@@BoxCuttahzfairly severe early payout penalties. I was quoted nearly $3k to insure against that possibility - if the insurance costs that much, the penalty must be very nasty.
@@richard7071You don’t need to pay out the lease, you could continue making the finance payments to the bank directly (although obviously wouldn’t be making a tax savings on your running expenses). The early termination fee isnt too hefty, but depending on how far you are into the lease and the interest rate, the payout might be more than what the car costed because you’re still paying off the interest
That shouldn't be too much of an issue if you are smart about it, get the lease with 10% of the car value saved up use that in either high interest savings or etfs, then if the company releases you you either have some weeks to look for a new job or enough savings to pay for it outright
Nice one Reece and in your next one on this, can you give a demo of how to use Excel spreadsheet to do some comparative analysis and include the compelling EV FBT options in Australia available now for say a Tesla 3 or Y?
I began writing the script for the video and realised that doing the calculations might not be beneficial for the majority of people. So instead, I'm currently in the process of revising the script to offer insights into how to analyse a quote for novate leasing. This will help you determine whether opting for novated leasing would be more advantageous compared to an outright purchase. Stay tuned its coming. I will pin a comment to the top of this video once its out!
@ReeceCaruso I am looking forward to your new video. My signed lease has pre-tax, post tax, and residual payment, resulting in me paying 4x the actual cost.
Hi, I am looking at either purchasing a car and deciding between outright paid in full or a novated lease. Is there any lease length or Regarding persons income and tax benefit, is there any income level where a novated lease becomes more financially beneficial compared to buying outright upfront? Or will buying outright always be ahead financially? I have searched online about this and of course what comes up is general information from novated lease companies saying how wonderful a novated lease is.
I haven’t responded for a while because I wanted to take the time to write a detailed response breaking it down but unfortunately the only answer I can offer is that it really is not a simple one to break down. You really need to factor a whole bunch of things into the novate lease to determine the best way forward. Your income, interest rate, car that you want to purchase, loan term will all play a significant role in the calculation. Simply put in almost every instance it will be more beneficial to buy the car outright than to novate lease it unless you are earning a significant amount of money. The shorter the term, the less you’ll pay in interest overall but your repayments will be higher. If you want send me an email using the one on my about page with some info and I’ll take a look to calculate the optimal option for you. Thanks for being patient with me!
@@ReeceCaruso Thank you for your reply, I greatly appreciate it. I ask because I keep asking myself am I missed something? People where I work rave about novated lease and I thought I should look into this. I understand everyone has different tax situations. I have spent many hours looking at this and crunching the numbers. To me it seems buying outright is better. An additional factor which is never spoken about in terms of cost for the novated lease is the $950 yearly commissions the novated finance company was adding on. I understand no company or no one does anything for free. Once again I appreciate your reply.
It comes down to the GST saving of the depreciation part mate. Also the tax benefit of the package. When you are doing calculation, you need to factor in the 5.5% saving account return of the $ you pay outright. What you are not saving is the FBT ECM part. In short, if you are buying an EV or a cheap car, it's worth it for longer run because the ECM is low and the other expenses are tax free. If you are buying expensive car, short term novated is worth it for the depreciation alone
@@o0prince I was looking at a car not captured u der the current scheme by the federal government to increase the take up if EV. The calculations are different for an EV because of the substantial reduction the federal government. Having said that a person then needs charging station, solar panels and battery. Otherwise you might as well just buy a normal car.
Hey Reece! Just wanted to say thanks for this awesome video! Your explanations about novated leases in Australia were really helpful, and I'm seriously considering signing up for one. Could you please share how you do the maths and what other factors you consider? Can't wait for your next release! Thanks again!❤
@@FeignednoobHey! Sorry about the delay. I have the script written but need to find time to record and edit the video. Planning to have out just after Christmas! Thank yo for following up and holding me accountable. It is coming!
For how long is the best lease? I have been looking at 2-3 years but wondering if 1 year is actually great as the residual value is 65.63% and therefore the remaining value of the car is already quite low for paying it out.
I'm currently in the process of reviewing the calculations video and am stuck at this point too. All signs point towards a 13-month term being optimal for novated leases, I haven't got a specific answer though. Each person's circumstances vary, and the intricacies of this lease type involve a significant array of factors that require careful consideration.
Lease company nowadays are cashing in most of the tax benefits. The longer you stay with them the more you pay for more expensive insurance, interest rate and other things. Anything beyond two years is not worth it for most people. In current economic ,1 year is probably the best if you have enough cash to pay out the residue. Even if you don't , you can look at option to finance with whoever offers the best rate. Interest rate will go down in 1 year without a doubt.
Not quite. Typically, at the end of the lease term, you have a few options but these most likely will be determined at the begging of the lease. Return the Car: Similar to leasing a house, you can return the car at the end of the novated lease term. Purchase the Car: Some novated leases offer you the option to purchase the car at the end of the lease term by paying a predetermined residual value. This is often a percentage of the car's original value. Renew or Extend the Lease: Depending on the lease agreement, you may have the option to renew or extend the lease for a specified period. Refinance or Pay Outstanding Balances: In some cases, there may be outstanding amounts or balloon payments at the end of the lease. You might need to either refinance these amounts or pay them to take ownership of the vehicle.
Can you elaborate on why you believe that? Once you do the maths it should be pretty clear which is the better option and in some circumstances it would be better to buy outright without a doubt.
@@ReeceCaruso short term savings sure. But to have that much capital tied up in a rapid depreciating asset (especially EVs) is not wise at all. The interest on a loan is far cheaper than the capital depreciation
@@aroy8094what you’ve actually highlighted then is buying an expensive car in cash or leasing an expensive car which depreciates quickly are both bad options
Thanks for the information, are you releasing the novated lease calculation guide soon?
The next video is out now!
The biggest risk is if you get made redundant you are screwed. The way companies are constantly restructuring these days it's a very real risk.
This is a great point! Absolutely a consideration before signing anything
What happens if one does?
@@BoxCuttahzfairly severe early payout penalties. I was quoted nearly $3k to insure against that possibility - if the insurance costs that much, the penalty must be very nasty.
@@richard7071You don’t need to pay out the lease, you could continue making the finance payments to the bank directly (although obviously wouldn’t be making a tax savings on your running expenses). The early termination fee isnt too hefty, but depending on how far you are into the lease and the interest rate, the payout might be more than what the car costed because you’re still paying off the interest
That shouldn't be too much of an issue if you are smart about it, get the lease with 10% of the car value saved up use that in either high interest savings or etfs, then if the company releases you you either have some weeks to look for a new job or enough savings to pay for it outright
Thanks for your hard work, kept it simple.
You bet
Nice one Reece and in your next one on this, can you give a demo of how to use Excel spreadsheet to do some comparative analysis and include the compelling EV FBT options in Australia available now for say a Tesla 3 or Y?
Great suggestion!
Have you posted the next video yet? This is great
I began writing the script for the video and realised that doing the calculations might not be beneficial for the majority of people. So instead, I'm currently in the process of revising the script to offer insights into how to analyse a quote for novate leasing. This will help you determine whether opting for novated leasing would be more advantageous compared to an outright purchase.
Stay tuned its coming. I will pin a comment to the top of this video once its out!
@ReeceCaruso I am looking forward to your new video. My signed lease has pre-tax, post tax, and residual payment, resulting in me paying 4x the actual cost.
Thank you! Can you tell me when the next video is coming out?
I am scripting it as we speak
Should be within the next few weeks!
Didn't even mention about depreciation of the vehicle and FTB
Hi, I am looking at either purchasing a car and deciding between outright paid in full or a novated lease. Is there any lease length or Regarding persons income and tax benefit, is there any income level where a novated lease becomes more financially beneficial compared to buying outright upfront? Or will buying outright always be ahead financially? I have searched online about this and of course what comes up is general information from novated lease companies saying how wonderful a novated lease is.
I haven’t responded for a while because I wanted to take the time to write a detailed response breaking it down but unfortunately the only answer I can offer is that it really is not a simple one to break down.
You really need to factor a whole bunch of things into the novate lease to determine the best way forward. Your income, interest rate, car that you want to purchase, loan term will all play a significant role in the calculation.
Simply put in almost every instance it will be more beneficial to buy the car outright than to novate lease it unless you are earning a significant amount of money. The shorter the term, the less you’ll pay in interest overall but your repayments will be higher.
If you want send me an email using the one on my about page with some info and I’ll take a look to calculate the optimal option for you.
Thanks for being patient with me!
@@ReeceCaruso Thank you for your reply, I greatly appreciate it. I ask because I keep asking myself am I missed something? People where I work rave about novated lease and I thought I should look into this. I understand everyone has different tax situations.
I have spent many hours looking at this and crunching the numbers. To me it seems buying outright is better. An additional factor which is never spoken about in terms of cost for the novated lease is the $950 yearly commissions the novated finance company was adding on. I understand no company or no one does anything for free. Once again I appreciate your reply.
It comes down to the GST saving of the depreciation part mate. Also the tax benefit of the package. When you are doing calculation, you need to factor in the 5.5% saving account return of the $ you pay outright. What you are not saving is the FBT ECM part. In short, if you are buying an EV or a cheap car, it's worth it for longer run because the ECM is low and the other expenses are tax free. If you are buying expensive car, short term novated is worth it for the depreciation alone
@@o0prince I was looking at a car not captured u der the current scheme by the federal government to increase the take up if EV. The calculations are different for an EV because of the substantial reduction the federal government. Having said that a person then needs charging station, solar panels and battery. Otherwise you might as well just buy a normal car.
Hey Reece! Just wanted to say thanks for this awesome video! Your explanations about novated leases in Australia were really helpful, and I'm seriously considering signing up for one. Could you please share how you do the maths and what other factors you consider? Can't wait for your next release! Thanks again!❤
Glad it was helpful!
The calculation video is coming soon. Stay tuned!
@@ReeceCaruso can’t wait! Any updates?
@@FeignednoobHey! Sorry about the delay. I have the script written but need to find time to record and edit the video. Planning to have out just after Christmas! Thank yo for following up and holding me accountable. It is coming!
Very well presented...thankyou
Glad it was helpful!
Hi Mate... where do I find the calculation matrix to know how long the lease is optimum
The latest video on the channel!
Thank you
You're welcome
For how long is the best lease? I have been looking at 2-3 years but wondering if 1 year is actually great as the residual value is 65.63% and therefore the remaining value of the car is already quite low for paying it out.
I'm currently in the process of reviewing the calculations video and am stuck at this point too. All signs point towards a 13-month term being optimal for novated leases, I haven't got a specific answer though. Each person's circumstances vary, and the intricacies of this lease type involve a significant array of factors that require careful consideration.
Lease company nowadays are cashing in most of the tax benefits. The longer you stay with them the more you pay for more expensive insurance, interest rate and other things. Anything beyond two years is not worth it for most people. In current economic ,1 year is probably the best if you have enough cash to pay out the residue. Even if you don't , you can look at option to finance with whoever offers the best rate. Interest rate will go down in 1 year without a doubt.
Thanks 👍
No thank you!
Can you just give the car back and the lease is over at the end like another lease (say leasing a house) or do you have to pay the remaining balance?
Not quite. Typically, at the end of the lease term, you have a few options but these most likely will be determined at the begging of the lease.
Return the Car: Similar to leasing a house, you can return the car at the end of the novated lease term.
Purchase the Car: Some novated leases offer you the option to purchase the car at the end of the lease term by paying a predetermined residual value. This is often a percentage of the car's original value.
Renew or Extend the Lease: Depending on the lease agreement, you may have the option to renew or extend the lease for a specified period.
Refinance or Pay Outstanding Balances: In some cases, there may be outstanding amounts or balloon payments at the end of the lease. You might need to either refinance these amounts or pay them to take ownership of the vehicle.
Agree with everything except for buying the car outright. That is terrible advice
Can you elaborate on why you believe that? Once you do the maths it should be pretty clear which is the better option and in some circumstances it would be better to buy outright without a doubt.
@@ReeceCaruso short term savings sure. But to have that much capital tied up in a rapid depreciating asset (especially EVs) is not wise at all. The interest on a loan is far cheaper than the capital depreciation
@@aroy8094what you’ve actually highlighted then is buying an expensive car in cash or leasing an expensive car which depreciates quickly are both bad options
Why are you moving your head side to side is so distracting is it a disability??
Yes its not having a Porsche 911itis