Salary Sacrifice Car Rental - Attention: Blue_Boost

[Wahesh]

So I'm after the advice of my homeboy @Blue_boost and here's the sitrep...

My Mrs received a tax notification last year. She's on the higher income tax bracket due to having 2 rental properties, plus a teachers salary from a private school.

Currently between us, we own 2 cars, 2 houses, a granny flat, and an apartment.

Now wifey is thinking of selling her car, and getting a salary sacrifice car. What this means is that she'll get about $15,000 for her car once it's sold, and pay to rent a car, however the car rental is immediately organised by Smart Salary, so they'll liaise directly with the car company whom we decide to lease the car from (each car company has a set of cars they'll lease and the ones we're interested in are all brand new).

Now the deal is, you pay about $560 per fortnight (depending on the car you choose) and the car is then leased to you for 3 years.

Here's the beauty... as well as getting the car, you get;

*Fuel paid for
*Insurance paid for
*Rego paid for
*CTP paid for
*bi-annual car servicing paid for
*Replacement tyres paid for
*Road-side assistance included

^ All that for 3 years. After the 3 years, you can decide to buy the car at what would be a discounted price, or hand the keys back and look at getting a newer model.

So you're paying close to $15,000 per year however all on road costs are included. So you're not out of pocket all the much when you consider the price of these extras, and you continuously have a newer car meaning (hopefully) it won't break down and require repairs that much like the older models do.

Best of all, as it's deducted automatically from Wifeys salary, she will then go to the lower tax bracket meaning we're not paying thousands of bucks to the ATO anymore.

With your strong business acumen Boosty, I'm after your thoughts on this.

 

[Kempsey Dog]

My wife did this in 2015 for Mazda CX3.
Wasn't perfect for us at the time being renters and in low tax bracket anyways, but was the best way for us to get a car that was desperately needed.

Once the term was over, had no choice but to buy out $15,000 as wife was on maternity leave and was leaving job. So turned out to be quite an expensive little exercise for us, especially when it didn't really effect our taxable income substantially.

If you have the expendable income and are happy to treat a vehicle like a phone plan for lack of better example then great go for it, this will always work for you.

Of course there are plenty of other ways to reduce taxable income with superannuation with pre and post contributions. Don't quote me but I think that's capped around. $27,000.

These days a quality car on salary sacrifice will be more than $27,000. So if you have the means to exceed the $27k cap through employer contributions and your own salary sacrifice, then using a salary package as a means to further reduce tax.
If you fall into this category it's a slam dunk imo.

One thing we noticed is that Mazda treated us like kings and services / washes etc were always S tier as fleet plus copped the bill. Maybe some of those bells and whistles were passed on at the end of term sale price, but was good to not be fucked around by dealerships / services for once.
I guess this is something that is pushed by the fleet companies, because they end up with the vehicle is you decide to upgrade so essentially they need to ensure your asset is taken care of incase it becomes theirs.

 

[diddly]

I did salary sacrifice for a car and superannuation - and there are plenty of benefits with both (more with super) - but a couple of potential downsides that are never clear when signing up

1. The initial cost of the car - are you getting the best deal?
2. Any interest. and if so, what rate for the car purchase (compare with market rates available)
3 Services, petrol cleaning etc - you are still paying for it but with before tax (except 15%) - just comes out of the money you are paying for the lease
4. After the lease ends you still have to pay the balance owing - unless you go into another lease
5. If you don't need to purchase a new car every 4 years (or however long you have the car) is the luxury of a new car every 4 years an expense worthwhile?
6 Fees paid to Smart salary

You may have it all sorted - seems with property etc you have

 

[hayes]

So I'm after the advice of my homeboy @Blue_boost and here's the sitrep...

My Mrs received a tax notification last year. She's on the higher income tax bracket due to having 2 rental properties, plus a teachers salary from a private school.

Currently between us, we own 2 cars, 2 houses, a granny flat, and an apartment.

Now wifey is thinking of selling her car, and getting a salary sacrifice car. What this means is that she'll get about $15,000 for her car once it's sold, and pay to rent a car, however the car rental is immediately organised by Smart Salary, so they'll liaise directly with the car company whom we decide to lease the car from (each car company has a set of cars they'll lease and the ones we're interested in are all brand new).

Now the deal is, you pay about $560 per fortnight (depending on the car you choose) and the car is then leased to you for 3 years.

Here's the beauty... as well as getting the car, you get;

*Fuel paid for
*Insurance paid for
*Rego paid for
*CTP paid for
*bi-annual car servicing paid for
*Replacement tyres paid for
*Road-side assistance included

^ All that for 3 years. After the 3 years, you can decide to buy the car at what would be a discounted price, or hand the keys back and look at getting a newer model.

So you're paying close to $15,000 per year however all on road costs are included. So you're not out of pocket all the much when you consider the price of these extras, and you continuously have a newer car meaning (hopefully) it won't break down and require repairs that much like the older models do.

Best of all, as it's deducted automatically from Wifeys salary, she will then go to the lower tax bracket meaning we're not paying thousands of bucks to the ATO anymore.

With your strong business acumen Boosty, I'm after your thoughts on this.

My advice always organise your quotes for insurance to compare.

Also once decided on car don't automatically pay the price from salary sacrifice. Call the dealer and asked for the fleet price and quote. Some of the dealer Nissan will give up to 30% off the driveway price.

 

[hayes]

Organise your own quotes purely because salary sacrifice company get commission.

 

[Alan79]

We used to have a salary sacrifice system that just gave you the sacrificed wages on a debit card. If you just wanted to use it to pay off anything including car loans you could. Now they've swapped to this novated lease deal it prevents you from paying out straight loans.

 

[Hacky McAxe]

Depends how it's done I think. It's generally good either way. But it's best if it's done via novated lease (her employer organises it). You end up saving lots of money, but the employer has to agree to do it.

 

[Blue_boost]

So I'm after the advice of my homeboy @Blue_boost and here's the sitrep...

My Mrs received a tax notification last year. She's on the higher income tax bracket due to having 2 rental properties, plus a teachers salary from a private school.

Currently between us, we own 2 cars, 2 houses, a granny flat, and an apartment.

Now wifey is thinking of selling her car, and getting a salary sacrifice car. What this means is that she'll get about $15,000 for her car once it's sold, and pay to rent a car, however the car rental is immediately organised by Smart Salary, so they'll liaise directly with the car company whom we decide to lease the car from (each car company has a set of cars they'll lease and the ones we're interested in are all brand new).

Now the deal is, you pay about $560 per fortnight (depending on the car you choose) and the car is then leased to you for 3 years.

Here's the beauty... as well as getting the car, you get;

*Fuel paid for
*Insurance paid for
*Rego paid for
*CTP paid for
*bi-annual car servicing paid for
*Replacement tyres paid for
*Road-side assistance included

^ All that for 3 years. After the 3 years, you can decide to buy the car at what would be a discounted price, or hand the keys back and look at getting a newer model.

So you're paying close to $15,000 per year however all on road costs are included. So you're not out of pocket all the much when you consider the price of these extras, and you continuously have a newer car meaning (hopefully) it won't break down and require repairs that much like the older models do.

Best of all, as it's deducted automatically from Wifeys salary, she will then go to the lower tax bracket meaning we're not paying thousands of bucks to the ATO anymore.

With your strong business acumen Boosty, I'm after your thoughts on this.

I’m honoured you have reached out…

There is a real sweet spot here depends which car you go for.. fbt is calculated as part of this pre tax dedication amount.. if your running costs are not equal to the fbt then you pay fbt for nothing.. so calculate your likely running costs and then what the fbt would be… if they are about square there is your sweet spot how much to spend on a car

Resist the urge to get a more plush expensive car as the fbt will be more..much more..

This novated lease can be a great way to buy a car if you minimise the fbt payable.. it’s also excluding GST so if your in a high salary tax bracket go for it!

The buy price at end of lease is a defined percentage of purchase price.. 3 years or 4 years lease..also many good novated lease operators can buy a car at discounted rate below rrp..

But there are pitfalls… The other pickle would be if you change jobs it’s all yours to pay with post tax money so it can hit your hard if your new employer will not participate

 

[Blue_boost]

By the way I have my own car on a lease and manage all the running costs myself.. vehicle only.. strip out all the fat from them

 

[Hacky McAxe]

Forgot to add one point. Boosty reminded me. You generally get more benefits and savings if you go for an Electric Vehicle.

 

[Wahesh]

Forgot to add one point. Boosty reminded me. You generally get more benefits and savings if you go for an Electric Vehicle.

We're likely to go hybrid. Definitely won't go full EV.

 

[Wahesh]

I’m honoured you have reached out…

There is a real sweet spot here depends which car you go for.. fbt is calculated as part of this pre tax dedication amount.. if your running costs are not equal to the fbt then you pay fbt for nothing.. so calculate your likely running costs and then what the fbt would be… if they are about square there is your sweet spot how much to spend on a car

Resist the urge to get a more plush expensive car as the fbt will be more..much more..

This novated lease can be a great way to buy a car if you minimise the fbt payable.. it’s also excluding GST so if your in a high salary tax bracket go for it!

The buy price at end of lease is a defined percentage of purchase price.. 3 years or 4 years lease..also many good novated lease operators can buy a car at discounted rate below rrp..

But there are pitfalls… The other pickle would be if you change jobs it’s all yours to pay with post tax money so it can hit your hard if your new employer will not participate

There's no one else I would rather ask brother. Thank you for the insight and your thoughts which are on-par with mine.

 

[Wahesh]

I did salary sacrifice for a car and superannuation - and there are plenty of benefits with both (more with super) - but a couple of potential downsides that are never clear when signing up

1. The initial cost of the car - are you getting the best deal?
2. Any interest. and if so, what rate for the car purchase (compare with market rates available)
3 Services, petrol cleaning etc - you are still paying for it but with before tax (except 15%) - just comes out of the money you are paying for the lease
4. After the lease ends you still have to pay the balance owing - unless you go into another lease
5. If you don't need to purchase a new car every 4 years (or however long you have the car) is the luxury of a new car every 4 years an expense worthwhile?
6 Fees paid to Smart salary

You may have it all sorted - seems with property etc you have

All good points.

1. It's hard to get a new car price negotiated below RRP in the current climate, but we might try to push it down. Toyota have indicated to us they will not negotiate - which is really rare considering that they always have for us. This is a good market indicator.
2. Will compare with what other dealerships have, however the car we want must have certain functions, non-negotiable.
3. Correct
4. Correct - might be worth going into another lease
5. Will revisit this. As we are looking at Hybrid it might be worth getting a new lease after 3 years to ensure the new car has new batteries etc...
6. These fees are part of the fortnightly deduction

 

[diddly]

All good points.

1. It's hard to get a new car price negotiated below RRP in the current climate, but we might try to push it down. Toyota have indicated to us they will not negotiate - which is really rare considering that they always have for us. This is a good market indicator.
2. Will compare with what other dealerships have, however the car we want must have certain functions, non-negotiable.
3. Correct
4. Correct - might be worth going into another lease
5. Will revisit this. As we are looking at Hybrid it might be worth getting a new lease after 3 years to ensure the new car has new batteries etc...
6. These fees are part of the fortnightly deduction

Keep them honest - squeeze them before they squeeze you -Have you done a comparison of interest rates - or if you just paid cash for acar with no borrowing /leasing?

When i was leasing it was worthwhile for me because of tax thresholds etc but for others i worked with it there was no benefit and in fact more expensive due to interest rates and un necessary new car every 3/4 years. I had a great difficulty in finding out the interest rates - things may have changed though with greater transparency

 

[Hacky McAxe]

We're likely to go hybrid. Definitely won't go full EV.

Hybrid is a good choice. What size are you looking for?

If you're looking for a mid-size SUV, the Toyota Rav 4 is king, but impossible to get unless you're willing to wait 18 months. The new Nissan X-Trail is a good alternative, but not as fuel efficient.

Toyota have decent hybrids across the range though. Corolla Cross is great and has excellent fuel efficiency if you can tolerate the smaller size.

 

[Wahesh]

Keep them honest - squeeze them before they squeeze you -Have you done a comparison of interest rates - or if you just paid cash for acar with no borrowing /leasing?

When i was leasing it was worthwhile for me because of tax thresholds etc but for others i worked with it there was no benefit and in fact more expensive due to interest rates and un necessary new car every 3/4 years. I had a great difficulty in finding out the interest rates - things may have changed though with greater transparency

Hmmm - I got a question regarding the buy back (if it comes to that), let's just say the car was $60,000 at the time of lease and we paid $45,000 to lease it over 3 years. At the end of the 3 years do we pay the remaining $15,000 to keep the car or do we pay a calculated depreciation cost minus the lease fee?

 

[diddly]

Hmmm - I got a question regarding the buy back (if it comes to that), let's just say the car was $60,000 at the time of lease and we paid $45,000 to lease it over 3 years. At the end of the 3 years do we pay the remaining $15,000 to keep the car or do we pay a calculated depreciation cost minus the lease fee?

In the initial agreement there would be (or was when i was salary sacrificing) an agreed amount - for me it was 40% of the initial cost so if i bought /leased $50k car i would be up for $20K to keep the car

 

[Blue_boost]

Hmmm - I got a question regarding the buy back (if it comes to that), let's just say the car was $60,000 at the time of lease and we paid $45,000 to lease it over 3 years. At the end of the 3 years do we pay the remaining $15,000 to keep the car or do we pay a calculated depreciation cost minus the lease fee?

The buy out will be an exact percentage… 4 year lease is 38% of cost of car from memory , 3 year rate more..