Novated Lease basics: The eco car LCT threshold explained in full | Auto Expert John Cadogan

[@AutoExpertJC]

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[@joeyl.2081]

I've leased 2 cars through my employer. One word of warning to anyone considering novated leasing and wanting to apply for a mortgage. Having a novated lease greatly reduces your borrowing power because the bank consider the lease payments an ongoing expense for the duration of the mortgage assessment period (normally 30 years) and not just the lease period. In my case, with all other things equal, removing the novated lease increased my borrowing power by 2.5 times.

[@PradoKakadu]

Excellent advice thanks John. I bought a Tesla Model Y Rwd last year only due to the FBT legislation. Best decision I've ever made.

[@grandpopescu]

Great informative video, another little thing to watch out for (as if it was not complicated enough already) is that it seems to me EV manufacturers are a lot more trigger happy in adjusting prices in response to FX and other cost movements. So ordering and waiting for an EV close to the threshold could end up being a car delivered at above the threshold and a lost deposit if you were to decide to not proceed. We may need some kind of threshold safety buffer 😂

[@letsseeif]

Thanks John. That a sobering but essential message to Australians considering buying a qualifing car in the near future.

[@AdmissionGaming]

I have a novated lease on my 79 one of the best things I’ve done

[@richardbuckingham4329]

79?

[@petesmitt]

@@richardbuckingham4329 Toyota LandCruiser 79 Series..

[@markmay184]

That’s a great video on explaining the ins and outs of Tennis Albo’s latest incentive to knacker the country.

[@teepatchong5668]

Maxxia Novated Lease is a rip-off. My wife wanted to buy a Tesla Model Y which is AUD$76,000. The proposal from Maxxia was pre-tax payment of $707 per fortnight for 5 years followed by a $21300 balloon payment. The finance lease interest is 12%. Total cost of the Model Y after 5 years is AUD$91,910 + $21,300 = AUD$113,210!!?!? A markup of $AUD$37,210. All the while, the Maxxia consultant kept telling my wife to focus on the ESTIMATED OUT OF POCKET (FAKE MARKETING CON) $480.65. If the pre-tax payment were $480.65, then the purchase of the car would be a no-brainer. ($480.65 x 26wk x 5 yr + $21300) = AUD$83,785 less tax savings from salary saccrifice of $16,000, the car costs is $67,785. Maxxia is a joke, their Car lease proposal is deceptive and misleading. I feel like making a complaint to ASIC about this financial trickery.

[@bv9735]

Isn’t the $480.65 fortnightly payment fixed though? Am I missing something? I’m looking into it myself and trying to get all the facts.

[@teepatchong5668]

@@bv9735 No. The pre-tax $707 is fixed. That's what Maxxia takes out of her gross salary before salary sacrifice every fortnight. Maxxia's "OUT-OF-POCKET" $480.65 calculation is based on the $707 less income tax savings because she salary sacrificed the pre-tax amount $707. Her hospital salary is approximately $70k. There should be regulation requiring lease/loan providers to state the actual total cost of the financial product. Something like mobile phone plans where phone companies need to mention the total cost of their mobile plans.

[@dopeddie]

The calculation should be the out of pocket repayment minus the annual running costs multiplied by the term + the residual X 1.1 (gst) Your calculation is correct but you’re not factoring in the pre-tax dollars you’re accessing to water down the higher interest rate. Having said that Maxxia is quite expensive. Try my formula and you will see it’s cheaper to lease with no fbt rather than paying cash.

[@mattoshannessy8984]

Hi John, very helpful and appreciated content. Wondering if you, or anyone else, would have a view on indexation of $84916 from July 2023. Eg. Thinking about cars around the threshold which might not be delivered until July onwards. Would be great to be able to order now (given waits on many models) and get slightly higher spec if indexation reasonably able to be estimated. Eg, does history show a cpi increase (which would be material at the moment). Thoughts re indexation appreciated.

[@johnoneill1011]

Thanks JC. Well explained, with good examples for the innumerate- which is most of us these days. Kinda related: My G01 X3 was built in Spartanburg in FTA "Murica, so zero import duty. However, some imported X3s now come from Rosslyn, Sud Afrika, which incurs import duty. This may partially explain price rises and equipment level downgrades, although the "chip" shortage takes much of the responsibility. The IX3 EV comes from FTA China.

[@dankeen4030]

Thanks John. Waiting for the plug in Tank Hybrid. Quick pro tip, fold the sleeve of the gloves, on the wall behind you, to keep the creepy crawlies out. Always stamp on your gloves before use as well. Enjoy.

[@seanworkman431]

There is only one creepy crawly in that fat cave and it don't fit in a glove.

[@jasoncee666]

John has a clean man cave unlike your stinky, filthy, insect feasted dump 🤣

[@dandyroth]

Does it ever make sense to go for a lease / novated lease instead of just buying the car outright then selling it when you want to move on? And especially buying used to avoid that initial depreciation

[@kappa7]

GST is a bit more complicated than you suggest John. GST is still paid to the dealer but becomes an input credit for your employer and/or the finance company and the lease amount (loan payment typically at exhorbitant rates) is based on the ex-GST value. When the lease ends you will need to pay the GST on the residual value of the vehicle (which ranges from 65% for a 1 year lease down to 28% for a 5 year lease) - so you're really deferring and saving 1/3 - 2/3 of the GST. With a non-EV you would typically get fuel GST free - I wonder if you could somehow get this benefit for at-home charging...?

[@timblaxland294]

Since you can't normally show a direct expense for at-home charging, I would say no. But you could include public charge station charging costs in a fully-maintained novated lease, in my view.

[@gboi264]

Agreed..which is why I've never been a fan of novated lease

[@ScottMurrayBestFamilyCars]

JB Hi-F- still flogs extended warranties like they're a Ford dealer in 2002 selling you a BA Falcon.

[@robverri7718]

Thanks for a great yet simple explanation. So, if you’re slightly over the limit, and you negotiate the price down with the dealer, is that ok? Or does the limit rely on RRP?

[@Janggut40]

Thank you John for the review.

[@Bronson9822]

Hi John, i just signed a novated lease on Friday but a personal issue come up over the weekend. Can i get out of the lease until i have sorted the problem and let the lease company know by Monday morning ? I haven't received the vehicle and finance hasn't been paid as yet. But paperwork has been sent to HR or payroll to sign on the Friday

[@aussauce]

Hi mate just come across ur channel. Is there a video explaining NL? As in if it’s worth it or not?

[@351tgv]

I'm expecting a massive "Cadogan Melt Down Rant" at the Wheels Media COTY winner for 2023. Making popcorn for it now.

[@gregrankin8073]

😂 some jokes just never get old

[@petermdoolan]

What is the best Tesla Model 3 that should qualify, would the long range qualify, they seem to sell heaps more Model 3s than any other electric car

[@MrTroytroy]

Great episode - informative - thanks 👍

[@seanworkman431]

Would appear the dash cam comes later, bit crappy that it is not a Nationwide equal cost with insurance and rego not being part of the costing. If the ATO actually simplified the tax codes we would be less reluctant to pay.

[@kyle782]

Wonder if someone is going to try and side load the extras with the dealer but after the fact, after receipt of the car.

[@gboi264]

Good video John but would prefer your clearly tell listeners you are not saving on novated leasing you're simply deferring the GST payment to end of the lease period! GST is part of the residual.

[@grove2654]

Does this total still apply to second hand cars that are leased. For example the car is 3 years old and costs $80000 drive away however new it was $120k so clearly above the threshold. Does it still qualify for the fbt benefit?

[@RobertSmith-di5ll]

So, its the purchase price before discount?

[@paulredfern2252]

John ,please explain how to clain the cost of recharging as there needs to e a metered connection installed at home this running cost claimable needs discussion, if just plugged into a wall socket with the cale that comes with the car, there is no way to claim the recharge cost at all. *easifleet wesite

[@effbee56]

Maybe this will encourage some dealers to discount the price to below the threshold on EVs with borderline pricing in order to increase sales?

[@101CBR600RR]

Super useful! Thanks for the clarifications! :)

[@nigelmacquillan7211]

I'm with NSWHealth. They take half the tax savings on it and partner with a leasing company that gives 9.5% after haggling on the finance. Cheaper to go with a bank loan (can get as low as 4.89%) over the course of 5 years etc. So much for helping out staff.. lol.

[@davidhauser2665]

Is that with Maxxia?

[@pasilinnosto6712]

@AutoExpertLC is this true. lease companies charge 9.5%?

[@buddmaster]

Hi @John In NSW stamp duty exception threshold for ev is different to gst exception threshold. So even if your car is under $84,914 you will still need to pay the stamp duty as that threshold in nsw is $78,000. Also the quote from my lease company interest rate isn't locked in until the car is ready for pickup. Meaning you may end up paying back an interest rate closer or above 9% due to rba rate rises. So is it really worth the ev incentives going through novated knowing how much you end up on paying in interest and fees to novated lease. For example the quote I have is for 36 month period the residual value after this period for is still around 50%. Note: gst rebate is also capped at $5,540. So still need to pocket out stamp duty which is abt $3300 and the gst balance of abt 2k 😅

[@zeno15sti33]

Why don't you guys do Full size American Trucks.

[@jzmmm]

I was looking at a novated lease recently, but i was told i can't do 100% salary sacrifice, it ended up being more like 50%. Is this normal? I was under the impression it was supposed to be 100%.

[@bomberaustychunksbruv4119]

I looked into Novated Leases recently as my Wifes (teacher) school had a visit from a Lease Company . Also a few of her colleagues have Novated Leased their cars and so I was able to ask what they paid etc and what the residual was at the end, I was a used car salesman and know a little about the motor trade, I also buy and service my own vehicles, and so save a lot of money etc as many of you do. But the question you have to ask is, where do the lease companies make their money?, why is it worth running a lease company?, why do they visit schools to showcase leasing, well first lets cover their main selling points - Leasing is Pre-Tax and so you save there, also fuel and servicing is on the card and is Pre-Tax - so great, you are only paying tax once for petrol, a win for the owner. These benefits are pushed by them, maintenance is on the card also, factored into the lease. Nothing new there really, it's in the blurb. BUT - when you lease a car in this way you pay the fees, yet at the end of the lease there's a shortfall, and you trade in and go to the next car, this is not hidden in any way - its in the terms . If you buy your own car with a loan you pay ALL outright, and its yours to trade in or sell etc, pretty basic. The shortfall on the lease is a clue, but sometimes the lease term is shorter than a Car Loan and so - well of coarse there's going to be a shortfall, fairs fair. But its bigger than it should be. So where does the lease company make the money?. It's on the maintenance, the allowances for maintenance are set higher than required and after the lease runs out you have paid money into maintenance that wasn't needed to be spent by the Lease company and the company gets to keep this. This is where they make their money and it can be ALOT. And this is why it's better to buy a car with a loan for maybe year longer than the Lease would be and own it outright at the end. I'm not saying this to have a go at lease companies, many people need the service they provide. It took me ages to figure this out, months in fact, and we were going to lease a car, a NEW car, which is exciting. However after finally figuring out what was going on, what I then did was buy a 6 month old vehicle with Bank Car Loan, and even though I pay my own maintenance and fuel, I'm way ahead even without the pre-tax offset. Get a quote from a Lease company for a car, add up the itemised maint. allowances, and then work out how much the service costs are for the car are including tyres etc. There will be a big gap, and sure some cars MAY need 3 sets of tyres on 2 years, but mine hasn't. :) Hope this helps anyone wondering what to do re a Lease.

[@jarrydf]

Not sure where you got this info from but it's totally wrong. Any surplus in your account at the end of the lease period gets refunded back to you through payroll and is taxed accordingly.

[@killingtime7350]

An what about Death Star abandoning Arsetralia…..cheers

[@craigquann]

You can almost do a spin off channel. "Man cave mathematics". Or at least a series. Go in to the finer math of physics or auto finance etc.

[@sticustom]

I’ve had 4 cars on a Novated lease. There’s positives and negatives.

[@johnoneill1011]

Biggest -ve is that a few hundred thousand of us are going to lose our jobs during the forthcoming RBA-engineered recession. When you leave your job, you remain liable for all future payments on that novated lease, as the whole point of such leases is to protect your employer from liability. This allows a wider choice of user-chooser vehicles. Back in the day of company cars, you got a choice between a Falcon and a Commodore, because the boss could easily redeploy that car when you left or were terminated.

[@metricstormtrooper]

So it's just like Negative gearing for buying a car, and just as Moral?

[@milamber319]

Given that, unlike housing, cars are not a limited resources in which individuals can make long term investments and take advantage of their tax status to make purchases over new car buyers....no I can't see how it is.

[@craigcullen4171]

Down side at the end of the lease you don’t own the car, limited to 15,000 klm max travel annually, any extra wear and tear is on you, balloon payment if you want to keep it at end of lease. Also at end of lease you have paid fully for a car you do not own plus interest, tax saved not that much, as you can get the same tax break sacrificing to super, mortgage or school fees, which are assets which a car is not.

[@kevinmccrohan8210]

Having leased 2 cars and about to trade in latest one for leasing 2 ev’s. Prior to the fbt changes what you say was very relevant and the advantages minimal if at all but they worked for our situation. With the changes to the fbt though and benefits to our personal situation that has well and truely fallen into the positive side. The balloon payment is a big issue and usually solved with trade in but still a risk. Our trade in on current leased car is over twice the balloon payment so all good this time. Last time it just covered it. If your not trading in then something to be aware of

[@davidbrayshaw3529]

You need to examine your position very carefully before you choose a novated lease as an option for financing a vehicle. And you need to be brutally honest with yourself about the real costs involved and the way you are going to use/abuse a vehicle. According to my last accountant, very few people are. FBT concessions on EV's are making novated leasing look a lot more sensible for a greater number of people than they used to. But you still need to have a large disposable income, preferably in a high tax bracket. It costs to live. How much do you want to spend? For me, when it comes to cars...nothing. For others, that's not the case.

[@catskillallcats3210]

Still not feeling the love from Govt for those who can't access (GST free) EVs. The No-Novated disenfranchised. C'mon Albo level the playing field.

[@MattBlack6]

Boom, spot on.

[@brettleonard8602]

Haha you think politicians give a shit. Oh mate. No matter what party is in our Country continues to decline. 2 wings of the same shit bird. They serve themselves, big business and the WEF.

[@davidhancock91]

This system excludes many potential buyers. Like self funded retirees, like myself. Luckily you couldn’t get me into an EV anyway. I have recently bought myself a late model Audi A6 S line twin turbo for about 25% of its new price. Yyyeeeessss.

[@MattBlack6]

@@davidhancock91 good luck.

[@catskillallcats3210]

@@davidhancock91 As a self funded retiree myself I could buy multiple shit box Audi XXXs but choose not to, because I think about things other than myself. Enjoy your discounted, polluting, shit box Audi while it lasts. We will all be dead soon and you may even be adding to the air pollution in your local environment that will contribute to your own early demise. Have fun (while it lasts).

[@andrewd4890]

This is an example of a presentation that would be far more understandable if the numbers were up on a whiteboard and included in the video as you described them. Run that entire presentation again without your script in your hands, especially the calculations subtracting the widgets from the starting price and with the threshold figure right there for comparison. As it is, the viewer has to form a mental picture of the whiteboard or be very good at taking notes while you speak. Not everyone can do that “rooly” well. But, good content and good advice. I am so glad my days of leasing vehicles are well and truly in the past. I’m still suffering “sticker shock” at the prices of these EVs. For that money I’d expect them to take me to the moon if not Mars. But no, it’s just down to the supermarket or the station for a city person.

[@bradleyfleming]

The great thing about KZbin is that you can pause, rewind and even rewatch the video multiply time.

[@mahcooharper9577]

Tax cuts for people who can buy $85000 cars doesn't seem all that egalitarian to be honest...

[@johnoneill1011]

It's a reward of $20k to $30k tax free over the term of the lease for smug virtue signallers, most of whom will live in Teal electorates..Total disgrace and an affront to hard working people in the 'burbs.

[@Grant80]

Agree doesn’t make sense

[@boskojovanovic2770]

Couldn’t disagree more

[@mahcooharper9577]

@@boskojovanovic2770 how are tax cuts for the rich progressive?

[@GuitarsRockForever]

Tax cut on EV.

[@margarita8442]

I want this darlinks

[@luke_rr4474]

Hey John, can any vehicle be put on a novated lease?

[@mini696]

No.

[@AutoExpertJC]

Most new vehicles and used up to 7yo I think.

[@TheBillyo13]

Any new vehicle can. I think if it’s a second hand vehicle it needs too meet certain requirements such as km’s already on the clock and age at the END of the lease.

[@gregrankin8073]

Woo Hoo 🤓

[@MattBlack6]

I'm not on a Salary. I would have thought Labor would be more supportive.

[@theairstig9164]

Oh they are supportive alright. Supportive of the financial services industry, of the business council of Australia, of the new car sellers and of their friends on the cross benches in the senate. Just not the self employed and others who can't get access to novated leases through private rulings. Its like the difference between being friends and friendly

[@w_stanky]

They are supportive, supportive of globalists, big business and big pharma.

[@AllTerrainAction]

ok

[@PSY7HON]

The person who creates hot swappable batteries for ev's and puts them next to the gas bottles at servos wins.

[@ScottMurrayBestFamilyCars]

You know an EV battery weighs hundreds of kilos, yeah?

[@PSY7HON]

@@ScottMurrayBestFamilyCars didn't say you had to lift them. Have you seen the Kenworth truck that has a battery that gets removed by a forklift from under the bonnet?

[@w_stanky]

This is going to be funny to watch, they’ll just keep taxing reliable affordable fossil fuels to prop up a fake green dream until it all collapses. By that stage China will be ready to pounce.

[@aliendroneservices6621]

1:44 This is why the income-tax needs to be deleted.

[@Steve211Ucdhihifvshi]

I'm thinking of it because I find it totally ducking bullshit that someone on a 150k salary working their ass off 60 plus hours a week with fuck all social life gets hit nearly 50k tax.... yet a multi billion dollar company like Google walk away with a $0 Tax bill here....

[@damodoesall6240]

I always want to be first, but never am

[@gregrankin8073]

Heads up, kid. It’s not all that it’s cracked up to be. It’s just something you can tell your grandkids about, that’s if you have any.🥲

[@gregrankin8073]

Okay (for once in my life) first

[@dougstubbs9637]

As a Ming Mole would say…”The Customer always comes first.”

[@gregrankin8073]

Now that I am almost a fossil, I don’t have that problem any more 🙁

[@MasterofNoneTV]

Why would you just buy these accessories, after market!! Don't buy it at the stupid dealer . Get the 15 amp charger after the fact.

[@ashm3335]

I agree, Maxxia novated lease is certain a rip off

[@gregrankin8073]

Sorry kids, Nuthin’ gay about that Tee. Where’s the RAINBOW?

[@busboy262]

I'm not Austrailian, but you sure attract my interest when you say that Austrailians can purchase a car with pre-tax money. It also gets the imagination working, so I have a question. Is there a minimum lease term length and is there a minimum residual value that has to remain at the end of the lease? In other words, could I lease a car for 2 years, pay down the value of the car to $1AUS and buy it at the end for the value remaining? Perhaps I could then sell the car then rinse and repeat if the program still exists. Or is this a one-and-done proposition? I don't know anything about Austrailian payroll or consumer taxes, so maybe this makes no sense.

[@seanworkman431]

Ask an accountant, our tax codes are supposedly quite simple but not in practice. For example, we had import duty on vehicles to protect our car manufacturing but we don't make cars anymore, haven't for years but still pay import duty on European cars.

[@justicebroker2271]

Short answer I believe is no. I haven’t novated leased for 12 years so what I say won’t be 100% correct, but back then you had a balloon payment at the end like 30-60% depending on how long your lease was. You can lease a new car for up to 5 years and a second hand car can be bought then leased up to an age of 5 years old.

[@busboy262]

@@justicebroker2271 It would make sense that they would have all the "exploits" covered. For instance, including a tax that the consumer would not be paying within the program's price cap seems almost deceptive imo. Thanks

[@timfreeman2603]

Novated leases are a bit shit, sole traders like myself are excluded.

[@ghs7714]

Nice gay t-shirt John!!! From Which department store?

[@dougstubbs9637]

That tee shirt was Houstons’ problem.

[@jasoncee666]

At LOWES 🤣