Now the Fringe Benefits Tax (FBT) to which you would otherwise be subject for enjoying all this can be curbed, or even cancelled, by forking out for a bit of the cost after tax. It’s called the “employee-contribution” method of paying.
Your first check, Cath, is whether the income-tax savings from the fact at least part of your repayments are pre-tax – or salary sacrificed – outweigh any FBT triggered.
I don’t know your salary or how much you drive but let’s assume, for this comparison, you make $90,000 and clock up 30,000km each year, as inputting these figures to Maxxia’s online calculator get us pretty close to those you cite.
Yes, the loan is at a competitive rate. Borrowing $57,000 over the identical five-year period would mean repayments of $480 a fortnight and a total of $5,460 in interest.
Of course, then you have to pay all the running costs on top.
If you instead took out a lease on the reduced cost of $52,087, you would pay the $674 inclusive that you say, of which about $290 represents running costs.
Consider getting a good second-hand car. This can save you money and you’ll have more cash for other things like insurance
However, the after-tax cost is actually $440 a month equivalent (based on a $90,000 salary).
So Paul Moran, principal at Moran Partners Financial Planning, says if the total running costs of the car were more than $150 a week, then the novated lease looks like a good idea.
However, don’t forget to factor in the residual, or balloon payment, on the lease of $14,324.
Will you have the cash or need a new lease or loan?
If you want to keep the car you will need to find the funds for this. Alternatively, if you plan to upgrade again then the trade-in value needs to cover this cost.
ASIC’s MoneySmart has another take on it all as well: “Consider getting a good second-hand car. This can save you money and you’ll have more cash for other things like insurance.”
It appears that $57,000 is a lot of money, no matter how you repay it.
Financial educator, commentator and author, as well as a qualified financial adviser and stockbroker.