Salary Packaging Lease Vehicles

yabby6 · 26-04-2008, 08:33 PM

Hi, I have a salary packaging question to ask, hopefully someone can give me some answers.

I know how it all works and that the lease companies buy large volumes of new vehicles to get discounts, but I want to know if any of them allow leases to be made on second hand privately sold vehicles? I've heard of people selling their own cars to the lease companies and then leasing them back for another term, so I would assume it would be ok (??), the reason I'm asking this is my plan was to wait until the FG is "ironed out" then lease through my work a new manual XR6/XR6T with a few options (sunroof, leather seats, fpv wheel, 6sp, rims, premium sound) and sell the BA, but if i can... why not lease a 2-3 year old F6 with all those things standard all i have to do is find one with a sunroof.
About a month ago I got an online price from the lease company for a BF2 with update XR6 N/A with the above options, all up it came to 48k for the auto 6sp and more for the manual because with the manual the wheels and premium sound weren't included iirc, and that was just for an N/A. Lookin around today second hand turbo's and f6 going cheaper than that by a lot.

Anyway so if anyone is a bit more informed on the topic I'd love to hear from you.

Cheers,

Brett.

yabby6 · 26-04-2008, 08:56 PM

had to make another post so i could subscribe email notification.

Green X · 26-04-2008, 09:16 PM

I think you can as long as it's no older than 5 years.

JG66ME · 26-04-2008, 10:06 PM

XR6 on a novated "operating" lease, this includes car, fuel, service, insurance and one set of tyres rer year based on 40,000k per year over 3 years is about 22k per year. This is pre tax. If your on less that 100k I am not sure its worth it.

I have looked at second hand vehicles and its definatly not worth it. If you go through a lease company like Interlease they will get the fleet and dealer discount, about 7k. Makes 2 year old cars look expensive.

Steve

yabby6 · 26-04-2008, 10:23 PM

So you're sure this interlease company allows the leases on secondhand privately purchased vehicles?

I don't 100% follow...

The 48k I mentioned above was purchase price for the lease company not my repayments if that's what you mean.

"I have looked at second hand vehicles and its definatly not worth it."

I've done the numbers based on a brand new car at 48k price and I will be saving money if I sell and take up a salary packaged lease. (Paying more per week but tax gap makes up for it). Saw an 05 F6 today for $42k fitted with everything that I wanted as far as options go (and most of it was standard to the FPV range). I don't see how this could not be a better option could you please elaborate.

If it's that ~$7k discount that you think makes it not worth pursuing a second hand vehicle, shouldn't the ~$20k price difference on a new F6 compared to second hand one make up for that? Or even the ~$6k from new XR6 N/A with options from first post difference to the s/h F6 that already has them all, still ~$1k left over N/A side, but that's the difference between brand new N/A and 3y.o F6... sure it's 3 years old but that doesn't really bother me because it would be a lot more fun than the N/A.

Cheers,

Brett.

edit: and the quotes i have acquired so far have all included tyres, fuel, servicing, maintenance, rego etc I can't remember if i ticked the 25 or 40k boxes but one of the two, and iirc i opted for 5 year terms in previous quotes.

BPXR6T · 27-04-2008, 12:01 AM

Yes, my old accountants packaged a second hand BA XR8 for me no probs at all.

Silversurfer · 27-04-2008, 01:32 AM

Try SMB as they also do used cars under 5 or 6 years.
I know this as I was looking at the difference between a new territory or 2nd hand and either way was possible .

Quote given included all running costs etc.
Good Luck
Muzza

JG66ME · 27-04-2008, 08:32 AM

Brett

I got a quote on a XR8 with Luxury pack, it was about 51k retail and about 45k with fleet etc. Seemed that the same car 2 years old people are asking 40k. Plain XR8 with auto came in at a wisker over 40k. again, 2 year old cars where 35k based on a 45k new retail.

I wanted the 6 speed auto so it excluded late BAs. Intelease didnt like leasing seconhand. Thats the company I have to go through at work, I have no choice in the matter.

Just my expirience.

Steve

devilcv8 · 27-04-2008, 10:30 AM

Quote:

Originally Posted by JG66ME

Thats the company I have to go through at work, I have no choice in the matter.

Just my expirience.

Steve

the federal gov dept I'm now with makes all first time novaters go and get financial advice before they can lease a car. I've just come off a job where I leased a SSV for $1900 a month, and for a few months had a SV6 at 1331 a month (total of 3331 a month) but now I have to get financial advice....

yabby6 · 27-04-2008, 11:18 AM

Thanks to everyone for replies. I don't think it's mandatory to get financial advice at my work but due to extra income I make through my ABN I will be talking to an accountant before I sign the dotted line.

To everyone that packaged a second hand vehicle - did you pick it from a list they gave you or choose it yourself completely and did the cars come from used car yards or private sales?

Brett

Pinch · 27-04-2008, 07:20 PM

Have packaged a few different cars over the last 7 years.

The first was a new BA XR6. Earned a bit over average wage then, but was doing pretty big k's*. Got the financial advice ($300 and compulsory with that employer) Worked out well. Saved about $3000 a year compared with paying same price after tax. Was a not for profit organisation thought so had a 48.5% FBT rebate. On that income with that car I would have only been about $1500 ahead in a private co.

Went to a new employer, wanted to keep BA as it wasn't that old and worth less than the payout. McMillan Shakespeare, the salary packaging provider had no problem starting the package with the now 2nd hand XR (the contract from the first provider was paid out).

As the whole shebang works on (1) how much you earn (ie how much tax you save), (2) the cost of the purchase price (FBT value), (3) how many k's you do per year and (4) whether the running costs form a big part of the package, ie fuel and maintenance as the more this is as a percentage of the package, the better it is as running costs aren't subject to FBT.

* How many k's. FBT is calculated on how many k's you do per year. The more k's you do, the less FBT you pay. the highest FBT bracket is less than 15K Kms per year. Unless you earn hundreds of thousands per year, if you drive less than 15K salary packaging is likely to cost more than paying after tax as FBT is more.

15-25K per year is something like 20% FBT, 25-40K is something like 12% and over 40 is like 7%. Check www.ato.gov.au for proper schedule though.

My case study: when I got the BA I was only earning about the average wage but doing big k's and the running costs were a high percentage of the package, coupled with a 48.5% FBT rebate for non-profit organisation this worked out really well.

I now package the Mini for my wife. Do much less k's (now in the 15-25K step), car cost more, running costs are a smaller part of the package, and I work for a full FBT employer but I am in a higher tax bracket so it works out again. Save about $2500 a year compared with after tax.

All this doesn't take into account the bigger discounts you get on purchase and running costs with a fleet buyer so you probably save quite a lot more that buying yourself and paying after tax. You do however pay management fees and interest (if you were lucky enough to have the cash available otherwise than leasing or a loan).

Whether it works out basically depends on all the variables so the financial advice for your particular situation would be beneficial.

I hope this general info helps. Feel free to ask me a question cause this is kind of in my professional area.

Pinch · 27-04-2008, 07:25 PM

Quote:

Originally Posted by yabby6

To everyone that packaged a second hand vehicle - did you pick it from a list they gave you or choose it yourself completely and did the cars come from used car yards or private sales?

Brett

McMillan Shakespeare was happy to package any used car I spoke to them about, private or otherwise. McMillan paid me for the XR (I then paid it out).

Some other providers might not do it. Selectus didn't used to do it, but they were a crap provider in my opinion anyway and their fleet partners were a joke when I used them about 5 years ago.

the_scotsman · 28-04-2008, 07:46 AM

Quote:

Originally Posted by yabby6

had to make another post so i could subscribe email notification.

Up the top right, click on "Thread Tools" in there you can choose to subscribe to the thread.

Ringo · 29-04-2008, 10:52 AM

Hi Yabby6 - every company is a bit different…which one are you going with?

Most will allow you to package a 2nd hand car (with age and km conditions) and I think it is a wise thing to do purely from a risk point of view. Particulalry with the used car market being the way it is right now (and for the forseable future) with the type of car you are after (lots of em around)

I work in the fleet industry and I regularly saw people who had commited themselves to expensive and long leases only wanting to bail out 18 months into it. They get a big payout figure (perhaps more than the car was worth) and abusing everyone in sight and saying that leasing sucks. It doesn't. Its just they are idiots who don't understand the risks and how to minimise them.

I would go for a 2 year old car for maybe a 1 year or 2 year lease…maybe even 18 months.

Low risk of mechanical bills due to the warranty being valid but they have taken the biggest depreciation hit, up to 40% off retail, but over the next year or so will lose only a little more. This will mean that the chances of a early termination payout figure being more than the market value of the vehicle will be much less.

What no-one has mentioned is that buying 2nd hand equals a cheaper car which also equals cheaper FBT. If you are able to use the Employee Contribution Method (ECM) then buying a 2nd hand car will be even more benificial to you and you will end up with a very lean lease where your paying very little FBT.

As far as working out if its is worth it or not there are lease simulators on most lease companies websites which can do calculation of pre and post tax income and lease costs and give you a net benefit figure in post tax dollars.

What I'm talking about is illustrated in two very real scenarios I have seen.

30 year old professional woman leases a Honda S2000 over 5 years. S2000 is worth about $75,000. Gets pregnant and then needs to get out of this lease 2 years into it and because of depreciation being kinda big in the first 18 months of an expensive 2 door car the gap between the payout figure and market value is about $14,000. She ends up having no real optoins what to do. What should she have done? Chosen MX5 and leased it for 2 or 3 years and thenshe probably would have had a payout figure that was about the same as the market value after 18 months because of MX-5 resale strength. Also would have been cheaper by hundreds a month.

Family guy leases 2 year old $22,000 2nd hand Toyota 'Cardigan' car for 2 years. Only paying FBT rate based on $22k (not $33 original retail) and enjoys Toyota reliability, runnning costs and resale e. He has lots of options here with little downside. He could trade it in on something else, sell it privately, ealry terminate it for a Mazda 6 Sports etc…he has options because he knows that if he needs to bail out of this he could and perhaps even make money out of it. This is extremely low risk and great value lease…he was paying about $1100 a month including all operating costs.

Now substitue the Cardigan car for a 2nd hand XR6 which is a hell of a lot more fun and you will still get the benefits but with a much lower risk factor and thus more options available that carry littl or not penatly if you want to take them

This is a lot of words and without numbers in front of you it can be hard to get your head around. I hope this makes sense…….post or even PM if its doesn't.

PS Ditto The Scotsman comment about Jennifer Morrison...mmmm She has busted up with Jessie Spencer you know?...she is on the market !

yabby6 · 29-04-2008, 06:36 PM

Ringo - I was looking at SelectUs at first, but have since been looking at SMB because of their used compatability and willingness. I've called and talked to a fair few though since making this post and most are able to organise a lease for secondhand cars though they don't prefer it. I'll be doing a lot more shopping around before I sign on. Is there any that are definitely ahead of the game or just down to personal preferences / situation. I am talking to work about it this week, I know they do offer novated leases as part of a salary package, but I don't know if they have a preferred lease company.

The reason I've been opting towards longer terms is because of the residual value drop - ie longer term less to pay at the end of the term.. Is this the wrong way to look at it? Should I be focusing on getting the lease over early and reselling the car for a decent price?

Re affordability.. In my current situation with the BA xr6 (5 years old this year) car repayments, petrol and maintenance, tyres etc etc etc are costing me a fortune and with the lease quotes I've had so far, after everything is taken into account and I can see my after tax dollars, the leases have come out on top. Quotes have been on a brand new xr6 with about $8g worth of options. Obviously even less for a stock standard spanker or lower again for secondhand.

Ringo · 01-05-2008, 02:32 PM

I have already PM'd with some info…..but I'll post something here for the folks at home

Most companies already have a preferred supplier for novated leases. There are contracts and other stuff that need to be agreed to as a novated lease is three way agreement contract b/w yourself, your employer and the leasing company. You most likey wont get a choice who it is. SMB are bl00dy good, don't know anything about SelectUs.

By all means you can think of longer terms for the lower RV but choose car that will hold it value better than a Falcon NA XR6. The back of a Wheels mag has car prices table which also includes and a 3 year residual value prediction ….this information is gold when your the one taking the risk on the cars value down the track - if your car is worth 12 and the lease RV is 15 that 3k you've just burnt…on the other hand it could be worth $18 or $20 and that $3-5k in your pocket tax free. Also think about what will be easy to sell and what popular know to private buyers of new cars. Private buyers don’t dump cars when get to 3 years old so the residual value stays higher - I suggest makes like Honda, Mazda, Subaru where they are popular (top 10 in sales every year) but not big in fleet deals….does this make sense?

Bare I mind that options are worth very little extra when the car is 3 years old….should you just get the next model up?

At all costs avoid anything like leasing that says fleet car - ie XT Falcon - they get dumped onto the market at 2-3-4 years old and tip the supply/demand equation and kill the price. Great if your buying but not so good if your selling.

Yes running cost can account for 1/3 of leasing costs so being able to pay the lost in pretax dollars saves you a packet.

The only thing is that these principle can change a little if you’re able to purchase the car for Government princing (ie you work for a Govt or Not For Profit Organisation)…if that’s the case then we should talk some more.

And as I mentione in my PM I practice what I preach and while i drool over an XR6 Turbo I drive a Mazda6 Luxury Sport with a 63% residual after three years.

devilracer_01 · 02-05-2008, 05:37 PM

We have a deal through our work where you can salary sacrifice a car, how would that work?

Bearman · 02-05-2008, 06:06 PM

DON'T DO IT - BIG MISTAKE!!

I work for a fed gov't department who allows novated leases and go via SMB. I bought a 12 month old BA XR6. About 6 months later I decided to do the novated lease. I sold my car to the lease company and leased it back. (big mistake - could have gone for a brand newie and got the fleet discount). At the time I factored in pay rises (which happened) and even factored in the savings on mortgage interest by having the purchase money sitting in my mortgage instead of being drawn out. It was a line ball call but it would turn in my favour as the 4 year lease progressed. Initially signed up for 20,000km per year then upped it to 25,000km.

What's happened?? Tax cuts which totally negated any benefits I was to receive. Also, my car has depreciated massively, more than expected. My circumstances changed and now to get out of the lease I have to pay out more than the car is worth!! To make matters worse I am being moved into a desk job on normal hours and taken off shift work so there's a big pay cut thank you very much!!

The best thing that can happen now is for a meteorite to end its billion km journey through space landing on the roof of my car!! Insurance payout please!!

A lot of people I know of that took on novated leases wish they hadn't!!

Only consider it if:
You have no mortgage.
You earn $100K plus per annum.
You buy brand new and get the fleet discount.
Your circumstances will not cause you to need to get out of the lease early.

You have been warned!!

gtfpv · 02-05-2008, 07:07 PM

is it better to lease/ or buy. if your under an ABN. ????

Rodp · 02-05-2008, 07:43 PM

Quote:

Originally Posted by Bearman

DON'T DO IT - BIG MISTAKE!!

I work for a fed gov't department who allows novated leases and go via SMB. I bought a 12 month old BA XR6. About 6 months later I decided to do the novated lease. I sold my car to the lease company and leased it back. (big mistake - could have gone for a brand newie and got the fleet discount). At the time I factored in pay rises (which happened) and even factored in the savings on mortgage interest by having the purchase money sitting in my mortgage instead of being drawn out. It was a line ball call but it would turn in my favour as the 4 year lease progressed. Initially signed up for 20,000km per year then upped it to 25,000km.

Only consider it if:
Your circumstances will not cause you to need to get out of the lease early.

That's largely why I've stayed away from it even though I may have benefitted using it since I use my car largely for business. Hire Purchase isn't much better if you want to escape early. You pay the same amount of interest over the term regardless if you pay it off early.

Leases can be good and they can get you into a car you may otherwise not been able to afford but if you want to get out of the lease early for whatever reason, it could be (very) costly. I prefer the flexibility of not being tied down to a car for a fixed term. Factor in the pretty savage depreciation the Fords can suffer from and the balloon may not cover the final figure and you're still digging into your pocket at the end of the term.

A guy I worked with moved from a field job to a desk job and took an absolute bath in tax because he wasn't doing anywhere near the km's he originally signed his lease on. Couldn't mod the vehicle and with a year to go on his lease, no longer enjoyed driving the vehicle.

TURBOTAXI · 02-05-2008, 08:00 PM

Hi all,

This works OK for me. I do 40,000k plus per annum and my car cost me $27,200.

I use McMillan Shakespeare. I pay about $200 per week (out of pocket) for everything that is about $300 in gross.

My salary is only about $96K but the high K bracket makes it worthwhile.

The other factor to consider is that if you have other business interests (rental properties, sales/procurement, consultancy, and more than one car, no one knows what car you drive when claiming K's. If your consultancy employer flies you at their cost to another city............

I hope I dont need to explain this too much more.

yabby6 · 02-05-2008, 08:27 PM

Thanks to all for info and replies. Ringo I'm not with govt/n-f-p. gtfpv pm box full check email.

gtfpv · 02-05-2008, 08:37 PM

Quote:

Originally Posted by yabby6

Thanks to all for info and replies. Ringo I'm not with govt/n-f-p. gtfpv pm box full check email.

pm now avail . deleted many.

devilracer_01 · 27-05-2008, 11:31 PM

Quote:

Originally Posted by Silversurfer

Try SMB as they also do used cars under 5 or 6 years.
I know this as I was looking at the difference between a new territory or 2nd hand and either way was possible .

Quote given included all running costs etc.
Good Luck
Muzza

Im about to go through SMB to salary sacrifice a Ford Territory TX with the following options fog lights, 1600kg tow pack, side steps, 375L roof pod, cruise control and gps/bluetooth setup with all the options it works out to $1131 per month before tax and over the five years I will save around $20K in income tax.

Ripped or good deal?