What is a novated lease? (Full 2024 details) | Auto Expert John Cadogan

Save thousands on a novated lease (Australia-only): autoexpert.com...
OLIGHT DISCOUNT! (Awesome torches.)
bit.ly/3zF5hCQ
12% off: Use code AEJC
VEVOR DISCOUNT! (Industrial & DIY tools at great prices.)
s.vevor.com/bf...
Get 5% off with code VVSALES
BLUETTI DISCOUNT! (Portable 240-volt power & power failure protection.)
www.bluettipow...
Discount codes here: autoexpert.com...
Help support my independent reporting, securely, via Patreon: www.patreon.co...
Podcast (audio-only version, for listening in the car, etc.): anchor.fm/auto...
Save thousands on any new car (Australia-only): autoexpert.com...
AutoExpert discount roadside assistance package:
247roadservice...
Did you like this report? You can help support the channel, securely via PayPal: www.paypal.com...

[@richardwalsh5570]

John, i was eligible for a Novated lease. Investigated fully and decided with a 25% residual due at the end it was not for me. Got a low rate car loan 4.8% fixed from a credit union. I own it out right after the period with no residual. The only bonus was the running costs in the novated lease, seriously i only do 8000 km per year so i am not spending much on that. The numbers definitely did not work for me. People remember, leasing companies are a business trying to make a profit. 😢

[@jasonscott2187]

Same here. I looked into this back in 2006. Unless the rules have changed since I don't see the benefit. I am also a low mileage driver. The amount allowed for fuel in the monthly payment was way more than I spend. For me it would have been the most expensive way to buy a car. I don't see the point in spending so much money to save a few grand in tax.

[@mikiandfriends1820]

Definitely not for you. But if you did 80,000 km and make 200k, it would have been. Just the time savings 😉 Can you get away with some old crap car and a bicycle?

[@jasonscott2187]

I forgot to mention that with a novated lease they also limit the amount of mileage you are allowed to do so doesn't make sense for a high mileage driver either. As for getting away with some old crap car yes I can I have been doing it for a long time.@@mikiandfriends1820

[@richardwalsh5570]

@@mikiandfriends1820 how many people do 80,000 per year? Wow

[@mikiandfriends1820]

Just some exaggerated number to make it more affordable, say petrol wise. Trying to say if you want good new car and plan to drive a lot, then it makes sense. But if you only drive little bit, it does not

[@davidbrayshaw3529]

Book a half hour with your accountant before entering a novated lease arrangement. It may or may not suit your specific situation. Plenty of people come unstuck on these types of finance arrangements. Mileage is something that you need to be mindful of, and so is maintaining the vehicle (to a high standard). When your dog chews up the upholstery in the car that you own, it's bad. Now try it in a novated lease vehicle. Not pretty. And then there are balloon payments to consider. Mr. Cadogan rightly pointed out the difficulties that one might face given job loss, with regards to transferring the lease to your next employer (If you get one!). This is not something to be taken lightly. A good friend of mine who is a particularly high income earner found out the hard way just how painful it can be when the boss gives you the marching orders. It's one thing getting sacked. It's another thing altogether getting sacked and having to come up with $25k. in the next 28 days. Avoiding tax is great. Who doesn't like that. But nothing is free. Novated leases come with risk attached. Consider your position and your liabilities wisely.

[@siiioxide7807]

then add the accountant cost to the vehicle 😂

[@davidbrayshaw3529]

@@siiioxide7807 Vehicle? Once I've settled my accountancy bills, I'm just grateful if I've got enough money left over to put air in the tyres of my bicycle!

[@JosephcallsmeNolan]

David...use the term Minimising tax.. Don't use avoiding tax as its illegal

[@davidbrayshaw3529]

@@JosephcallsmeNolan You are correct.

[@anthonyche6257]

Same with any finance option when you are jobless you are stuffed anyhow . You always have the option to pay it out .

[@maddomaddo9637]

I never, ever thought I would hear John singing the praises of an EV, even if it is just about the financial benefits of leasing one 😆

[@chrissmith2114]

We had the same twisted tax benefits for diesel company vehicles in UK- because stupid governments were focused on the evil CO2 and ignored the other nasty stuff diesels pumped out, and Petrol vehicles were actually much cleaner. Tax credits just skew the market.

[@JustPeasant]

Plus, that Toyota Corolla is a CVT. Just stay away from that type of Gearbox/Transmission.

[@chrissmith2114]

@@JustPeasant Nothing wrong with CVT, very pleasant to drive

[@michaelmoorrees3585]

Given that lease terms are usually short (5 years or less), you get rid of that EV before that expensive battery dies !

[@thewholls7176]

John, I worked for the federal government for a decade ive looked into this many times, and basically the savings made on novated leases were essentially pocket change because there was only one provider whom I won’t name here, and the reason why there was only one provider is because the federal government had to give them access to their payroll system in order to execute salary Sacrifice for a car and they were only comfortable to do that with one entity and the interest they were charging was extortionist and you went through all this hassle and the money is saved was just absolute pocket change………

[@raymadani270]

Yeah mate. Smartleading are a bunch of motherfkrz. Maybe govt heads get some sweets kickback so they gave smartleasing the key to the kingdom. They pocket more then a dealer does.

[@hamsterminator]

I live in the UK and we have an identical issue here. 1 provider of novated leases- SG fleet. Is that the same as you guys? I am charged 48% tax on my income, and their offers are exactly 48% more expensive than normal leases. Guess where the money is going...

[@raymadani270]

@@hamsterminator I've heard the name. They are the legs of the sane octapus. Only giving us a delusion of choices. Desinged by the same entity that has designed taxes. Financing or leasing is like paying from your left pocket or the right.

[@thewholls7176]

@@hamsterminatortell em to stick it mate - its the only way……. Just don’t bother…… All the best from Melbourne Australia

[@hamsterminator]

I've decided to go second hand. Still want an EV (we have a diesel still as a workhorse) but the lease markets are all over inflated while the second hand market currently has almost a 50% saving on a 3 year old car. I'm OK with further depreciation for those kinds of prices (especially when it works out as the same or less than a lease!)

[@blowfly71]

Hi John. What about lease payout? If you have a lease and want to pay it out, you can be liable for the whole cost of the lease. You need to be prepared to stick with the car for the whole lease period or that $40k car could cost you $60k+! Some benefits tax wise and risk wise going shorter leases, also you can pay more with pre-tax dollars (eg 5yr lease vs 5 x 1 yr ongoing lease) and lower balloon but you will be hit be 'lease application' charges. Do the sums to see what works best

[@robtmcL12]

Salary sacrifice don't tie you into the car like normal leases do. Since it's through work, if you leave your job, you give the car back. That's it.

[@bobfrombrisbane1831]

When I looked at this recently for a ICE car there were almost a thousand dollars in fees a year.

[@blowfly71]

@@robtmcL12 - AFAIK, with Novated leases you wear all the risk. The lease is with you, not the employer. If the business itself obtains the lease, on behalf of you (finance/operating lease), they have the risk/obligation eg can just hand car back

[@blowfly71]

@@bobfrombrisbane1831 - the company my employer uses seems to about $500 per lease but dont list the interest rate :) A few thou seems a bit rich! Seen that they can also add insurance too for the lease payout gap (to cover what I mentioned above - difference between value of car and lease payour figure). Sometimes this may be covered by yours or the employers existing car insurance coverage, so is wasted money...

[@aron2199]

As a practicing public accountant I will say novated lease on EV (only) for most people who does not use the vehicle for work makes financial sense ( the higher private km you do the more benefit). If you need and want finance, you can do something call an associate lease as well to potentially save the finance costs. HOWEVER, you need to go back to first principle and decide whether 1) you need a new car now/soon, 2) an EV is right vehicle to get for your intended use, and 3) for those who intend to keep their vehicle for a very long time ( at least 15 years) an EV now is the right time to get one, in terms of reliability and ease of parts and services

[@214lilley]

Cheers.

[@Spiceman333]

Can you expand on 3? Why is now the best time for EVs? I don’t know if many people would be keeping an EV for 15 years.. especially when companies encourage people to trade up to a new lease after the term.

[@aron2199]

That’s the point - keep changing to new vehicles is what keeps the manufacturers and finance company going - it’s generally not for your benefit- it’s for their bottom line. My wife and I generally either buy new car or cars less than 2 years old in our earlier life- we keep them for a very long time - 15 - 20 years -250 to 300k. So we only buy very reliable cars and not fancy cars - we save on $$- EV is still in its early infancy and there are a lot issues and infrastructure structures issues to sort out - when our 14 year old forester needing to be replaced maybe in 6 years time - things would be more mature for EV and I will most likely get an EV as our second car- in the meantime I will be taking our Prado to the mythical dingo piss creek on a regular basis!

[@n1cky23]

Ease of parts and service? Easy accountant...

[@cmarax2]

Thank you for putting your conclusion at the beginning of your presentation. I watched the whole thing afterwards to see what your argument was, but thanks for not burying your conclusion in the middle of the presentation or dragging it out until the end.

[@brettbennett4906]

The fringe benefit of buying an EV can quickly be eroded by leasing companies who charge excessive fees and apply a ridiculously high interest rate on the loan that can easily be beaten if seeking your own fianance. Make sure you check the numbers carefully or you can quickly find yourself financially worse off on top of exposing yourself to the cons of signing up to a fixed term lease. Also, If your employer allows it, get a quote from more than one leasing agent as the cost can vary greatly.

[@chrissmith2114]

The car leasing companies business model does not cover the vertical depreciation that EV suffer from...

[@bobfrombrisbane1831]

I would have to agree with you regarding fees and excessively high interest rates. I spent a lot of time going through the numbers to see if it was worthwhile for me to buy an ICE car this way. The fees and the huge interest rate made it not worthwhile. Meanwhile the sales person kept saying the payments come from your pre tax dollars and I am saving thousands but only a proportion does with just under half coming from after tax dollars due to FBT.

[@DHIRAJDC]

I compared the quote i got, They say you save this this on gst, and tax but the lease amount is 27,28 % interest where as finacne gives, 7,8 %

[@DHIRAJDC]

@@bobfrombrisbane1831 i calculated the no. In my case of 63840 upcoming Triton, Leasing for 1.5 yrs with 38600 residual value, the fortnightly pay came 904 , interest seems 28.8 % interest as i calculated. whereas finance give 8.16 %

[@billy4eyes512]

I’ve had 2 novated leases in the past. To reduce FBT to zero, both were structured as Employee Contribution Method (ECM) so the employee (me) paid for fuel, servicing, insurance and consumables such as tyres. At the end of the leases the was a residual of 25% which I paid out. With the EV and PHEV incentives, it’s almost a no brainer for some, especially if you earn over $100K and drive 8-10,000+ km per year.

[@ajipaul8303]

I have been thinking purchasing an electric vehicle (EV) and exploring the potential benefits of utilizing novated leasing to take advantage of fringe benefits tax (FBT) savings. To assess the savings , I conducted a thorough calculation based on the purchase of a BYD Atto 3 extended range model. For calculation purposes, I assumed a cash payment of $50,000, inclusive of a $3,000 government rebate for the car. Under a 5-year novated lease agreement, I would be required to pay $18,000 annually for 5 years, with a residual value of $15,000 at the end of the lease term. Therefore, the total amount paid to the novated lease company over the 5-year period (assuming I decide to purchase the vehicle at the end of the 5th year) would be $18,000 x 5 + $15,000 = $105,000. It's important to note that there is no Goods and Services Tax (GST) applicable on novated leases. While I would receive tax deductions on the $18,000 annual payments over 5 years, totaling approximately $30,000, deducting this from the total amount paid ($105,000) leaves me with $75,000 as the effective cost for the vehicle. Factoring in additional expenses such as registration, insurance, Compulsory Third Party (CTP) insurance, electricity, and tire costs, totaling $10,500 over 5 years, the total cost of the vehicle under the novated lease arrangement amounts to $64,500. Therefore, since there is no GST applicable on novated leases, it becomes apparent that I am effectively purchasing a $45,000 car. This underscores that the novated lease option is not a means of achieving savings, but rather a disadvantageous financial arrangement. IMO, novated leases revealing it to be a rip-off rather than savings.

[@4ebees]

With the exception that your novated lease INCLUDES savings for CTP etc and that is taken from your pre-tax income. I agree that it's not brilliantly cheap, but it's certainly arguable it's cheaper than just buying the car from your already taxed monies and then paying for the running costs from your already taxed monies. The issue becomes one of the fees you pay the novated leasing company.

[@bobfrombrisbane1831]

I have done the figures on this for a ICE car and it is dependent on the interest rate if a person comes out better when compared to buying outright upfront. It is a different story for an EV.

[@RobertPendini]

Hi John, Agree with all your comments regarding the novated leases & the positives of leasing. However, anyone taking on a novated lease should be aware that should they lose their job or experience a long term illness during the term of the lease, they are still responsible for the monthly payments. Hardship applications to the financial institutions for novated leases are treated very differently than a standard car loan, as the term of the lease cannot be extended. The end result is that payments may increase significantly to bring the lease up to date, or as often occurs, the vehicle may need to be sold or surrendered to the financial institution that has financed the lease.

[@BennosShed]

Thanks for the info John, pretty spot on with my understanding of Novated leasing. I did watch the whole vid and your appreciation is duly noted. Cheers

[@TheWombat2012]

Awesome advice and timely! This popped up just as I’m doing the sums to lease a car through work.

[@N1withaskillet]

Novated leasing seems like a nice idea, but appears to me to be a gvt stimulus program for auto manufacturers and big banks powered by the unpaid taxes of people trying to buy things they can't afford.

[@bobbysenterprises3220]

In the US. First time a car dealer or salesperson starts concentrating on payments and not what they are selling me the car for I'm done. Walked out of dealerships more than a couple times over this. Each time I thought we agreed on a sale price. And the way they made it the vehicle was more than we talked about and in one case more than the price on the window before any taxes. But they were hiding it with finance numbers saying the payment was lower than we talked about. We talked about a vehicle price. He took that and made it into a payment amount then did a shady balloon interest loan and was trying to mark the car up but give me a low payment. But on the end I would still owe after the loan was "done". That way I come back to him and get another car instead of owning it. So I always talk a out purchase price and out the door price. Then make sure the payments are where I need them to be. Always thinking where I'll be when I'm done. As in do I want to keep this vehicle that long, what do I think it may be worth of anything at the end. Along with the value of anything I'm trading vs what they say they are giving me for it.

[@scottcurtis5322]

Excellent excellent excellent information and presentation. Your ability to ensure the facts trump any bias is at a gold medal standard.

[@42cuba]

Ive had three novated leases, pre tax deductions and my specific financials meant it was a no brianer. If you can reduce your taxable income below a threshold sometimes the savings are amazing! Everything is captured pre tax up to the limit, then switches to post tax. Totally worth it and as long as the interest rate is worth it over all I wouldnt buy another car any other way.

[@konkonidaris8469]

Thanks for posting this video John, I financed my current car via novated lease and it was a pleasant experience. No hassles, and all bills associated with the costs of running the car were looked after. The only concern I have at the moment is my age and health. I could decide on early retirement, so until some health issues stabilise I will keep my current car, nust a little longer. I really have no interest in an electric EV or PHEV although your recent Outlander video made the prospect of owning one tempting, I just happen to prefer driving regular sedans. What I enjoyed most about the novated lease experience is how almost everything was paiid for in advance, just use your car at the servo, and all's good, certain items were handled manually, or via a claims process, but all up, all good. I remember how the final days of the Rudd Gillard Rudd government where they literally killed off local manufacturing by banning novated leasing. As most companies received special perks for using Australian made cars for their fleets, orders for fleet cars all but stopped, helping kill our local auto industry. Should I go ahead with a new novated lease, I will be in touch. Cheers.

[@peemun4545]

Hey bro, please raed my comments on the top of this chatroom first. Also nothing is paid free, novated lease arrange all deduction pre and post tax from your salary so you are the one paying for it. so please read my comments on the top to see the issues first.

[@konkonidaris8469]

@@peemun4545 I fail to see your point as I had leased two cars from my employer in the past and you have not told me anything I didn't already know about novated leases. Of course you pay for it all, but the income tax benefits combined with the pre tax post tax deductions from my fortnightly salary outweigh borrowing money all from post tax income and paying interest on top of that. What had turned me off leasing to begin with was it all seemed overly complicated, but after having leased two cars, I don't see the problem. My issue is choosing the better of the two leasing companies my employer has to offer, of course I could be in a position to purchase the car outright, and if that is the case I will ignore financing via novated lease altogether.

[@briancoates1]

Admittedly I have not looked into the company that you promote, the prefered novated lease manager that my employer uses has an interest rate that is approx 4 times the rate that I can get on a personal loan. Sort of negates the tax savings. Will be interesting to investigate what "you" are offering.

[@narsil316]

I do not understand the repetitive mention that you "get the GST off to the max limit set by the ATO". The finance company who buy the car pay that GST. They claim a credit for the GST but then add GST back onto the rent and residual. There is no GST credit on the purchase price for you.

[@damodoesall6240]

The novated lease loan rate is always way higher than you can negotiate privately, add the management fees and its not the bargain that they make out.

[@nicholasmaguire2669]

You can negotiate that by playing multiple leasing companies against each other

[@damodoesall6240]

Nope, my work only deals with 3 companies and they all suck. !! @@nicholasmaguire2669

[@tobybrowne7906]

@@nicholasmaguire2669not if your company only has one provider and they know it, your at their mercy.

[@Gazzatron51]

Thanks John, in the first 4 minutes you have more clearly explained how a basic Novated lease deal works compared with the two Company affiliated lease companies that could only email me their standard brochures or drip feed me info while the dealer tried to harrass me into signing on the dotted line.

[@peemun4545]

I had a novated lease before. There were two deductions on my payslips regularly after entered to the contract with the novated lease, 1- pre-tax deduction and 2- post tax deduction. Which also may also reduce your taxable income I think for the tax you need to pay, but there is FBT also to consider. The issues I found with the novated lease is 1- the novated lease company won't let you pay off the car faster in order to reduce the residual value only they allow you with a penalties fee which they won't let you know upfront 2- the way they calculate the payment is designed to pay the minim amount of the car price 3- also the interest rate may not be cheaper than other car loan and 4- for second hand car, you will need to do the legs work finding the car, and they will not help you find a second-hand car 5- at the end of the novated lease contract, the car cannot be less than 12 yrs old 6- if you choose for 15000 KM driven per year, and later you drive more, they will deduct more from your salary to cover for petrol 7- they petrol rate may be higher for allocation, but later they will send the money left to your company to pay tax which you cannot avoid, 8- lets say you want to use the car for ride-share, if you do 20 or more hours on ride-share per week (believe me I was one of them) you will easily get your car mileage so high and so fast.

[@gramps4125]

You showed us how much we can save with a novated lease, but you didn't show us how much the lease company makes on this deal in real figures. Have you got such info

[@hughsavage2136]

Thanks John. Best explanation I've heard. Well prepared and well presented!

[@Two-Dads]

Normally love your vids, and was hoping you would do an unbiased and informative video on novated leases to help those of us trying to decide if they are really worth it. Unfortunately, this just seems like a paid presentation from a notated lease company :/

[@tobybrowne7906]

That’s exactly how it comes across, especially spruiking EVs like what, this bloke hates them with a passion.

[@vanmusiciansally9685]

Very timely for me and such great presentation. Much appreciated

[@jamesaustralian9829]

If you jave the equity built up in your home loan, just redraw on that for a really decent second hand car, its even cheaper still.

[@adrianbarwick2987]

Thanks John, that’s a much clearer explanation than I got from the novated lease consultant I spoke to (different company to your mates)

[@blondspike74]

Sounds like a sale pitch for a Tesla! I have a hybrid Lexus and seen a line up for charging points in Tenterfield whilst on holidays. I'll take the hybrid thanks.

[@pantoqwerty]

Main difference between the leased Corolla and the Tesla Model 3 is that the Corolla is more likely to be worth it’s 37.5% residual. Wouldn’t take a second hand EV if you paid me.

[@mikiandfriends1820]

Cool video. I am thinking it is the way to go depending on the price you can get at a dealer. And no point leasing if you are not serious driver. If you do less than 10k, may as well stick to old car and a bicycle

[@GuitarsRockForever]

John, one point I have to disagree: it is not cheaper than buying the car in cash, at least for most cars. I have been on it since two cars ago (right now it is my 3rd car on lease). It is however, easier than most car finance/loan. We have someone who was pro accountant at work, and he doesn't do it and he says it is always cheaper in real world to pay cash. I do it because I don't have the cash, and I'm lazy. And from my own experience, the amount I have to pay for the life of lease, is definitely not cheaper than what I would spend if I could buy in cash.

[@rajnadarasan8249]

Hi, I have to agree with you where the payments over the life of the lease is not cheaper than buying the car in cash. Have you also considered that when you sell the car after the 5 year term, the market price is also higher than the residual loan amount. I'm not convinced one is cheaper than the other. this is a very grey area. the other thing is why do the annual kms matter? why do you people say it is not worth then driving less kms?

[@GuitarsRockForever]

@@rajnadarasan8249 Annual km matters because the running cost is partially out of the pre-tax deduction from your wage. You get a bit more than you just spending your otherwise post tax wage. Any extra fund you have, you cannot just withdraw out as cash. You do the withdraw, the amount needs to pay full tax. So if you drive too less, you don't get much "savings".

[@ROTEsimplemachines]

This video prompted me to search for more content on how this could be relevant in the US. But it also made me think about the problems we have in some industrial circles, where there is a question about "Who is an 'independent contractor,' who is an Employee," which is conflated with Operating a piece of heavy equipment (rather than simply commuting to a regular job as a retail customer), whether it be on the highways, or the "Last Mile." Very interesting concept; thanks for the breakdown.

[@paulcurtis333]

Leasing my current car was the best thing I ever did. And even better, I got it cheap and didnt have to deal directly with the dealer.

[@abijag100]

Very informative and presented in clear and plain English...thx JC

[@ron_zrl]

I did some numbers for an Outlander PHEV lease for a 5 year lease + payout at the end if you plan to keep the vehicle. You definitely save 20-30k> Do the maths between getting a personal loan for the Outlander PHEV (include all the car rego, insurance costs etc) and compare that to a novated lease and do the numbers per month, per year and the total 5 years. Novated lease for EV (and currently PHEV) you will save alot of money, contrary to the comments on this page but please do your own research and see if it fits your budget/lifestyle.

[@DHIRAJDC]

Novated lease charges like 28 % interest, I don’t think its worthy . I did calculate all the tax reductions and the end the charge is very high

[@bikesandbits1000]

@@DHIRAJDC where are you getting these figures from. My Outlander PHEV Novated lease rate is 8.67%. Are you sure you aren't confusing your rate with the residual payment percentage?

[@johnbambo9036]

Novated Leases can become complicated when changing Employer / Becoming Self Employed or When the Car is written off. Just further General Information. Also if planning the Big Australian Trip modifications to a car you do not own could be problematic at the Balloon Point of the Lease. As with anything. Eyes wide open when you enter the land of Contract Law.

[@adrianw7011]

Thanks for the effort, very informative

[@parasinthephilippines]

Unfortunately in the UK the government dictated that all Novated Leases could only be for the dreaded EV only.

[@davidbusch8912]

That’s ridiculous

[@kennethblakeley6536]

Market manipulation as per wef,un instructions

[@fadingbeleifs]

So when are you guys going to finally overthrow your draconian government?

[@robtmcL12]

Sorry to disagree but our NHS fleet choices did include ICE cars and Hybrids. Only thing was, they were much much more to rent than the EVs. I'm onto our 4th lease car, initially the Golf GTes we had ( for 5 years ) were brilliant and cheap. Then our next one was the Audi Etron that was the same price as the Golf GTe so it was a no brainer to get a £62K car for same money as a Golfs £35K. Got the new XC40 twin recharge now so I'm saving close to £50/month from the Etron. Giving the Etron back and seeing they are going for sub £30K, I know we paid just £18K to rent it, who stomaches the rest ? It lost £32K while we only paid £18K including insurance and maintenance.

[@garynew9637]

UK is getting grafted big time.

[@michaelaitken177]

Do your homework and see if it right for you. Remember the car isn’t free and don’t fall for the “tax deduction salary sacrifice marketing.

[@lilth501]

I've been working for over 30 years and I can't believe I haven't done innovated leasing plan which I only started 1 month ago on a budget friendly Mazda. My Mazda cx-3 at 30,450 grand at this stage I've signed up for 2-year contract with a possible extension for the full five. Fortunately I'm able to pay assumed balance if and when I decide to end my contract owning the car outright. So far I'm pretty content not having to deal with RTA petrol cost and running cost.

[@louieisme]

great explanation, one of the reasons I got a novated lease! The best benefit is reducing your taxable income and not thinking about the unexpected maintenance costs.

[@monkeysausageclub]

A few years ago I got royally stung by one of these schemes. HMRC took it on themselves to class it as a company car because the lease company and the company I worked for didn't have a clue.

[@elmin2323]

I'm on 300k a year it's a no brainer ix3 is 89k and it's all pre tax 4 years costing 400 a fortnight compared to 800 for the petrol version

[@privacyplease3593]

thanks for explaining this. Ive just done this on a $65k new car.. I'm feeling reassured about my choice I Did the sums, it felt right. But I fell I understand it much better now. Cheers

[@travisfrost5175]

How much come out of your pay each week?

[@liamandrewartha4803]

Issue I see is almost all of them will not let you modify anything to the car, even if you just want to tint the windows to keep some UV out.

[@244col]

I have used 4 lease companies over my time and not one knocked back modification. Tow bar, Tint, Number plates and even car mats.

[@liamandrewartha4803]

@@244col I'm researching a NL now and it's a common point a lot of the leasing companies put in their FAQs. If the reality is that tint is acceptable then awesome, big tick.

[@slygamer01]

My employer recently started an agreement with a novated leasing company, and we had a group video call with reps from the novated leasing company where they explained how it all worked. I asked if we could do modifications to vehicles, such as wheels and tyres, roof racks, suspension, etc, and their position is that as long as it adds value to the vehicle, they are good with it.

[@onthemark3480]

Bullshit.

[@davidhancock91]

Great info John. I will take the Hybrid Corolla and save the Tesla for the EVangelists.

[@notathome13]

I will go hybrid over ev…. No range cancer for me!

[@timmoylan1478]

Unfortunately you won’t get there extra fb benefits as it needs to be a phev or ev. Hybrids alone don’t qualify.

[@williamvarga4181]

In relation to this issue of cash vs leasing you should also consider what that cash can earn you without spending it. A high yield savings account or some other investment strategy can make it worthwhile not stumping up a large chunk of change for a car. Just something worthwhile to think about when doing the sums

[@daveogilvy5573]

As a fun little FYI, if you use a novated lease to purchase a plug in hybrid while they are still eligible for the FBT exemption the fuel is included in the lease payment taken out of your pre taxed income. This means under the government's own green scheme you are getting subsidised fossil fuels.

[@mongo64071]

This sounds interesting. We don’t have anything like this in the US. The only pretax deductions we can take are for retirement savings, health care saving accounts, and health insurance. . Nothing as detailed as car payments.

[@teepatchong5668]

Depends on your marginal tax rate. If you are at the top tax bracket, then it makes sense. But if you are in the 32.5%, it is a waste of time and rip-off.

[@spencerwhite7071]

Some wise words mate. Not only for me, but my children who are just starting their journey in their careers

[@kheirhie18]

So my situation now is im not on any salary packaging since i have changed employers, and my current job does not do salary packaging and I am paying the novated lease of about 900 a month not including the service, etc. It is killing me 😅 i am new to all this and i should have read more about it.

[@maifantasia3650]

I take it that the guy selling cars at 25:35 didn't meet his sales quota, as evidenced at 23:58. "Box up your desk lamp and indoor plant, here's your DCM and get outta here!"

[@silkysixx]

Missed a trick at 4:35 John; salary sacrifice monetarily benefits the employer by reducing booked salaries and thereby workers’ comp insurance and other expenses pegged to outgoing salaries.

[@DallasSDogger]

Workers comp is paid on gross salaries. The employer makes the payment, which is grossed up anyway, costing more in insurance as no employees wants to take home less.

[@bobbysenterprises3220]

Non stralian here. I think I get the benefits. But it bothers me basically sounding like a govt subsidized way of forcing people to not only replace their vehicle on a routine schedule as well as possible before they would need to. It also makes people have a perpetual car payment. Here even a long car loan is 8 years. My newer car is 11 years old. When I'm done with it anything I get back is mine to keep. Or I can donate or give the car to someone. Seems like enticing people into driving more expensive cars than they could normally afford and having nothing left and no equity when they are done. If you buy something with a real good resale value you don't make money but look at a 2000 wrangler with over 200k miles. Cost around 16k when new. They still fetch 8-9k of on reasonable condition. Plus you got the use out of it. If it was leased would be 3-4 years and limited mileage (here leases always have limited mileage) and then you get to lease another. And another and another. Next step. No one wants to own a car of their own and we have perpetual payments to use a random corporate owned vehicle.

[@frodosadventures8757]

Lots of good info here. Thanks!

[@noodlefoo]

Thank you very much for this video as I am currently thinking about purchasing a BYD Dolphin.

[@FreeFlyerUk]

So, who is paying for people to buy/lease cars incentives for well off people? Answer: Everyone else, that's who. Through their general tax burden. We're subsidising other people buying new cars, even though "we" can't afford one ourselves. That seems fair...... Dooood.

[@214lilley]

Yes and if our stinking government didn't allow life long dole bludgers etc I might give a stuff, but after paying for every other parasite for over 40 years I'm shoving my snout well and truly in the trough.

[@iamguyincognito]

Personal opinion only, but I have found that novated leasing works really well if you are the type of person who takes a vehicle as an everyday living expense and is always going to be - i.e. you're always paying for a car. If this is the case, then you'll always be in a new car that is costing you less to run than paying it out. If however, you want to keep it, the residual payment usually erodes most if not all of the savings made over time. In addition, the fancier the car, the more FBT you pay. Cars with a lower base cost are typically a better deal a they attract far less FBT. Running cost though is usually not too different as fuel, registration etc. don't vary too greatly as a rule (obviously case by case). The changes with FBT for EVs makes a BIG difference and can absolutely see the benefit. But for something like a Ford Ranger, the FBT is actually quite significant and eats away at pre-tax savings. As per the video, make sure you do your homework for all the costs and have a good think about if it works for you.

[@ZennonDamant]

Telsa Model 3 vs Toyota Corolla @ 16:23 Yeah "only" $5 a week! (conveniently doesn't mention the $10.4k difference in the Residual payment at the end after 4 years)

[@rtmpgt]

You can return the car and upgrade to a new one every 5 years.

[@dvk518]

Thanks for the info! Useful

[@The_Slavstralian]

Please be very careful when doing all this to check what the interest rate for the car repayment will be. Depending on the finance it can be horrendous.

[@roamingalone5226]

Great content to explain the novated lease so well. Thank you.

[@kimballscarr]

Generally novated contracts exist between parties with a legal preexisting relationship because the notation signifies a continuation of relationship. I would not say it would or should be used between parties without a continuing often long relationship. For that situation is more akin to ratification in contracts.

[@ev0wat]

Yea but you can’t claim depreciation on the asset through your accountant, so you lose …… 17% per year of the vehicle valuation. The novated lease people get this money. The novated lease also has all the power over the vehicle since you technically don’t own it. You can’t claim additional costs etc. You also might struggle to purchase a home if you’re on the market as it affects your credit still yet you don’t own the asset, if purchase it yourself through finance you can also claim the interest and the asset is under your name and can actually strengthen your borrowing ability not ruin it. There’s good and bad in both novated vs buying yourself under an abn.

[@alanpartington86]

he states in the video its for employees only! All you mentioned isnt really relevant for most people as an employee

[@ev0wat]

@@alanpartington86 yea but employees give workers the options, I know all this info because it’s what happened to me! And if given them option it’s actually best Not To novated lease than actually go novated! Upfront novated works out best yes, after the full term of 5yrs no, getting it yourself works out better.

[@markmacdonald2417]

Great advise thankyou John, and very timley for me as im looking at new cars.

[@michaelmoorrees3585]

If you failed to read the first sentence of the description, this video ONLY applies to Australia. Even if novated leases exist in your country (not Australia), the laws may, and probably are, different. In the US, lease terms are all over the place. Basically simple (which means convoluted) contract law. I noticed in the stocked footage of the exiting employees, they got their stuff in a wooden box, instead of the realistic cardboard box. Usually from an empty box retrieved from the dumpster.

[@robtmcL12]

Not to forget, here in the UK, those that do get an EV for work, not only enjoy the reduced tax burden. Often, work places have EV chargers that are FREE to use for employees. Ive seen 7 KW and 22KW 3 phase chargers at work places so if you are there for 7 hours, you can easily fully charge your EV. So for many, its a no brainer.

[@ricks7583]

Wish you had made this a year or so ago it took me 3 months to come to the conclusion that the savings were real. Have had a model 3 rwd on a lease for A year now. I don’t even notice the pre tax salary deduction. The car is perfect for my use case. The balloon payment is tucked away already. Very happy with my choice.

[@MA77SP]

If I lease a brand new car that was worth 58K and the GST was 5K. My lease repayments for 1 year would cost $720 a week or $34560 for the entire year. After the life of the lease I decide to own the car and pay the residual value of the car it would cost me 38K. So I'm paying $34560 for the 12 month lease then the residual 38k would add a total of $72500! Am I just better off to just buy the car outright in the first place? It seems like I'm paying more than what the car is worth originally. Am I wrong about this? How much tax will I be getting back?

[@markadams5462]

One of the best pieces of information you have ever provided. Can't congratulate you enough.

[@shellez101]

Funny I clicked on this video and I look up and you’re on Current Affair as well .

[@AutoExpertJC]

I'm omniscient...

[@adrianzmajla4844]

How dodgy did they make him look?

[@AutoExpertJC]

I strived for maximum dodgy...

[@mahcooharper9577]

To me it's kinda gross that we're giving tax cuts to wealthy people to buy new cars, and that the tax system is being set up to basically pay for people to buy Teslas instead of Corollas. Surely there are better things we could be doing with that money.

[@Donster888]

Food for thought JohnC. thanks!

[@user-lp9dv3dw1h]

Another way of salary sacrificing is for your employer to make concessional contributions directly to your super. The max cap for this $27500 including the emploer contribution. Can novated leasing allow you to do both concessional contributions up to the max and save up to $6000 and further reduce your taxable income?

[@sheersy2987]

Nice video John. The only other issue I’ve come across with novated lease is that the bank have an issue with it if you go to get another loan?

[@domp8172]

Did you include the residual value mandatory payments when comparing total costs of leases vs finance, cash?

[@jw6968]

Can someone explain in simple terms the downsides of a NL? I can't really see any. I have the ability to control my running costs and can move them up and down as I see fit, I will save over 6k GST on the purchase price, I can use a chunk of my pre-tax dollars to buy the car... yes there is a balloon payment at the end, but the way I work mine out, the total I will be paying is the same as a loan, but the NL amount includes running costs. What am I missing?

[@markandrews2010]

There is GST payable on the residual, so you don't receive the full $6k GST credit

[@pixaim69]

You also pay gst on the after tax component of the monthly payments

[@janebrown7231]

Wiki: A novated lease is a way of providing the benefit of the use of a motor vehicle for an employee via salary packaging without the employer having to actually own the vehicle and also allowing the vehicle to move from employer to employer with the employee bearing the responsibility of the transaction.

[@user-lr8xu4pw4s]

If the novated lease puts hefty $19k on running cost/year when most people actually spend $4-5k/year driving under 10,000. Still understand the math on why running cost in package is so high. Can we lease just the car without bundled running costs ?

[@andy37372]

Well at least you are honest enough to mention you are buddies with the leasing company. You are right the ev ownership thanks to the government's funding becomes great option IF thats what you want..... But for the any other vehicle you failed to point out it is not necessarily cheaper than buying it outright, yes it is a great alternative to traditional finance But according to the numbers you put up for the ranger To buy the ranger outright & cost of ownership according to the numbers provided total cost to you $98,748 With a lease overall cost with owning the car at the end aka paying out the ballon which puts you in the same position as if you own it... Total cost $115,795 Cost to you after tax savings $102,898 So yes much cheaper alternative to a personal loan but it is not cheaper than buying the car you want outright as your "tax savings" disappear to the lease company, so are they really savings?

[@tomglynn8943]

Isnt the GST saving offset by the superannuation loss? Sacrifice your income and you subsequently sacrifice your super and the tax free compounding interest

[@narsil316]

Except to add further to that the finance company who buy the car pay that GST. They claim a credit for the GST but add GST back onto the rent and residual. There is no GST credit on the purchase price for you. I have to say I found this video far from a detailed explanation.

[@lo5tcau5e35]

So for the Tesla (56272) the novated lease costs 71680 total or 17920pa or 344.6pw (237.9pw + 106.6pw residual) or 64799 once (incl 4year costs) a 6881 saving. But that doesn't include the tax write off, that makes a 26896 savings difference over 4years in favour of novated lease. 6724pa could go into my super saving even more tax $, right? If only there was something for excellent casual employees that's hold their jobs for 48 months.... Cheers

[@progaholic123]

If you weren't aware your employer is legally required to offer you a permanent contract after 12 months of regular casual work in Aus.

[@legbreaker2762]

So once the lease period expires you're left with what? A car that's not yours and can't be traded in?

[@ellgee9402]

is the running cost of maintenance and fuel interest free? ie do they apply the interest only on the car or the entire lease running cost?

[@jamiemoyses5036]

Completely free. Only the car payments attract interest. Not only are they free but they are ex gst

[@chrisandshazza01]

Brilliant - great video 🙌

[@joebachmeier6747]

I love hearing from food expert John. He lives burgers and sedans.

[@michaelputnam2532]

hmm....why am I feeling something like "not owning and still being happy"?

[@moparmaster8925]

😂😂😂 WEF Klaus classic line

[@jwazftw4200]

The employer may also stiff you with their FBT they pay on the 'grossed up' car fringe benefits. So the employee has the lease come out of their pre-tax wage, which is good.. But their after-tax pay is also docked for the boss's FBT...not as good. Makes more sense for public hospitals and charities which have higher FBT-free limits to offer their employees.

[@pvda64]

Thanks for the video and doing it without the Fruity language in your normal content as that tends to prevent me sharing them with others who might get upset 😉

[@domp8172]

In the first 7mins mentioned the GST saving or $6130 8 times.

[@scokim]

Can I novated lease the car I'm owning now and how would GST exemption work in such case?

[@peemun4545]

yes you can, they will buy the car off from you and novate the lease to you,

[@HSVJD]

Most customers seeking to take advantage of the generous FBT policy for EV will already have a car (probably ICE). Can we trade-in our existing (owned outright) car for the new novated EV, to decrease the borrowed amount? Or is it just a matter of selling it ourselves and doing something else with the cash?

[@ricks7583]

Depends on the leasing company mine would have, but I chose to sell it myself I got more than I would have trading.

[@michaelbenham7876]

When calculating the total cost of your lease over 5 years, you need to take into account the residual cost of the car and the resale value of your car. A 5 year old Tesla will be worth nothing but a good dual cab will hold value. I once had a hilux for 12 months and between the resale and the balance left in my account it cost me $150pw to do 25000ks before they changed the km rules.

[@travisfrost5175]

So with the Tesla example, that’s over 5 years? So how much approx comes out of your pre tax pay each week?

[@anakinskywalker4113]

Not for me. I’m sorry but I prefer to own my car outright. GST savings or not. I’m not a fan of any type of finance for purchasing cars. I don’t want any companies etc with their mits on my car.

[@peglor]

The whole car finance business is based on convincing people that paying hundreds a month, every month for the rest of their lives, for something they'll never own is normal. The messed up thing is that having the newest possible car is still seen by many as some kind of indicator of success, even if it is all debt.

[@anakinskywalker4113]

@@peglor I prefer to purchase a really good used car with low mileage. That way I can own it outright.

[@peglor]

@@anakinskywalker4113 The best deals are on used cars with high mileage - that's what I bought and have been using almost completely trouble free for the past 10 years. A decent diesel car with a lot of miles will scare many buyers away, so the price tends to be very good. At 100 000 km, when a lot of people already consider the car to be high mileage, most decent diesels are only just about worn in rather than worn out. This type of car (Usually leased as a fleet car and driven by a traveling sales rep and put on the market at 2-3 years old) can be a serious deal because it will have had all its servicing done by the book and will have had enough use to find any teething problems and get them already fixed under warranty. If you live somewhere that the only likely way to cover high mileage in that little time is to do it on motorways or fast A-Roads, which tend to put the least wear and tear per mile on cars anyway, you're on to a winner.

[@agg-lv6qx]

Higher interest, balloon payment, and don't forget the FBT can negate any potential savings. Did my maths and not for me.