Porsche Lease costs

[AlexB7RS4]

Hi all, I've got a B7 RS4 at the moment which I absolutely love, but the call of a Porsche is strong and I'm not sure how much longer I can ignore it.

I'd love a 997 or 991 GT3, but back to reality... Looking at a 997/991 Carrera S or perhaps a GT4 which I suspect will hold value better. What are leasing costs like in terms of monthly payments (ie for a car circa 150-180k)? Are there options for guaranteed value and balloons?

[hugh]

You would be much better off going in a speaking with a dealer or asking a broker. Answers will depend on many factors and unless you are prepared to disclose all of your particulars here then I’d suggest you speak to some professionals personally. 

[epilot]

i agree with Hugh

but roughly if you are running a fully maintained novated lease work on $100/ $10000 of vehicle cost nett per fortnight for 15,000k's

novating is an expensive way to own a car with somebody else’s money but may work for you financially and there are age limits to what you can novate

HTH

[TwoHeadsTas]

Our first Boxster was purchased on a Novated lease - it was a 2005 car purchased in 2013, so 8 years old at time of purchase and  13 years old at the end (we did have a nil residual though).  Current 981 is a 2013 car purchased in 2018, on a 3 year Novated lease , 40% residual from memory (at our choice).  First car leased thru Macquarie (Maxxia's chosen finance company, perhaps they'll finance virtually anything due to their relationship with Maxxia???), 2nd car thru CBA at my arrangement, at 1/2 the interest rate.  No mention of age at all in that case.

[JB]

Better off going with a chp or chattel mortgage. Better Value for money than a novated lease. If your disciplined you can lease something a lot more expensive for the same price as a novated but you run All the maintenance and fuel etc yourself, but all still tax deductible. 

[TwoHeadsTas]

4 hours ago, JB said:

Better off going with a chp or chattel mortgage. Better Value for money than a novated lease. If your disciplined you can lease something a lot more expensive for the same price as a novated but you run All the maintenance and fuel etc yourself, but all still tax deductible. 

Horses for courses JB.  If it's your own business Chattel Mortgage usually way to go, but as an employee of a hospital (like my wife), fully maintained novated lease can be a good way to go.  Haven't done the sums, but it may even work out for someone to novate just the lease costs, and then meet all the running costs themselves as a way to offset the FBT their employer may otherwise have to pay, or be salary packaged.  Can also help if some work related travel is done too...

[Gsaps]

Am I the only one who hasn’t got a clue what’s being said here 🤯... really wish I did as I’m sure I’m missing out on something 

[YellowDieselGolf]

I'm with Gsaps.  I'd like to learn though.  I've just changed jobs and my daily driver is getting old.

[micknine01]

What happened to the good old days when people bought toys with cash 💰 😂

[TwoHeadsTas]

1 hour ago, YellowDieselGolf said:

I'm with Gsaps.  I'd like to learn though.  I've just changed jobs and my daily driver is getting old.

OK guys.  I'm flat out with client tax work at present, but when I have time I'll try to put out a brief summary of how various finance options can work for tax purposes if you're an employee, a hospital or aged care employee, or self employed - none of which will replace proper advice from your own accountant who will be familiar with your specific circumstances

[Gsaps]

He pulls up a chair and prepares to get schooled ....  (but is happy to wait 😊)

[Peter John]

57 minutes ago, 901er said:

What happened to the good old days when people bought toys with cash 💰 😂

Cash is so cheap that you use someone else’s! 🤣

[smit2100]

On ‎13‎/‎04‎/‎2019 at 17:15, Gsaps said:

Am I the only one who hasn’t got a clue what’s being said here 🤯... really wish I did as I’m sure I’m missing out on something 

A reflective view.  Unless you own a business that's killing it or need to free up cash in the business/ leasing gives you a tax advantage, or you are on salary and at the top margin tax  rate  and could retire tomorrow, or you don't  have the ability to fund a p car outright of your liking using mortgage offset dollars that you don't  have anything else better to spend on   (circa 4% money is cheap if you don't have the cash, but happy with a little bit of offsetting of your net assets down the track and still have access to offset mortgage account dollars which is just your defacto piggy bank), don't loose any sleep as I don't thinking you are missing out on anything. Cash is still king and leasing is likely to put a dint in your ability to grow your net assets.

 

22 hours ago, 901er said:

What happened to the good old days when people bought toys with cash 💰 😂

The me want it now / afterpay generation.   I'd be interested to know the ratio of the value of cars (including leased cars)  / net assets owned excluding the cars for those on salary who have a lease for more than 40k.   I suspect the ratio is piss poor.  eg not many with a ratio of circa 10% which I reckon is a pretty good go by.

[Simonk]

A couple points. 

A car that expensive will attract a heap of FBT if its bought in a business unless you have a high log book business %. 

Most people will look at the affordability of  car finance based on the monthly repayment and not consider the total cost over the term of the finance. The longer the term and the higher the balloon, the more interest you pay and the less equity you have at the end. ie. the lower the monthly repayment, the more the car costs you (other things being equal such as the price for the car and interest rate)

If this is going to be a business use vehicle, talk to your accountant and make sure you’re clear on the FBT implications.

If you’re buying it personally, I can put you in contact with a broker who can explain your options and offer very good rates.

[smit2100]

On 13/04/2019 at 09:05, epilot said:

i agree with Hugh

but roughly if you are running a fully maintained novated lease work on $100/ $10000 of vehicle cost nett per fortnight for 15,000k's

novating is an expensive way to won a car with somebody else money but mat work for you financially and there are age limits to what you can novate

HTH

If the OP puts his target car up on a novated lease, unless its a lemon and in the workshop for a long time, isn't he up for circa  $1150 per fortnight gross/ $600 net if he is on top marginal rate and we only have a fbt line on the first row of the novated lease costing spreadsheet.

I would be pretty confident if you had a lease with the millionaires factory and mention it's for a P car, you will pay for it but age is not a constraint. For example  they did'nt blink on a circa turn of the century boosted p car relative to the lease value of the car.

[Simonk]

FBT taxable value on a $140k car is $28k per year. 

[smit2100]

On ‎13‎/‎04‎/‎2019 at 19:17, Gsaps said:

He pulls up a chair and prepares to get schooled ....  (but is happy to wait 😊)

Ok, so not too many accountant types  about like @Twoheads Tas who actually crunch the numbers and actually have novated an older  P Car me thinks.  

Probably a different angle to what @Twoheads Tas is going to deliver.   But I reckon its extremely hard to get the numbers looking black and not red on a novated lease on a P car unless its an aircooled which sees about 4 weeks on the road and 48 in the workshop and the lease is only for one year.   For me its all abount minimising FBT (very very few avenues) and maximising repair costs paid in pre tax dollars, and lowering the loan amount and having a car at the end of the lease that is worth more than what the book value is on what you are paying fbt on.

Me thinks the OP's GT4 second hand cost of 150k if on a novated lease is going to cost 20% @ 150k = 30k a year pretax / 1150 per fortnight pre tax / 600 per fornight post tax assuming top marginal rate.   For me WTF.  That's only the first row on the novated lease costing spreadsheet.  Ways to reduce that somewhat, eg I would buy private and drive the lease value as being the  lowest value in redbook, glasses guide (trust lowest trade in price) or what you paid for it.  Hopefully glasses guide is less than what market is.  Eg Tax office tend to not trust you on what your purchase price was when valuing FBT along with leasing companies.  Then I would only do a one year sale and lease back and adjust the taxable value value assuming glass / rebook guides are showing numbers going South

 

I am interested in @Twoheads Tas heads view compared to mine in that it would be rare personnel circumstances that the numbers stack up for a novated lease compared to financing  a car if you have access to money in a mortgage offset account (eg fixed interest at circa 4 % in todays terms).     Eg 150K @ 4% = 6k a year interest in after tax dollars.  30k of pre tax fbt = circa 15,600 in after tax dollars.  I reckon on a gt4, you could nearly get insurance , rego,  fuel  for fortnightly smt runs to Maryville and probably servicing cover for the delta of $9500 in after tax dollars (assume brakes and tyres were in great shape when you brought the car).  As mentioned above, we have haven't touched the sides on any other lease line item costs pre or post tax ( eg luxury car lease impost, lease admin costs, principle repayments (53% of loan value, novated lease company interest rates, circa 8-9%, pretax decustions savings and gst savings) . Even with the salry sacrifcing in pre tax dollarsa and gst savings, can't see those numbers getting you a red number compared to the 15,600 funded from after tax dollars.  

Then theres the opportunity cost kicker that not many talk about.  Lets tone it down on say a 60k car.  If on the top margin rate, I  reckon you could structure a salary to have a 60k car and annual expenses financed via the circa 4% fixed mortgage (line of credit / offset) as well as covering $145000 worth of CSl shares salary sacrificed and having the same after tax pay compared to having a three year novated lease. So after three years, I would be quietly confident of being in front in terms of a free carried  average first generation Boxster on the net profit after capital gains taxes on the CSL shares compared to the residual value of the 60k car in three years time when you buy out the residual (47%) and flog the leased car off in the second hand market.

Now a 150k novated lease on  GT4.  Absolutely the wrong car to put on a novated lease.   Reckon I would need a gross PAYG income of over a million to even entertain that.  

 

[wilburforce]

Novating/salary sacrificing has been in the ATO's sights for quite a while now - as its been a benefit to many in the past.  More recently (ie: in the last 8 or 9 years) they've made changes to the FBT calculation (stat method to min 20%) that functionally restricts novating benefits to those with cars under the Luxury Car Limit ($57k) and where a logbook is kept with a very high business use percentage.  Those professions where FBT is treated concessionally are the outliers.

What this means is that for cars less than the Luxury Car Limit there are quite few scenarios where the novating benefits aren't outweighed by the FBT - business use must be very high to make a business case.  In a lot of cases people are novating when they are actually worse off and never realise. 

In contrast cars over the Luxury Car Limit have added downside to restricted deductions for the company party to the novated lease - in addition to the large FBT cost (as outlined by @Simonk).  This can be an unwanted and usually misunderstood downside to these arrangements.  FBT doesn't just exist in novated arrangements - for many who own their own business and have a 'business vehicle' the FBT component is misunderstood and, most times, ignored until the ATO come knocking.

 

Having said that, I'm not sure @AlexB7RS4 was specifically asking about novated leases - you are still able to purchase on a loan facility or lease outside the novated arrangements.  Novating aside there are 3 main ways to finance a car (other than to use cash or draw on other facilities)

1. Chattel Mortgage (CM).  You pay interest and you can deduct the interest cost and a depreciation cost in your personal tax affairs given that you are eligible.  You own the car from day 1 and ultimately pay principal and interest over the term of the loan, plus a balloon (if any).  If eligible you get the GST refunded at time of purchase.

2. Hire Purchase. Same principal as above except you don't own title of the car (legally) until the final payment is made. Very popular in the early 2000's to get around some GST quirks - pretty rare now.  Some still refer to a CM as an HP. 

3. Lease. You have an agreed lease payment monthly of which you have GST of 1/11th.  For tax purposes you can claim the business portion of this lease repayment.  Usually at the end of the lease you agree to payout the agreed balance to own the car, or you swap it out for another.

Very generally I find leasing is used more as a business equipment tool and CM used more frequently to finance vehicles.  Some ballpark ratios I've seen used by our clients and brokers.  3 year term 50% balloon, 4 year 40%, 5 year 30%.

@AlexB7RS4 by all means gets facts (and opinions) from the interwebs - but it's important you get advice relating directly to your circumstances from your accountant as @TwoHeadsTas has pointed out. 

[smit2100]

10 hours ago, wilburforce said:

Novating/salary sacrificing has been in the ATO's sights for quite a while now - as its been a benefit to many in the past.  More recently (ie: in the last 8 or 9 years) they've made changes to the FBT calculation (stat method to min 20%) that functionally restricts novating benefits to those with cars under the Luxury Car Limit ($57k) and where a logbook is kept with a very high business use percentage.  Those professions where FBT is treated concessionally are the outliers.

What this means is that for cars less than the Luxury Car Limit there are quite few scenarios where the novating benefits aren't outweighed by the FBT - business use must be very high to make a business case.  In a lot of cases people are novating when they are actually worse off and never realise. 

In contrast cars over the Luxury Car Limit have added downside to restricted deductions for the company party to the novated lease - in addition to the large FBT cost (as outlined by @Simonk).  This can be an unwanted and usually misunderstood downside to these arrangements.  FBT doesn't just exist in novated arrangements - for many who own their own business and have a 'business vehicle' the FBT component is misunderstood and, most times, ignored until the ATO come knocking.

 

Having said that, I'm not sure @AlexB7RS4 was specifically asking about novated leases - you are still able to purchase on a loan facility or lease outside the novated arrangements.  Novating aside there are 3 main ways to finance a car (other than to use cash or draw on other facilities)

1. Chattel Mortgage (CM).  You pay interest and you can deduct the interest cost and a depreciation cost in your personal tax affairs given that you are eligible.  You own the car from day 1 and ultimately pay principal and interest over the term of the loan, plus a balloon (if any).  If eligible you get the GST refunded at time of purchase.

2. Hire Purchase. Same principal as above except you don't own title of the car (legally) until the final payment is made. Very popular in the early 2000's to get around some GST quirks - pretty rare now.  Some still refer to a CM as an HP. 

3. Lease. You have an agreed lease payment monthly of which you have GST of 1/11th.  For tax purposes you can claim the business portion of this lease repayment.  Usually at the end of the lease you agree to payout the agreed balance to own the car, or you swap it out for another.

Very generally I find leasing is used more as a business equipment tool and CM used more frequently to finance vehicles.  Some ballpark ratios I've seen used by our clients and brokers.  3 year term 50% balloon, 4 year 40%, 5 year 30%.

@AlexB7RS4 by all means gets facts (and opinions) from the interwebs - but it's important you get advice relating directly to your circumstances from your accountant as @TwoHeadsTas has pointed out. 

I think you will find those ball park ratios are based on current ATO minimum guidelines for residual payout ratios for novated leases.   Eg 1 year lease is 65.63% and 5years is 28.13 and in the middle at 3  its 46.88%.

[Simonk]

2 minutes ago, smit2100 said:

I think you will find those ball park ratios are based on current ATO minimum guidelines for residual payout ratios for novated leases.   Eg 1 year lease is 65.63% and 5years is 28.13 and in the middle at 3  its 46.88%.

No, they're actual terms offered by lenders that are typically taken up by their customers for hire purchase or chattel mortgage finance.

The terms can be adjusted also. For example, my 997 is financed over 4 years with nil residual. I could probably buy a 991 with the monthly payment but I will own the car outright in 4 years time, a car that doesn't depreciate.

[wilburforce]

@smit2100 @Simonk I believe they started life loosely based around the ATO effective life tables on motor vehicles and have been adopted by most lenders as a starting point/template. I know proper operating leases stick to them (not sure whether this is commercial or lending framework prescribed) - but think all other funding models are flexible.

[Stu]

On 13/04/2019 at 19:15, Gsaps said:

Am I the only one who hasn’t got a clue what’s being said here 🤯... really wish I did as I’m sure I’m missing out on something 

Agreed!

[smit2100]

On 12/04/2019 at 20:19, AlexB7RS4 said:

Hi all, I've got a B7 RS4 at the moment which I absolutely love, but the call of a Porsche is strong and I'm not sure how much longer I can ignore it.

I'd love a 997 or 991 GT3, but back to reality... Looking at a 997/991 Carrera S or perhaps a GT4 which I suspect will hold value better. What are leasing costs like in terms of monthly payments (ie for a car circa 150-180k)? Are there options for guaranteed value and balloons?

Just curious. Agency contractor/ payg salaried/ own a business / abn number.

[reddahaydn]

Can I just ask a dumb question please -

Can someone confirm whether my understanding is correct or not - trying to use Lehman’s terms - basically the long and short of it is that only the first $57,000 of the vehicle cost is tax deductible/depreciable no matter how much it costs you. Financing costs are ratioed at 57k divide by the purchase price as to how deductible they are. 

This is then cut down again based on your log book percentage for work use. Unless you use, or can say you use, the vehicle for 80-90% business then your back to only $45k being deductible  

Running costs I’m not sure about? Same ratio? Or are all the running costs deductible x log book percentage work use?

Anything you claim as depreciation has to be paid back unless you sell you car for the price you have depreciated it to?

 

maybe this is different for a lease, but isn’t the ratio of lease costs the same - ie only 57k/cost is deductible off you taxable income and you have to pay the rest from your after tax income?

Happy to be schooled! Please someone tell me there’s a way to make a $120k vehicle more tax effective than putting it against your house!

 

[ArthurK]

On 24/04/2019 at 21:36, reddahaydn said:

Can I just ask a dumb question please -

Can someone confirm whether my understanding is correct or not - trying to use Lehman’s terms - basically the long and short of it is that only the first $57,000 of the vehicle cost is tax deductible/depreciable no matter how much it costs you. Financing costs are ratioed at 57k divide by the purchase price as to how deductible they are. 

.......

Happy to be schooled! Please someone tell me there’s a way to make a $120k vehicle more tax effective than putting it against your house!

 

 From my personal experience over the last 28 years of running a business and deducting car expenses you have it pretty much summed up correctly. Either that or my accountant has ballsed it up over this period. 

I have no interest in claiming expenses that will need to be paid back down the track and thus don't deduct my 911 expenses. It's bad enough the asset depreciated and to add insult to injury you need to pay the tax man back all of the claim and the perceived benefit. No thanks. Owning a 911 is a first wold problem making a minor saving on tax won't make or break the amount of tax paid. The savings are insignificant. Say you have 20k of depreciation and expenses you are saving 6k a year on tax. 

I'm sure there are ways to get around it but the structural costs might outweigh the benefits. 

Ps I even talked to my accountant about setting  up a car hire business that buys exotics and I rent a car through this business but the hire business is still restricted by the depreciation issues. The only way this will work is if the depreciating asset is worth $0 in the end. A bit hard to do this on a new Ferrari,  Lamborghini Porsche or McLaren etc that might be held for 3 years.

 

Happy to be shot down if all of the above is wrong or there are ways to play the system