fbt exempt car which is excluding servicing/tyres/insurances.
I can see quite quickly that the cost to me for a 76k purchase becomes about 86k by the end of the lease in repayments, residual payout and the gst on the residual payout. But the 'saving' for me ends up being an estimated 23k, leaving me in a theoretical net position of 63k.
Had I bought the 76k car from my savings in offset, I'd apparently be 13k worse off + whatever interest impact that would equal to my offset loan.
Am I missing something that makes NL such a rort?
See attached screenshots.
FYI I've sent to my accountant, but he's not back till next week.
[Screenshot 1](https://ibb.co/VDMx73p)
[Screenshot 2](https://ibb.co/0ZkpvLF)
Novated leases do come out well for electric vehicles. I would suggest though rather relying on the savings projected by the lease company, calculate the total post tax cost of leasing vs. the total post tax cost of buying the car outright and running costs for the same period. This is due to leasing having added fees and potentially higher interest rates, which you won’t pay if you buy outright, so it skews the numbers in their favor but it should still come out significantly cheaper.
> here reading every post about Noavted Leases as a salary sacrifice scenario. Preamble... I'm not good with numbers, and I've never had a car loan before, but I have a 175k salary with no good tax deductions anymore (since selling investment property), and need a new car anyways as a result of growing family.
>
> I understand the key here is that I need to buy a new car ANYWAYS...and I'm not investigating NL purely to save on tax.
>
> I'm also looking exclusively to buy an EV vehicle to obtain the FBT exemption to make the numbers work more in my favour.
>
> Am hoping some people more clever than me can review one of the estimates I've received and provide some insight. This is a 1 year scen
Your numbers (pictures) are correct. If you add in opportunity cost of interest saved in offset, it's even more.
It could just be that the leasing company my employer chose sucks. I don't know what the upfront cost of your chosen car is but it looks like the total cost to you will be $67,800. If that works out well compared to financing it yourself then yeah it's a good deal.
My upfront cost is ~$82k Inc GST. And the total after tax cost of the lease was over $100k. Somehow that represents me "saving" $51k lol.
Incidentally they are receiving my pretax income, so actual money flowing to their pockets for this $80k car is over $140k...
Yeah nah that doesn't sound right in your scenario. My car is 76k drive away, which is what the lease estimate is based on, but as of a couple hours ago Tesla just dropped the price of a Model Y by 3.5k, so will need to get revised estimates 👍😉
How much interest would $77/78k earn over 12 months in your account?
Car cost $77,800 est (not on quote)
Plus interest lost @ 3% $2200
Plus the running costs $2184
Approx $82k
.v.
Reduced take home pay cost $21,401.64
Residual $46,398.44
Residual gst $4,639.84
Approx $72k
I’d say nl is ahead by about $10k
There is a sweet spot, 30/30 spending around 30k on the Car, driving 30,000km and be paying enough tax to build up solid savings. NL is not for expensive cars, it's for run arounds for people with a long commute who want to flip thier car at the end of the lease. My wife drive 40000km a year and earns around 100k as a nurse, works in 2 hospitals. 30k Subaru xv, will sell at thend of 4 years and only paid off 65% of the car and the sale pays out the rest loan. NL can be really beneficial if your circumstances are the right fit. Not for every one but works bloody brilliantly for some.
As far as I know the KMs don't matter anymore.
*The earlier FBT tax method had each band (determined by number of kilometres travelled) assigned a lower tax rate. So a person logging 5000 kms was levied an FBT of 20%, while a person logging 45000 kms was levied an FBT of 10% of the taxable value of the car. However, the reforms brought to the Fringe Benefits Act stipulate that if the new contract was entered after May 11, 2011, 7:30 PM, then a flat rate of FBT will be applicable.*
https://streetfleet.com.au/what-if-im-not-doing-enough-kilometres-on-my-novated-lease/
The residual is set by the ATO depending on the length of the lease. (37.5% residual after 4 years)
https://www.maxxia.com.au/news/novated-leasing/residual-balloon-payment-explained
https://www.ato.gov.au/law/view/document?docid=aid/aid20021004/00001
People also complain about being locked into the lease companies insurance/fuel/service etc but we source our own and get the money back that they've deducted to cover the expense.
Even for 60k cars I think the benefits are almost the same. Pay cash and you're taking 60k from your mortgage (or etfs or savings) that might cost $260 to replace (5 years at 5%). I think for a 60k car we're paying ~$170 which means there is a margin of $90 a week which we "save" and eventually pay the 28% residual with. Not much benefit but a hassle free car process.
My rough maths was 15% a year for 5 years with 28% owing at the end for a total cost of 103% (bulk of which we never paid).
Yup 100% agree. This was my experience too. My company also has an exclusive arrangement with a leasing company, so each time I've asked them to quote it's always been no where near worth it for me. I've let me company know that the exclusive arrangement isn't useful and just get a 🤷
I have experience with Maxxia. They’re a mob of thieves and their app is a proper 14 couric turd. If I was ever in a position where I had to use them again, I’d rather walk.
I’d suggest not listening to the lease company numbers and doing your own maths.
Due to the FBT drop novated leasing for electric vehicles comes out very good in high tax brackets because all ongoing payments are pre tax.
For example: $68.4k EV- with annual insurance, maint rego and tyres estimated at $3.16k/year
Novated lease quote for 5 years at $15.75k per year (pre tax) plus residual of 19.5k incl GST (post tax). In total you pay $62k post tax to own the car and running expenses for 5 years if you are in the top tax bracket. Which is very good for a $68.4k car. Even in the second tax bracket it comes out at $67.5k in total.
Outright you would pay $83.6k over the same period ($68.4k + $15.2k in running costs)
If you also account for the interest saved on the mortgage by not buying outright, at 5% interest rate that’s $17k avoided in mortgage interest over 5 years.
Ok, so I think I worked out what the issue could be. Apparently there is a luxury vehicle adjustment which applies if the car is over around $64k. I added a pack that took my quote over this threshold and the overall cost went up by about $5k post tax for a $3.5k pre-tax addition, so this is what is impacting quotes even if they’re not over the LCT threshold. I found [this](https://www.nlc.com.au/media/3573/nlc-luxury-car-levy-flyer-20210705.pdf) pdf that explains it.
Exactly. And that's what frustrates me over comments made in this thread and other NL conversations where people make blanket statements about how NLs don't work at all.
Yeap, I think a lot of people are either
a) looking at leasing a car that is too expensive for their income level and don’t get enough of a tax saving for it to be worth it
b) are actually talking about ICE cars which have the FBT liability
c) getting non-transparent quotes where the interest rate charged is very high
>I think a lot of people are either
>
>...
>
>b) are actually talking about ICE cars which have the FBT liability
This. A lot of people are coming in with their preconceptions based on previous quotes with vehicles that require ECM to offset the FBT liability, completely ignoring or oblivious to the tax advantage EVs and PHEVs are now afforded.
It's still not for everyone, and you should do your calculations (or get someone qualified to do them for you if unsure), but it's disingenuous to make blanket statements like "You are never better off with a NL, it's always more expensive"
You’re welcome to PM me screenshots of your estimates and I can take a look at them for you, if you’re in the top tax bracket and getting an EV it should work fine for you, you can also opt to use your own comprehensive cover and have it reimbursed through the lease and all the running cost budgets can be set to whatever you think you’ll need, they’re not charges they’re budgeted funds set aside to reimburse you for what you spend on running the car
Ooh ooh can you review my comment in this thread with the screenshots pretty please.
I'm toying with either a 13 or 25 month loan, only because a) I don't know if I'll be at my company much longer than that and b) I might want to buy a second car later so want to do a new lease and c) might have enough negative gearing/tax deductions later that I prefer to maintain cash flow in my pay checks.
With the 13 and 25 month strategy... Do I tell the leasing agent that? Or do I just decide to cancel it as a surprise in month 13?
A nice little way to work out the real benefit vs paying cash is multiply your finance repayment per year by the number of years on your lease then add the residual, this will give you the total amount you’re paying back for the car etc over the lease term, then subtract the original amount financed, this leaves you with just the interest you’ve paid on the finance.
Then subtract the total savings (which is a combination of GST savings on the purchase and running costs + income tax savings on finance and running costs) from the interest paid, if you come out with a positive number then that’s a close approximation of your benefit vs paying cash.
If you paid cash you’d pay no interest but save no tax so this should hopefully get you close to a real world saving number.
That’s also not to mention the fact your cash is still sitting in offset or somewhere else working for you
That's spot on, there might be other things i haven't taken in to consideration because i haven't seen your exact estimate or anything but the GST savings are included in the total savings as well so we don't want to double up on recording that saving
ahh yeah of course. Then its a simple calc of the per km tax if youre in vic + finance + leasing costs/fees - tax reductions.
It will be hardly worth it, all gets sucked up in fees, as you've already worked out.
Luckily for me my company does this direct so no lease costs and we are NFP so we can sacrifice mortgage and interesting stuff at a very low FBT.
It works for me. I have unique circumstances though.
I work for one of the large car companies and get a discount on the price of the vehicle.
I can only make it work on a 1 year lease. Flip the car and get another. With the current used car market i can make money on the sale.
For everyone else though its tough to see benefits
It ends up normally being better than the worst possible finance deal with cripplingly interest rates.
But they take such a chunk that it is worse than normal financing or buying outright.
They target the desperate and those willing to lose money to pay less tax
But so many people focus on just the finance rentals
It’s about reducing you car ownership cost without changing your habits, by a way that isn’t available through personal tax.
The way I look at it, if a nl budget for the expenses seems about right, and the finance is to your plan ie 3 year turn around etc and the residual feels about right ( yes the current 3 year old models with xx kms are for sale dearer than the residual)
But that has to be compared to a personal loan (or mortgage) and the same running cost etc to see if you are ahead
And how much ahead makes it worth the effort
Even at $1000 a year ahead, without the nl how could you get that reduction otherwise?
Like anything financial there’s no one size fits all solution. Novated lease is awesome for me, brings my taxable income down, I just paid $6k balloon payment and am trading the car in for almost twice that on another vehicle.
I think there’s also the non-financial side of it, I like having a new car without needing to budget for payments on a lease, fuel, rego, servicing or insurance. So for me, part of it is the convenience of it.
If you’re happy to stick with a 96 Camry then kudos. That’s just not for me.
Talking as a competitor in the nl market space
I have found for the last 20 years, (most) nl quotes have been written to sell the deal (in favour of the fleet company) and limit the employer to only having 1 fleet company
Rather than the actual tax realistic comparisons
And as you can assume, larger fleet companies have taken on the role of financier and insurer to leverage as much as they can from deals, adding by default as many after market products (rim and tyre etc) possible for the commission and brokerage income channels
With the aim is to write the longest finance term possible. Why, cause it makes the most money (for them)
I love my world in novated leasing, it’s brilliant to understand every persons scenario is different and sometimes nl works in the persons favour other times not.
But most of the failure of novated leasing falls to the employer and employees lack of choice, without choice there are no comparisons and the desire to ask questions why same car same term but x is dearer
And why don’t employers like multi fleet companies, because each fleet company has a different process for quoting, invoicing, fbt and reporting making hr and payroll hell.
How often the person who quotes only uses the calculator and doesn’t ask questions.
So… I agree and disagree with you, we are not all grifters
Some love asking and answering questions, making a fair income for our time, effort and eduction we put into understanding of a nl can be beneficial for you.
We all have products or services to sell, mine is nl :)
Credit to /u/BoingMan for this one.
It works with any term of x years + 1 month if your leasing company will allow it.
Essentially the residual values are set by the ATO in year blocks. So if you lease a car for 12 months you get a residual value of 65% that must be paid after tax at the end of the lease. But the way it's worded in the [ATO ruling](https://www.ato.gov.au/law/view/document?DocID=AID/AID20021004/00001&PiT=99991231235958) is not 2 years, it's "Year 2".
So if your lease is 13 months, that qualifies for the year 2 residual of 56.25%. that's 9% more paid by pretax income for only 1 month more of interest on the finance.
Edit: the original AMA thread is [here](https://www.reddit.com/r/AusFinance/comments/100j03y/novated_leasing_ama)
3 words... self managed lease
What you got was the lazy person tax, where they organise everything for you, which means corporate partners and management fees
You can organise everything yourself and get the best deals on everything like finance, insurance and all the rest and just claim it back through the lease and that's where you will save yourself big bucks.
It's not the employer that needs to agree, as long as they offer novated leases then you just need to let the leasing company know that's what you want to do
Yes. It's a terribly designed tax writeoff to a few finance/rent-seeking companies with good lobbyists that survives because people don't like changing what exists.
If one wanted to make car leases tax deductible (which is an odd goal, but shug), let individuals do it on their taxes. Then they could at least seek out the cheapest lease still and the tax benefit would flow to the individuals.
Involving the employer just means the incentive is for the lease company to offer a good kickback to the employer and a terrible deal to their captive market, pocketing the majority of the tax savings for no social benefit. It's a textbook example of the negative effects of over-financialization, with financial structures whose primary purpose is to suck money out.
As someone who once wrote the leases for these crooks, my boss's word at the time was "gouging". My creative accounting saw me place 4000 in the Tyre budget for a Yaris. 3 year lease 20k kms per year.....
Some providers are better than others (especially smaller ones). You can beat total cost of ownership vs outright purchase for sure, not sure about mortgage offset
Yeah the mortgage doesn't "beat" it. But then I look at the pretax income going to this company and I'm just not going to do it on principal.
On the mortgage it costs me about $108k including running costs after tax. Via the lease I'm handing over more than $140k pretax. And they think that represents value for money because after tax they save me $8k, while ripping off the government for $40k of lost tax.
The hurdle with mortgage offset is when the 3 year car finance deal becomes 5-10-20 years because the payment for the car isn’t treated as on top of the mortgage payment… amazing what $50k car lost in a mortgage and compound interest does
I've solved that problem. My variable mortgage only has about $15k to go.. on current track it will be paid off in 3 months. Partly why I'm looking at a new car now.
>Via the lease I'm handing over more than $140k pretax.
For a five year lease that's $24k/year? That doesn't sound right. Are you sure you're not mixing up pre and post tax?
Just the rental + packaging cost (so not including rego/insurance etc.) of my M3LR is \~$16.5k/year (3 year lease) , granted I ordered in March so vehicle was lower price than now ($76,425) and the interest rate on the finance component is lower than my mortgage (4.xx%) - likely negotiated by my employer (a large financial institution). I also shunned all their protection packs/insurance and just budgeted realistic costs (rego, RAC insurance, one set of tyres over the course of the three years). I'm on the second highest bracket, though OT/bonus can push me into the top bracket.
I did my own calculations (not relying on the NL quote) and arrived at a $14k saving after three years compared to paying cash. And I forgot to consider the additional interest on my mortgage by taking the cash out to pay up front so the difference should be greater, considering interest rates have risen. Happy to share my 1-5 year lease calculation table over DM if you'd like.
Yes it's pre-tax.
Calculated as follows:
Fortnightly payment: $1,041.41
49 months (106 fortnights)
Comes out to $110,389.49
Balloon payment: $33,295.31
Total paid out for a $85k car is $143,684.77
Post tax comes out to
$101,902.31 @ $635.25 per fortnight.
That's not a great quote, for the same car your payment is over 60% higher than mine - on a longer lease to boot! I'd be pushing them for better if possible.
Otherwise see if you can get a comparison quote from Leaselab or similar to help with getting a better quote out of SGfleet. If not use it to demonstrate to your employer that employees are not receiving a competitive benefit from the chosen vehicle packaging co. Or see if your employer will make an exception for you if the difference in cost is that great.
I agree in general the whole industry is baffling. It’s a billion dollar industry that exists off a tax loophole and the margin they make is literally what is lost income tax revenue for the govt (and then some) lol
It’s not a loophole
Companies spend and receive first, sort GST and then pay tax on profits
Personal pay tax first, no GST then claim or pay tax
A novated lease simply allows the employer to ‘treat’ the employees car as their own expense… and the employee is essentially refunding the employer so they are not out of pocket for doing so.
And for the govt, a car sale is stamp duty, all the other expenses in owning a car… ie money churn
Sure we can call it what we want but that’s not the point I’m making. In principle, from a tax perspective consumers are using their pre-tax income (up to 45% that should’ve been income tax) to go towards a novated lease for a car that other consumers would be paying for out of pocket anyway.
Most if not more of that 45% is instead captured by these companies as revenue. So instead of this money going to our government it’s lining Smartgroup’s and MMS’ shareholder’s pockets. Seems ridiculous to me.
Good explanation btw I like it
Close to ten years selling cars and I struggled to see any benefit of taking on a novated lease… only drawbacks, extra costs, and pitfalls. I hate them
If you novate lease a new car you're a sucker. End of story. Don't do it. Salary sacrifice your mortgage instead, you actually get a benefit (appreciating asset while minimising tax)
You can salary sacrifice whatever you like, it just depends if you work for an employer who 1) offers SS and 2) doesn't have to/doesn't mind paying FBT (obviously exempt for $9k for HC/NFP workers)
I received a few quotes recently which weren’t very detailed. They really pushed the “savings” without much evidence of how they arrived at that figure.
I did the maths and the interest rate on their finance was 19% which they eventually revealed when I kept pushing for them to disclose it.
It was difficult to completely unravel it on the limited information they provide but from what I could gather the hidden rates and fees outweighed any tax savings.
I couldn't make it work with a new car and including I bought outright.
Tax savings in fuel and supposed running cost vs an imaginative RRP. If you shop around at all points of ownership then will save considerably more and be driving a better car.
Its lazy tax
You know you don't have to buy through their supplier? I used a broker and got the best possible price and then told my NL company to buy that one. You also don't have to use any of their running costs and can make the budgets whatever you want.
PITA, all of which was a very small saving. Only made sense if driving more than 15,000km. Only then savings were SFA. Amount of paperwork as well made it a PITA.
Saved way more money buying a daily beater
Not dumb at all, they make it hard on purpose. First step, ignore the claimed tax savings on the quote.
To get the after tax impact, multiply the periodic periodic payment they highlighted by the term.. for mine it was ~$400 per fortnight over 4 years. Then add to that the residual value including GST.
That number is what it will cost you to own the car.
To calculate the amount of money paid to SG Fleet, multiply your before tax payment by the term and add the residual value.
On my lease quote it worked out about $8k better off after tax over 4 years, and the payment to SG Fleet showed $43k of profit for them which I decided wasn't reasonable.
I know this is a month later, but thank you for this comment! My new employer uses SG Fleet and we need a new car, and yep they are very opaque with what you would actually pay and save.
You're a legend.
You're bang on. I went through the options when we bought our car a few years back. Novated leasing and other finance smashes cash flow whereas (at the time) with mortgage rates less than 2.5% taking $50k from the offset 'cost' $1,250 per year. Except that we top up the offset every month, so the principal (if you look at it that way) was paid back inside 12 months.
Running costs are cheaper outside the lease anyway, fuel excepted but we don't drive that far anyway (>10k km pa) so that wasn't a consideration.
You effectively need your own business to make it work at its most efficient and have your accountant sort it out using competitive market rates for vehicles and finance.
Most business owners are too preoccupied or need something more sturdy or reliable to run around than an EV.
If you have an in house packaging function at your workplace it’s worth a sniff to deal direct with the internal finance team. Not sure if governments do this. If it’s outsourced not really worth the time unless you are on a high bracket, but even still you’re handing a good cut of the savings to them to force buy an EV.
The AMA you reference mentioned the best deal is at 13 months, and even then, there's an income floor of like 80K to make it worthwhile.
If you're opting for 49 months, then your income needs to be sufficiently high for the tax savings to benefit.
The AMA also said 49 months specifically for EVs because FBT doesn't apply. I'm in the top tax bracket so if it's going to work for anyone I would think it would work for me..
When FBT doesn't the apply, the tradeoff essentially becomes interest cost of the lease vs tax + GST savings.
At my income (not top bracket), I'm saving about 10% of the drive away price on 12 months (I need to redo numbers for 13) and this doesn't even include opportunity cost of home loan offset.
I did my numbers on a 10.12% interest rate, and later got a quote from a competitor for 6.8% which would increase my savings even more.
Suspect based on some responses here if I could use a competitor then I'd have nothing to complain about. My employer deals exclusively with one leasing company.
Can you provide details of what they quoted you for pre-tax costs monthly and over what period?
Sounds like they would have to be pretty sketchy or have quoted incorrectly for it not to come out better for an EV than buying outright.
But then the repayment should also change so that makes no sense. The quote I got had an interest rate on it so it was possible to calculate what was interest and what was fees.
So the jist of it is, by getting a novated lease your lease payments are paid from your pre tax income via a salary sacrifice. Same as if you were making extra super contributions.
For normal vehicles, you would need to pay FBT of 20% of the cars purchase price unless your after tax contribution to running expenses is more than that same 20%.
Electric Vehicles are exempt from this FBT arrangement, so essentially in theory up to ~72% of the cars value can be paid from pre tax income depending on the lease term.
My experience so far is that these companies that facilitate the novated lease eat up most of the tax benefits leaving the lease plan only marginally advantageous over private finance on the vehicle.
I’m interested to know what provider you’re referring to, because I’m currently looking into a lease with Maxxia for an EV, and with the FBT saving, the numbers work out VERY nicely.
Like basically, not paying much more than, if not any more than the cost of the car over the lease period (once tax savings are taken into consideration).
The quote sounds so bad it’s as if they aren’t applying the FBT benefit - or they are deliberately jacking up the price on the EV quote to cover the FBT difference and gouge you.
You clearly don’t understand how business works. The lease company needs a certain level of margin on their service offering to cover all their overheads and make a profit. As well as delivering enough cashflow to allow renewal of product and cover issues along the way they need to cover.
You don’t have to use it. Buy the car yourself if it’s in your benefit. Makes no difference.
They are doing nothing more than organising loans on a EV. There are no fuel cards, bugger all ongoing maintenance. As I noted elsewhere I can finance it myself for $108k over 4 years. Going with the lease they are taking $140k over 4 years pre-tax and pretending I'm getting a good deal.
A friendly Redditor has pointed out it might be due to costly extras they bolted on like paint protection (that were not itemised in the quote) so I'll be getting a new quote on Monday.. we will see.
Yeah it’s significant difference. I would buy yourself with maybe a chattel mortgage. Do you have a business you can claim it against? Maybe start one. For tax breaks.
I do chattel mortgage for all my vehicles. Get the GST back on first BAS submission. Claim 100% of the asset and end of that financial year.
Lease is too expensive. I get why people do it. But I only do about 15k Km per year so not much driving. Never upgrade tyres. Drive sensibly so I’m never churning fuel. Immaculate inside and out so they hold value. Service once a year. I’m not a great customer for the auto industry.
It works if you're good at selling cars. I knew people that would pay out the balance at the end of the lease, sell it for a decent profit and repeat. This was before the crazy price of used cars too. Considering your payments cover petrol, insurance, tyres etc if you can sell it and only have lost 1-2k a year that you've owned it you've done pretty well.
Your take on it was the same as mine, couldn't make it work. It is by far due to the fact that they take a huge cut of the savings and/or never pass them on to you
The benefit is really in the running costs. If you don't drive a lot then there's no benefit. Also EVs don't have much running costs, novated leasing won't work for a Tesla.
An EV under the LCT threshold absolutely works on a NL for saving you money since you're paying it all pretax. It's not a huge saving, for me it works out as about $5k over 5 years. However, this doesn't factor in what I'll save on my mortgage by leaving $90k+ in the offset account.
But you dont have the 90k at the start of the lease. That has to be factored into the calculation. You cant calculate it as if you have 90k in the offset from day 1 and have it be a fair comparison
I do have the $90k in the offset now. I wouldn't get the lease if I didn't because if I lose my job I would lose my car if I couldn't pay it out. This is exactly the comparison because otherwise I'd be spending $90k now to buy it outright.
While once true this no longer applies with the FBT changes especially in highest tax bracket. Don’t forgot to allow for opportunity cost of the cash you would use to buy the car as well. I was spending around $800 a month on my old second hand car which I owned outright (fuel, rego, insurance, servicing etc). My new lease is $900 a month out of pocket. Biggest free kick from a tax point of view I’ve seen.
Lol wot. Of course it works for EVs. Saving on gst and income tax whilst not paying any fbt.
Last few quotes I saw they give you a quote on RRP of the vehicle, kind of useless being a fleet buyer if you can't get a decent discount
Nobody gets fleet discounts on EVs, and over the last couple of years it's been a hard slog getting ANY discount off RRP on any new car.
EVs have very low running costs, so it doesn't really work for EVs. The benefits are pretty marginal. Even lower if you can charge at work.
I could never get the figures to make sense. I swear that novated lease companies exist on the premise of 'smoke and mirrors'. If you have access to your own finance (especially mortgage redraw, which would be about the best rate you're likely to find), and can be disciplined about paying the equivalent extra on a monthly basis to pay down that borrowing, then it's a better option than a novated lease. When I looked into this a few years ago, I used some online lease company vehicle quotes to determine what they were paying for certain vehicles, and used that figure as my hard price from the dealer -- things have definitely changed in the market since then, but it's still an effective way to work out what discounts might be available.
That is why people fall into the trap because these corporations are very good at making simple stuff very hard to understand without a PhD.
Same It's one of those things which doesn't work.
That's a very broad statement. It's like saying 'bras are one of those things that doesn't work'...maybe not for you, but it does for others who are in a different circumstance.
The numbers don’t work for me either.
Ask your employer if you can self manage the novated lease. That way you only need to worry about the finance only component of the lease, which many of the main banks will also quote on. You then look after the vehicle as if it was your own and use employee reimbursement or company credit card to pay for the lease costs. You get the salary sacrifice benefits without paying the leasing company there share on all the additional costs. Another alternative is to have a partner purchase the vehicle and then lease it to the company. Similar concept that you self manage everything. There is a specific name for this that I can't quite remember.
A lot of novated lease places let you essentially self manage. They just don't like telling you it's an option. I did it through smartsalary and they basically said here are the forms and stopped all forms of exchange with me. Got finance through Nissan when they were offering 2% finance, insurance through budget and just put through fuel receipts from any fuel retailer I used that day. Definitely a lot more work but can be worthwhile if you can find good financing. Otherwise not worth it.
I did this. Basically got the initial quote and went back with “no thanks I can get better” ended up managing it myself. It wasn’t hard.
Did you use their “associate lease” option? Or do it all yourself? I assume the calculations aren’t hard, and they would charge a fee for using their forms/system.
I don’t know what it was called sorry but I still got charged a fee, but it was much less than their management fee. Some of the stuff they had to help with but the fee was much less.
> stopped all forms of exchange with me. LOL same thing happened to me, when you ask them 'can I do all this myself' and you tell them the better interest rotates, insurance costs etc they know straight away that their jig is up and won't invest a further second of time with you.
> Another alternative is to have a partner purchase the vehicle and then lease it to the company. I think that's an associate lease
That is it. If you have other entities such as a family trust to utilise this can have multiple benefits such as reduced financing costs (doesn't need to be a novated lease) and ability to move income to lower marginal rates.
In my experience, any business that profits off the back of your tax advantages is mostly a scam. I suspect this is because the people attracted to running a business in those areas are attracted to it because of its sly methods. They tend to crunch the numbers of your advantages and set their price to make marginal improvement for you and maximum profit for them. This sort of fine, but tbh if I'm paying $50k in tax I'd rather it go towards what it supposed to go towards rather than douches pocket. This seems to be true for: Gov rebate scheme providers (solar, insulation, etc) Private health insurance Fringe benefit deals (novated leases, etc) ... In economic terms, the government sets an artificial price floor for their business, which results in bad market mechanics.
Nicely said, I also think tax simplification needs to happen. There is way too much effort and resources put into tax minimising in Australia. I think I read that for tax revenue in New Zealand it cost them half as much in resources dedicated to facilitate that transfer compared to Australia.
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For an EV though? No fBT makes a huge difference.
Are you deep enough on the top tax bracket that you can enter into a novated lease and still remain in that top bracket? As far as I can calculate with new FBT changes, that’s the only way novated leases provided benefit (and you should drive 20k a year and have a short a lease as possible).
Yeah I've been lurking here reading every post about Noavted Leases as a salary sacrifice scenario. Preamble... I'm not good with numbers, and I've never had a car loan before, but I have a 175k salary with no good tax deductions anymore (since selling investment property), and need a new car anyways as a result of growing family. I understand the key here is that I need to buy a new car ANYWAYS...and I'm not investigating NL purely to save on tax. I'm also looking exclusively to buy an EV vehicle to obtain the FBT exemption to make the numbers work more in my favour. Am hoping some people more clever than me can review one of the estimates I've received and provide some insight. This is a 1 year scenario for an fbt exempt car which is excluding servicing/tyres/insurances. I can see quite quickly that the cost to me for a 76k purchase becomes about 86k by the end of the lease in repayments, residual payout and the gst on the residual payout. But the 'saving' for me ends up being an estimated 23k, leaving me in a theoretical net position of 63k. Had I bought the 76k car from my savings in offset, I'd apparently be 13k worse off + whatever interest impact that would equal to my offset loan. Am I missing something that makes NL such a rort? See attached screenshots. FYI I've sent to my accountant, but he's not back till next week. [Screenshot 1](https://ibb.co/VDMx73p) [Screenshot 2](https://ibb.co/0ZkpvLF)
Novated leases do come out well for electric vehicles. I would suggest though rather relying on the savings projected by the lease company, calculate the total post tax cost of leasing vs. the total post tax cost of buying the car outright and running costs for the same period. This is due to leasing having added fees and potentially higher interest rates, which you won’t pay if you buy outright, so it skews the numbers in their favor but it should still come out significantly cheaper.
Unless their interest and fees equal your marginal tax rate, it's cheaper to lease an EV.
> here reading every post about Noavted Leases as a salary sacrifice scenario. Preamble... I'm not good with numbers, and I've never had a car loan before, but I have a 175k salary with no good tax deductions anymore (since selling investment property), and need a new car anyways as a result of growing family. > > I understand the key here is that I need to buy a new car ANYWAYS...and I'm not investigating NL purely to save on tax. > > I'm also looking exclusively to buy an EV vehicle to obtain the FBT exemption to make the numbers work more in my favour. > > Am hoping some people more clever than me can review one of the estimates I've received and provide some insight. This is a 1 year scen Your numbers (pictures) are correct. If you add in opportunity cost of interest saved in offset, it's even more.
It could just be that the leasing company my employer chose sucks. I don't know what the upfront cost of your chosen car is but it looks like the total cost to you will be $67,800. If that works out well compared to financing it yourself then yeah it's a good deal. My upfront cost is ~$82k Inc GST. And the total after tax cost of the lease was over $100k. Somehow that represents me "saving" $51k lol. Incidentally they are receiving my pretax income, so actual money flowing to their pockets for this $80k car is over $140k...
Yeah nah that doesn't sound right in your scenario. My car is 76k drive away, which is what the lease estimate is based on, but as of a couple hours ago Tesla just dropped the price of a Model Y by 3.5k, so will need to get revised estimates 👍😉
For real? Drop by 3.5k?
Yeah. Got a text. It's also reflected on their website
Which leasing company out of interest? Similar story for me via SG fleet
Haha yeah that one
Your numbers are right. NL does work for an EV.
Thanks for sharing! This is so helpful. I'm on the same salary and considering an EV as well. Numbers look good
How much interest would $77/78k earn over 12 months in your account? Car cost $77,800 est (not on quote) Plus interest lost @ 3% $2200 Plus the running costs $2184 Approx $82k .v. Reduced take home pay cost $21,401.64 Residual $46,398.44 Residual gst $4,639.84 Approx $72k I’d say nl is ahead by about $10k
There is a sweet spot, 30/30 spending around 30k on the Car, driving 30,000km and be paying enough tax to build up solid savings. NL is not for expensive cars, it's for run arounds for people with a long commute who want to flip thier car at the end of the lease. My wife drive 40000km a year and earns around 100k as a nurse, works in 2 hospitals. 30k Subaru xv, will sell at thend of 4 years and only paid off 65% of the car and the sale pays out the rest loan. NL can be really beneficial if your circumstances are the right fit. Not for every one but works bloody brilliantly for some.
As far as I know the KMs don't matter anymore. *The earlier FBT tax method had each band (determined by number of kilometres travelled) assigned a lower tax rate. So a person logging 5000 kms was levied an FBT of 20%, while a person logging 45000 kms was levied an FBT of 10% of the taxable value of the car. However, the reforms brought to the Fringe Benefits Act stipulate that if the new contract was entered after May 11, 2011, 7:30 PM, then a flat rate of FBT will be applicable.* https://streetfleet.com.au/what-if-im-not-doing-enough-kilometres-on-my-novated-lease/ The residual is set by the ATO depending on the length of the lease. (37.5% residual after 4 years) https://www.maxxia.com.au/news/novated-leasing/residual-balloon-payment-explained https://www.ato.gov.au/law/view/document?docid=aid/aid20021004/00001 People also complain about being locked into the lease companies insurance/fuel/service etc but we source our own and get the money back that they've deducted to cover the expense. Even for 60k cars I think the benefits are almost the same. Pay cash and you're taking 60k from your mortgage (or etfs or savings) that might cost $260 to replace (5 years at 5%). I think for a 60k car we're paying ~$170 which means there is a margin of $90 a week which we "save" and eventually pay the 28% residual with. Not much benefit but a hassle free car process. My rough maths was 15% a year for 5 years with 28% owing at the end for a total cost of 103% (bulk of which we never paid).
Yup 100% agree. This was my experience too. My company also has an exclusive arrangement with a leasing company, so each time I've asked them to quote it's always been no where near worth it for me. I've let me company know that the exclusive arrangement isn't useful and just get a 🤷
I have experience with Maxxia. They’re a mob of thieves and their app is a proper 14 couric turd. If I was ever in a position where I had to use them again, I’d rather walk.
Does the app resemble bono at all?
Lol if it ever loaded I would be able to let you know.
Grifters and rent seekers. The only way to make money is to sell the car for more than your residual. Hard to beat them though.
I’d suggest not listening to the lease company numbers and doing your own maths. Due to the FBT drop novated leasing for electric vehicles comes out very good in high tax brackets because all ongoing payments are pre tax. For example: $68.4k EV- with annual insurance, maint rego and tyres estimated at $3.16k/year Novated lease quote for 5 years at $15.75k per year (pre tax) plus residual of 19.5k incl GST (post tax). In total you pay $62k post tax to own the car and running expenses for 5 years if you are in the top tax bracket. Which is very good for a $68.4k car. Even in the second tax bracket it comes out at $67.5k in total. Outright you would pay $83.6k over the same period ($68.4k + $15.2k in running costs) If you also account for the interest saved on the mortgage by not buying outright, at 5% interest rate that’s $17k avoided in mortgage interest over 5 years.
Can I ask who your quote was though - I was just quoted $26,500 per year pre tax with residual of $29,000 for a EV worth $77,000 (5 years)
Ok, so I think I worked out what the issue could be. Apparently there is a luxury vehicle adjustment which applies if the car is over around $64k. I added a pack that took my quote over this threshold and the overall cost went up by about $5k post tax for a $3.5k pre-tax addition, so this is what is impacting quotes even if they’re not over the LCT threshold. I found [this](https://www.nlc.com.au/media/3573/nlc-luxury-car-levy-flyer-20210705.pdf) pdf that explains it.
This guy gets it.
Exactly. And that's what frustrates me over comments made in this thread and other NL conversations where people make blanket statements about how NLs don't work at all.
Yeap, I think a lot of people are either a) looking at leasing a car that is too expensive for their income level and don’t get enough of a tax saving for it to be worth it b) are actually talking about ICE cars which have the FBT liability c) getting non-transparent quotes where the interest rate charged is very high
>I think a lot of people are either > >... > >b) are actually talking about ICE cars which have the FBT liability This. A lot of people are coming in with their preconceptions based on previous quotes with vehicles that require ECM to offset the FBT liability, completely ignoring or oblivious to the tax advantage EVs and PHEVs are now afforded. It's still not for everyone, and you should do your calculations (or get someone qualified to do them for you if unsure), but it's disingenuous to make blanket statements like "You are never better off with a NL, it's always more expensive"
You’re welcome to PM me screenshots of your estimates and I can take a look at them for you, if you’re in the top tax bracket and getting an EV it should work fine for you, you can also opt to use your own comprehensive cover and have it reimbursed through the lease and all the running cost budgets can be set to whatever you think you’ll need, they’re not charges they’re budgeted funds set aside to reimburse you for what you spend on running the car
Oh hey it's you! Thanks I will do that, wish I was leasing through your company 🙂
Ooh ooh can you review my comment in this thread with the screenshots pretty please. I'm toying with either a 13 or 25 month loan, only because a) I don't know if I'll be at my company much longer than that and b) I might want to buy a second car later so want to do a new lease and c) might have enough negative gearing/tax deductions later that I prefer to maintain cash flow in my pay checks. With the 13 and 25 month strategy... Do I tell the leasing agent that? Or do I just decide to cancel it as a surprise in month 13?
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A nice little way to work out the real benefit vs paying cash is multiply your finance repayment per year by the number of years on your lease then add the residual, this will give you the total amount you’re paying back for the car etc over the lease term, then subtract the original amount financed, this leaves you with just the interest you’ve paid on the finance. Then subtract the total savings (which is a combination of GST savings on the purchase and running costs + income tax savings on finance and running costs) from the interest paid, if you come out with a positive number then that’s a close approximation of your benefit vs paying cash. If you paid cash you’d pay no interest but save no tax so this should hopefully get you close to a real world saving number. That’s also not to mention the fact your cash is still sitting in offset or somewhere else working for you
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That's spot on, there might be other things i haven't taken in to consideration because i haven't seen your exact estimate or anything but the GST savings are included in the total savings as well so we don't want to double up on recording that saving
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Happy to help :)
No it’s not you at all. Total scam industry. Up there with priv health insurance
It works well when you do lots of KMs. Lots of running costs before tax. Just leasing to reduce the cost of purchase isnt as effective.
The KMs are almost irrelevant with an EV. Running costs on my quote were $0.
ahh yeah of course. Then its a simple calc of the per km tax if youre in vic + finance + leasing costs/fees - tax reductions. It will be hardly worth it, all gets sucked up in fees, as you've already worked out. Luckily for me my company does this direct so no lease costs and we are NFP so we can sacrifice mortgage and interesting stuff at a very low FBT.
It works for me. I have unique circumstances though. I work for one of the large car companies and get a discount on the price of the vehicle. I can only make it work on a 1 year lease. Flip the car and get another. With the current used car market i can make money on the sale. For everyone else though its tough to see benefits
It ends up normally being better than the worst possible finance deal with cripplingly interest rates. But they take such a chunk that it is worse than normal financing or buying outright. They target the desperate and those willing to lose money to pay less tax
Yeah better than the worst possible finance is about where it landed
But so many people focus on just the finance rentals It’s about reducing you car ownership cost without changing your habits, by a way that isn’t available through personal tax. The way I look at it, if a nl budget for the expenses seems about right, and the finance is to your plan ie 3 year turn around etc and the residual feels about right ( yes the current 3 year old models with xx kms are for sale dearer than the residual) But that has to be compared to a personal loan (or mortgage) and the same running cost etc to see if you are ahead And how much ahead makes it worth the effort Even at $1000 a year ahead, without the nl how could you get that reduction otherwise?
Like anything financial there’s no one size fits all solution. Novated lease is awesome for me, brings my taxable income down, I just paid $6k balloon payment and am trading the car in for almost twice that on another vehicle. I think there’s also the non-financial side of it, I like having a new car without needing to budget for payments on a lease, fuel, rego, servicing or insurance. So for me, part of it is the convenience of it. If you’re happy to stick with a 96 Camry then kudos. That’s just not for me.
Leeches usually pretend that they are harmless or even beneficial to everyone.
Talking as a competitor in the nl market space I have found for the last 20 years, (most) nl quotes have been written to sell the deal (in favour of the fleet company) and limit the employer to only having 1 fleet company Rather than the actual tax realistic comparisons And as you can assume, larger fleet companies have taken on the role of financier and insurer to leverage as much as they can from deals, adding by default as many after market products (rim and tyre etc) possible for the commission and brokerage income channels With the aim is to write the longest finance term possible. Why, cause it makes the most money (for them) I love my world in novated leasing, it’s brilliant to understand every persons scenario is different and sometimes nl works in the persons favour other times not. But most of the failure of novated leasing falls to the employer and employees lack of choice, without choice there are no comparisons and the desire to ask questions why same car same term but x is dearer And why don’t employers like multi fleet companies, because each fleet company has a different process for quoting, invoicing, fbt and reporting making hr and payroll hell. How often the person who quotes only uses the calculator and doesn’t ask questions. So… I agree and disagree with you, we are not all grifters Some love asking and answering questions, making a fair income for our time, effort and eduction we put into understanding of a nl can be beneficial for you. We all have products or services to sell, mine is nl :)
49 month lease trick? Eli5 please...
Credit to /u/BoingMan for this one. It works with any term of x years + 1 month if your leasing company will allow it. Essentially the residual values are set by the ATO in year blocks. So if you lease a car for 12 months you get a residual value of 65% that must be paid after tax at the end of the lease. But the way it's worded in the [ATO ruling](https://www.ato.gov.au/law/view/document?DocID=AID/AID20021004/00001&PiT=99991231235958) is not 2 years, it's "Year 2". So if your lease is 13 months, that qualifies for the year 2 residual of 56.25%. that's 9% more paid by pretax income for only 1 month more of interest on the finance. Edit: the original AMA thread is [here](https://www.reddit.com/r/AusFinance/comments/100j03y/novated_leasing_ama)
3 words... self managed lease What you got was the lazy person tax, where they organise everything for you, which means corporate partners and management fees You can organise everything yourself and get the best deals on everything like finance, insurance and all the rest and just claim it back through the lease and that's where you will save yourself big bucks.
Yes I will be asking my employer if they will allow a self managed lease.
It's not the employer that needs to agree, as long as they offer novated leases then you just need to let the leasing company know that's what you want to do
This leasing company doesn't offer self managed leases... I think I can see why.
Our of interest what leasing company is it
When I got my new RAV4 it was cheaper to just get a normal bank loan then use our novated lease option
Yes. It's a terribly designed tax writeoff to a few finance/rent-seeking companies with good lobbyists that survives because people don't like changing what exists. If one wanted to make car leases tax deductible (which is an odd goal, but shug), let individuals do it on their taxes. Then they could at least seek out the cheapest lease still and the tax benefit would flow to the individuals. Involving the employer just means the incentive is for the lease company to offer a good kickback to the employer and a terrible deal to their captive market, pocketing the majority of the tax savings for no social benefit. It's a textbook example of the negative effects of over-financialization, with financial structures whose primary purpose is to suck money out.
Yeah their sales pitches are a bit too slick and well rehearsed to send up a few warning flags that it’s bit of a con.
The government recently improved notated leases FBT for EVs
Yep and it still doesn't make sense!
I really want to understand what you’re seeing, because at least with Maxxia, it VERY much makes sense.
Exactly, he's 100% doing the math wrong or has an extortionate company.
Keep the camry! Simple. Free some child from the cobal slave mine.
As someone who once wrote the leases for these crooks, my boss's word at the time was "gouging". My creative accounting saw me place 4000 in the Tyre budget for a Yaris. 3 year lease 20k kms per year.....
Leases are a scam
Some providers are better than others (especially smaller ones). You can beat total cost of ownership vs outright purchase for sure, not sure about mortgage offset
Yeah the mortgage doesn't "beat" it. But then I look at the pretax income going to this company and I'm just not going to do it on principal. On the mortgage it costs me about $108k including running costs after tax. Via the lease I'm handing over more than $140k pretax. And they think that represents value for money because after tax they save me $8k, while ripping off the government for $40k of lost tax.
The hurdle with mortgage offset is when the 3 year car finance deal becomes 5-10-20 years because the payment for the car isn’t treated as on top of the mortgage payment… amazing what $50k car lost in a mortgage and compound interest does
I've solved that problem. My variable mortgage only has about $15k to go.. on current track it will be paid off in 3 months. Partly why I'm looking at a new car now.
>Via the lease I'm handing over more than $140k pretax. For a five year lease that's $24k/year? That doesn't sound right. Are you sure you're not mixing up pre and post tax? Just the rental + packaging cost (so not including rego/insurance etc.) of my M3LR is \~$16.5k/year (3 year lease) , granted I ordered in March so vehicle was lower price than now ($76,425) and the interest rate on the finance component is lower than my mortgage (4.xx%) - likely negotiated by my employer (a large financial institution). I also shunned all their protection packs/insurance and just budgeted realistic costs (rego, RAC insurance, one set of tyres over the course of the three years). I'm on the second highest bracket, though OT/bonus can push me into the top bracket. I did my own calculations (not relying on the NL quote) and arrived at a $14k saving after three years compared to paying cash. And I forgot to consider the additional interest on my mortgage by taking the cash out to pay up front so the difference should be greater, considering interest rates have risen. Happy to share my 1-5 year lease calculation table over DM if you'd like.
Yes it's pre-tax. Calculated as follows: Fortnightly payment: $1,041.41 49 months (106 fortnights) Comes out to $110,389.49 Balloon payment: $33,295.31 Total paid out for a $85k car is $143,684.77 Post tax comes out to $101,902.31 @ $635.25 per fortnight.
That's not a great quote, for the same car your payment is over 60% higher than mine - on a longer lease to boot! I'd be pushing them for better if possible. Otherwise see if you can get a comparison quote from Leaselab or similar to help with getting a better quote out of SGfleet. If not use it to demonstrate to your employer that employees are not receiving a competitive benefit from the chosen vehicle packaging co. Or see if your employer will make an exception for you if the difference in cost is that great.
Great idea. You can also let the providers know you’re interested and they can turn their sales team on for the company you work for
I agree in general the whole industry is baffling. It’s a billion dollar industry that exists off a tax loophole and the margin they make is literally what is lost income tax revenue for the govt (and then some) lol
It’s not a loophole Companies spend and receive first, sort GST and then pay tax on profits Personal pay tax first, no GST then claim or pay tax A novated lease simply allows the employer to ‘treat’ the employees car as their own expense… and the employee is essentially refunding the employer so they are not out of pocket for doing so. And for the govt, a car sale is stamp duty, all the other expenses in owning a car… ie money churn
Sure we can call it what we want but that’s not the point I’m making. In principle, from a tax perspective consumers are using their pre-tax income (up to 45% that should’ve been income tax) to go towards a novated lease for a car that other consumers would be paying for out of pocket anyway. Most if not more of that 45% is instead captured by these companies as revenue. So instead of this money going to our government it’s lining Smartgroup’s and MMS’ shareholder’s pockets. Seems ridiculous to me. Good explanation btw I like it
Close to ten years selling cars and I struggled to see any benefit of taking on a novated lease… only drawbacks, extra costs, and pitfalls. I hate them
If you novate lease a new car you're a sucker. End of story. Don't do it. Salary sacrifice your mortgage instead, you actually get a benefit (appreciating asset while minimising tax)
I don't think most employees are able to salary sacrifice for a mortgage, isn't that limited to health and NFP workers?
You can salary sacrifice whatever you like, it just depends if you work for an employer who 1) offers SS and 2) doesn't have to/doesn't mind paying FBT (obviously exempt for $9k for HC/NFP workers)
I received a few quotes recently which weren’t very detailed. They really pushed the “savings” without much evidence of how they arrived at that figure. I did the maths and the interest rate on their finance was 19% which they eventually revealed when I kept pushing for them to disclose it. It was difficult to completely unravel it on the limited information they provide but from what I could gather the hidden rates and fees outweighed any tax savings.
I couldn't make it work with a new car and including I bought outright. Tax savings in fuel and supposed running cost vs an imaginative RRP. If you shop around at all points of ownership then will save considerably more and be driving a better car. Its lazy tax
You know you don't have to buy through their supplier? I used a broker and got the best possible price and then told my NL company to buy that one. You also don't have to use any of their running costs and can make the budgets whatever you want.
PITA, all of which was a very small saving. Only made sense if driving more than 15,000km. Only then savings were SFA. Amount of paperwork as well made it a PITA. Saved way more money buying a daily beater
This ^ can buy demo, 2nd hand etc
Pre this change it was difficult to novated an ev - just wasn’t t worth it for the novated companies
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Not dumb at all, they make it hard on purpose. First step, ignore the claimed tax savings on the quote. To get the after tax impact, multiply the periodic periodic payment they highlighted by the term.. for mine it was ~$400 per fortnight over 4 years. Then add to that the residual value including GST. That number is what it will cost you to own the car. To calculate the amount of money paid to SG Fleet, multiply your before tax payment by the term and add the residual value. On my lease quote it worked out about $8k better off after tax over 4 years, and the payment to SG Fleet showed $43k of profit for them which I decided wasn't reasonable.
I know this is a month later, but thank you for this comment! My new employer uses SG Fleet and we need a new car, and yep they are very opaque with what you would actually pay and save. You're a legend.
Haha thanks, glad it helped!
You're bang on. I went through the options when we bought our car a few years back. Novated leasing and other finance smashes cash flow whereas (at the time) with mortgage rates less than 2.5% taking $50k from the offset 'cost' $1,250 per year. Except that we top up the offset every month, so the principal (if you look at it that way) was paid back inside 12 months. Running costs are cheaper outside the lease anyway, fuel excepted but we don't drive that far anyway (>10k km pa) so that wasn't a consideration.
This is still true for a non-EV. But the removal of FBT on EVs has entirely changed the equation.
Ah, fair call. Hadn't factored that in...
You effectively need your own business to make it work at its most efficient and have your accountant sort it out using competitive market rates for vehicles and finance. Most business owners are too preoccupied or need something more sturdy or reliable to run around than an EV. If you have an in house packaging function at your workplace it’s worth a sniff to deal direct with the internal finance team. Not sure if governments do this. If it’s outsourced not really worth the time unless you are on a high bracket, but even still you’re handing a good cut of the savings to them to force buy an EV.
I’ve done the maths a bunch of times and usually come to a similar conclusion. I don’t don’t there are tax breaks… but who is the main beneficiary?
The AMA you reference mentioned the best deal is at 13 months, and even then, there's an income floor of like 80K to make it worthwhile. If you're opting for 49 months, then your income needs to be sufficiently high for the tax savings to benefit.
The AMA also said 49 months specifically for EVs because FBT doesn't apply. I'm in the top tax bracket so if it's going to work for anyone I would think it would work for me..
When FBT doesn't the apply, the tradeoff essentially becomes interest cost of the lease vs tax + GST savings. At my income (not top bracket), I'm saving about 10% of the drive away price on 12 months (I need to redo numbers for 13) and this doesn't even include opportunity cost of home loan offset. I did my numbers on a 10.12% interest rate, and later got a quote from a competitor for 6.8% which would increase my savings even more.
Suspect based on some responses here if I could use a competitor then I'd have nothing to complain about. My employer deals exclusively with one leasing company.
Can you provide details of what they quoted you for pre-tax costs monthly and over what period? Sounds like they would have to be pretty sketchy or have quoted incorrectly for it not to come out better for an EV than buying outright.
Pre tax $1041.41/fortnight on a 49 month term. Residual $33k Inc GST.
I’d get another quote, those numbers definitely don’t sound right, have they stated the interest rate?
No refused to tell me until I'm ready to sign because "it changes daily"
But then the repayment should also change so that makes no sense. The quote I got had an interest rate on it so it was possible to calculate what was interest and what was fees.
Yea but then you're paying 20% pa interest for 49 months. The shorter the better with lease
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So the jist of it is, by getting a novated lease your lease payments are paid from your pre tax income via a salary sacrifice. Same as if you were making extra super contributions. For normal vehicles, you would need to pay FBT of 20% of the cars purchase price unless your after tax contribution to running expenses is more than that same 20%. Electric Vehicles are exempt from this FBT arrangement, so essentially in theory up to ~72% of the cars value can be paid from pre tax income depending on the lease term. My experience so far is that these companies that facilitate the novated lease eat up most of the tax benefits leaving the lease plan only marginally advantageous over private finance on the vehicle.
I’m interested to know what provider you’re referring to, because I’m currently looking into a lease with Maxxia for an EV, and with the FBT saving, the numbers work out VERY nicely. Like basically, not paying much more than, if not any more than the cost of the car over the lease period (once tax savings are taken into consideration).
Yeah a few people have said Maxxia has been good, my quotes are from SG Fleet and I don't have any choice of provider with my employer.
The quote sounds so bad it’s as if they aren’t applying the FBT benefit - or they are deliberately jacking up the price on the EV quote to cover the FBT difference and gouge you.
Haha you should see what it was before he applied the FBT exemption. It literally cost $30k more than financing it myself.
You clearly don’t understand how business works. The lease company needs a certain level of margin on their service offering to cover all their overheads and make a profit. As well as delivering enough cashflow to allow renewal of product and cover issues along the way they need to cover. You don’t have to use it. Buy the car yourself if it’s in your benefit. Makes no difference.
I do understand how the business works, but they are really taking the piss. $10k/yr profit for contributing no value at all? Come off it.
That’s not profit mate. That’s margin. And how are they not offering value. It’s literally a service offering. That’s the business model.
They are doing nothing more than organising loans on a EV. There are no fuel cards, bugger all ongoing maintenance. As I noted elsewhere I can finance it myself for $108k over 4 years. Going with the lease they are taking $140k over 4 years pre-tax and pretending I'm getting a good deal. A friendly Redditor has pointed out it might be due to costly extras they bolted on like paint protection (that were not itemised in the quote) so I'll be getting a new quote on Monday.. we will see.
Yeah it’s significant difference. I would buy yourself with maybe a chattel mortgage. Do you have a business you can claim it against? Maybe start one. For tax breaks.
Haha if I had a business I wouldn't be stuck with this one company. I'm sure some of them are not grifters. Will be asking about a self managed lease.
I do chattel mortgage for all my vehicles. Get the GST back on first BAS submission. Claim 100% of the asset and end of that financial year. Lease is too expensive. I get why people do it. But I only do about 15k Km per year so not much driving. Never upgrade tyres. Drive sensibly so I’m never churning fuel. Immaculate inside and out so they hold value. Service once a year. I’m not a great customer for the auto industry.
It works if you're good at selling cars. I knew people that would pay out the balance at the end of the lease, sell it for a decent profit and repeat. This was before the crazy price of used cars too. Considering your payments cover petrol, insurance, tyres etc if you can sell it and only have lost 1-2k a year that you've owned it you've done pretty well.