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Assumptions Annual cash salary Base cost of vehicle (inc GST) Car age (in year.

0 means brand new) Stamp duty rate (NSW) Stamp duty Luxury car tax payable applicable? Luxury car tax FBT claimable Transport of vehicle (if required) LCT paid by employee LCT non-deductable part for employer Income Tax Credit Driveaway cost of vehicle Reduce by GST? FBT value of vehicle Vehicle value financed - lease Vehicle value financed - own loan Residual value (ex GST) Residual value (inc GST) Periods Lease period (years) Own loan period (years) Interest rate - lease Interest rate - own loan Results cycle Annual km's FBT Statutory rate Fuel cost (per litre) (ex GST) Fuel consumption (l/100 km) Annual fuel consumption (ex GST) Annual maintenance (service+tyre+roadside ex GST) Annual insurance (ex GST) Registration including CTP (ex GST) Lease Management fee Lease protection Total Monthly running costs (Excl lease costs)

99,000.00 80,000.00 0 3% below 45000 and 5% above that 3,100.00 Yes 75375.00 1,000.00 7436.22 925.00 6852.27 92,856.22 Yes 80,000.00 84,263.49 92,856.22 34094.55 37504.00 12.00 3 3 9.3% 6.0% Monthly 15.00 20.0% 1.30 13.0 2.5 770.00 1,500.00 1,200.00 230.00 400.00 289.38

Gross salary Lease/Loan payment After tax contribution Running costs FBT payable GST on employee contribution LCT non-deductible component to be paid by employee Lease interest per period Depreciation per period Input tax credits claimed Total salary sacrifice Taxable gross salary Tax and medicare levy payable Net salary (take home) Monthly after tax cost Monthly benefit Vehicle finance residual (inc GST for own loan, ex GST for others) Vehicle value (hopefully more than residual) (inc GST) GST payable at end of lease Equity

Base (no car) Monthly 8250.00 0.00 0.00 0.00 0.00 0.00

Own Loan Monthly 8250.00 1871.44 0.00 318.32 0.00 0.00

Pre tax lease Monthly 8250.00 1866.61 0.00 341.88 1280.11 0.00

ECM lease (no LCT) Monthly 8250.00 1866.61 1333.33 341.88 0.00 0.00

0.00 0.00 8250.00 2172.05 6077.95

0.00 0.00 8250.00 2172.05 3888.19 2189.76

200.77 3287.83 4962.17 1025.56 3936.61 2141.33 48.42 34094.55 51999.48 3409.45 14495.48

200.77 674.38 7575.62 1912.42 4329.87 1748.08 441.68 34094.55 51999.48 3409.45 14495.48

ECM lease (with LCT) Monthly 8250.00 1866.61 1256.25 341.88 74.01 114.20 77.08 473.02 1073.13 200.77 545.22 7704.78 1962.14 4486.39 1668.64 521.12 34094.55 51999.48 3409.45 14495.48

37504.00 51999.48 0.00 14495.48

Cash flow benefit (compared to own loan)

Equity benefit (compared to own loan) Total benefit (compared to own loan) Total benefit (per annum) Total benefit (per period)

0.00 1743.26 581.09 48.42

0.00 15900.51 5300.17 441.68

0.00 18760.18 6253.39 521.12

Miscellaneous calculations Annual lease payments (pre tax) Annual after tax contribution Pre tax - salary sacrifice Total running cost over the finance period Total car value + running cost over the finance period Interest paid (compared to outright purchase)

22399.27 39453.92 11459.37 104315.59 0.00 11459.37 116335.27 12019.68 114592.01 10276.43

22399.27 16000.00 8092.55 100434.75 -3880.83

22399.27 15075.00 6542.60 97575.09 -6740.49

Income 6,001.00 37,001.00 80,001.00 180,001.00

Marginal rate 0.0% 15.0% 30.0% 37.0% 45.0%

Tax from previous bracket

Lease 1 2 3 4 5

4,650.00 17,550.00 54,550.00

Extracted from Car age Car Resale value (average) Relative drop in one year 0 100% 1 77% 77.00% 2 65% 84.42% 3 56% 86.15% 4 47% 83.93% 5 40% 85.11% 6 34% 85.00% 7 29% 85.29% 8 25% 86.21% 9 21% 84.00% 10 18% 85.71% So the first year depreciation is the worst. Then it is about 85% per year.

Statutory residual value 65.63% 56.25% 46.88% 37.50% 28.13%

Km's 15,000.00 24,999.00 40,000.00 Km's 15,000.00 24,999.00 40,000.00

Statutory rate FY2012 20.0% 20.0% 17.0% 13.0% Statutory rate FY2013 20.0% 20.0% 17.0% 13.0%

This document was originally posted by Bakks amxer later modified this to include multiple yars and include LCT effect This file is discussed in

Version "1.0" "2.0" "3.0" "4.0"

Date 2011-Sep-22 2012-Jun-6 2012-Jun-7 2012-Jun-13

Author Bakks amxer amxer amxer




Cleanup Fixed formulas for salary sacrifice Changed the calculation for residual for own loan. Also added LCT calculations using a car hire purchase method (still need some review by forum members) Replaced references with named cells. Fixed the residual GST. Added car age. Added the "help" page.




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One of the first questions that pops out is the lease term. I have been trying to understand what is the optimum lease term. So the following are my thoughts after playing with numbers and looking at different scenarios. --------------------------------------------------------------------

This spreadsheet is to help understand how novated leases are calculated. This should not be used to replace professional advise from an accountant. Understand your own financial situation and your limits well, and try not to overestimate it. Take your time. Cars won't run out, but your money will. So do not hurry to finish this in a day or two, or even a week or two. It is highly advisable to have a read through the following forum threads and for a lot of valuable comments Then read even more and make sure you understand what you are getting into For those who for any reason cannot or do not want to understand the financial aspects, it is advisable to at least consult a "competent" accountat for more detailed analysis and financial advise. It can save you thousands of dollars. Ask them to go through different lease/loan scenarios with different car prices and lease and loan terms. It is absolutely important to know the "interest rate", the "car price", the "amount of finance", and the "residue" that the lease company is providing for you. If you don't see these, the lease company is hiding something. They HAVE TO give you these information. Try to enter all your data (yellow boxes) as accurately as you can. Compare your results with those you have got from the lease company, and understand why there are differences. Ideally "every tiny cent" should be exactly the same, but if you get within a couple of dollars, your have done very well! Understand that the car purchasing part of the novated lease is a separate process. Some lease companies mix that with the lease, and people lose the sight. They might be able to get better prices (not necessarily), but that doesn't mean that if you don't push, they will pass the savings to you. Spend some time, go to different dealers, and find the best price, and then compare that with what the lease company gets you.

The following notes have been cut and pasted from Note 1: If you are buying a more expensive car or its optional extras because of novated leasing, it is a sign that you are not thinking clearly. Just get what you would normally get, and save the bucks on your home loan! Otherwise you are essentially taking more risk than you would normally do or need to. Note 2: The fact that your car may be worth less or more than residual should have no bearing. Regardless of how your car sells, the amount of benefit/loss compared to your own loan purchase would be identical. If the car that you have picked is considered junk after the lease term, novated leasing doesn't make it better or worse. So be wise when choosing a car, i.e. don't get excited because novated leasing may save you money, and if it does don't blow it!! Note 3: LCT really kills the deal. It changes the equations in bad ways, so it would be questionable if you would gain anything if you buy a car beyond $80-$100K. Try to avoid LCT at all costs, unless your wife really needs to drive a merc or bmw, in which case I would suggest going to an accountant.

Note 4: The major benefit in novated leasing comes from ECM. Without ECM most of the benefit will be eaten away by FBT and the inflated interest rates from the lease company. Again most won't tell you for obvious reasons, but ask them. Even with ECM a good portion of the benefit will go to the lease company. Of course they deserve part of the pie provided by the tax man, as they are the party that make this all happen. Note 5: Lease companies that also provide dealer services, will use similar tactics, i.e. pushing the paint/rust/seat protection, lease protection, their own insurance companies, their own extended warranty, etc. etc. Just beware. Sometimes these might be ok and better. But again be wise. Ask for the PDS and read them. Stay calm and don't get excited!. Because you may be saving money through novated leasing, doesn't mean you have to add all the options that you would not buy normally and most likely don't need.

Note 6: Novated leasing is a financial liability on the employee, and so there are risks like everything else, such as your home loan, job, etc. The main risk with novated leasing is that if you cannot continue the lease for any reason, then you will have to pay up big time. So either get lease protection (which may not actually fully protect you after all), or plan your exit strategy!! So don't be lured by messages that advertise better lifestyle from lease companies. The only reason that they are happier for you to buy a more expensive cars, is because you will have to take a bigger finance, and they will have a larger share of it. It is not because they love you!! So remember if you buy a more expensive car and the brown matter hits the fan and you cannot keep the lease, you will be in a deeper pool of the brown matter!!. Understand the risk that you are taking. If you are confident about your job and financial situation, then go for it. Note 7: Try to understand the process. Fortunately, this thread ( and a few others have been supported by a couple of professional guys like Zenra and nikkiboi. So ask your questions. I am just like most of you, trying to work out how it works, and share my experience. Note 8: The main component that helps you save using novated leasing is the running cost, because of GST and because all of it is tax deducted. The value of the car eats away the gains through FBT, and that's why ECM is used to counter that FBT (but remember you are still paying for it), which means cheaper cars can give you much higher proportional savings (just play with the car value, for example set it to $10K and $50K and $70K). Of course cheaper cars will have lower running costs, but probably by not as much. The following notes have been cut and pasted from One of the first questions that pops out is the lease term. I have been trying to understand what is the optimum lease term. So the following are my thoughts after playing with numbers and looking at different scenarios. -------------------------------------------------------------------There is not an easy answer and it depends on the exact financial situation, and how you can move money around to achieve the best outcome. The best outcome does not necessarily mean being financially better off, it might be a better risk profile, or better cash flow, or better liquidity, whichever is important to you.

1- Job continuity: In this day and age, job continuity (not job security) is not that great, so even if we are in a profession with good job prospects the chances are that we would hardly be with the same employer for too long. So the first issue to consider is realistically how long do you anticipate to be with your current employer. Round it down, and that would be the term to consider. While you might think that even if you cannot keep the novated lease in place, you can still afford it, you are locked into a contract that has already lost all its benefits and at best would be on par with any other car loan that you can get if you walk into any bank. Breaking it would cost you, continuing it would cost you. Maybe it wont be that much worse, but find out how much before you enter the contract. In other words, find your exit strategy and its consequences. But don't gamble on your job continuity factor. 2- Can you afford to repay more? Like any other loan, the more you repay the better. Assuming that you have a fixed car price in mind; in the case of novated leasing, you can change repayments only by changing the lease term. With a one year lease, your repayments will be the highest, but the advantage is that you will be paying less interest. The much more important advantage is that your repayments are tax deductible (if your car doesn't get LCT); meaning that in a one year term you are going to take the maximum benefit of this, because firstly you have one year to pay, and the annualized residual is the highest (34% for one year, 22% for two, 17% for three, 15% for four, 14% for five). 3- Can you move money around? Regardless of the lease term, at some point you have to pay the residual. So you have to have enough money for this. Realistically you should have enough money to pay the entire car back at any time; should something happen; as you don't want to lose your house on your car. So can you move money around? If yes, then you could use it to your advantage. In my case I found that if I take a one year lease, and then use my extra repayments on home loan, I would be better off than if I take a three year lease. Financially, by not much difference, but I have reduced my exposure to the lease company. 4- Do you want to pay FBT for five years? Novated leasing would have been great if FBT wasn't there! Now that we have to pay it, the question is how we can reduce it. The answer is don't pay FBT. How? By ending your lease sooner. We know that it is the first year that has the most benefit. Beyond the first year the amount of residues and FBT almost negate everything else. You may say that a three year lease still gives you benefit after the first year. But with a one year lease, I only have to cover 65% of the car value through my own loan. This coupled with the fact that I won't be paying a huge amount of FBT will make this a viable option, and I will be free after the first year. So I would say it is insane to pay FBT for five years, which BTW equates to the value of your car. 5- The convenience of fleet companies: This is the general question, would you prefer convenience? Given everything being equal would you rather have everything being dealt through one channel? I let you to decide on this, but for most people these are almost standard given that most identical services are obtainable through other means; i.e. use you plastic for all payments, get insurance, rego, etc online, and you have to take your car to service anyway. 6- The upside of long leases: The upside of a long lease is that you have spread your repayments and pay less. You have also spread the benefits over this many years. Finance companies prefer long leases, as it gives them a more stable income stream, and of course being a longer lease they get more interest out of it.