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Best way to buy a car?

Discussion in 'Accounting & Tax' started by Bran, 5th Aug, 2015.

  1. Bran

    Bran Well-Known Member

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    I'm going to put this to my accountant today, but you lot are mostly a clever bunch.

    I need to buy a car at short notice (I had borrowed/agreed to look after one for 2 years and have to give it up 18 months early).

    Considerations:
    High income (>300kpa), high tax but limited cash
    Car required to travel between different work sites
    I have access to finance at about 5.5%
    I can set up novated lease (Ive done this before, convenient yes, cheap - dunno)
    Looking to spend ALAP (as little as possible) but needs to be family friendly/safe - I don't care for new/used. (If I could get in to a luxury car cheap I would, but am yet to find a way - I drive an 11 year old Barina, and we have only the other borrowed car).


    Use the cash?
    Accept 5.5% with a tax deductible component given work travel?
    Lease?
    Novated lease?

    Too complicated for me.
     
  2. Hodor

    Hodor Well-Known Member

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    Places offer zero percent on new cars. Never looked into it any further. But its a way to preserve cash if you went new.

    I sold my car an no longer have one so now I'm out of ideas
     
  3. FireDragon

    FireDragon Well-Known Member

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    Just out of curiosity, what's the budget for your car. You've > 300k pa but still limited cash? :confused: Have you got any cash in your IP offset accounts?
     
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  4. skater

    skater Capitalist Premium Member

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    I pay cash for cars.
     
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  5. spludgey

    spludgey Well-Known Member

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    I guess it all depends how you come up with that figure. If you look at all my partner's and my income combined, we make just over $300k a year but half of that is rent and we've got IP expenses that are nearly the same amount.

    Though we're looking at buying a car next year and that will definitely be bought with cash.
     
  6. Greyghost

    Greyghost Well-Known Member

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    I was thinking the same as above..
    300k income but no cash?
    Just putting it out there, maybe you should invest some time into a personal budget after you buy your car..

    I have done hire purchase loans, a personal loan when I was 18 to buy a car.. All a waste of money.

    I pay cash for all my cars now.
    Except for credit cards they are the biggest waste of money..
    Exception is collectible cars :) like the 69 camaro I'm saving up for!!

    In all seriousness. If you are on 300k, 5.5% vs 5% for a hire purchase is not going to make a big difference. What will is the ballon amount at the end of the contract.

    If I were you I would work out the market value of the car at say year 4, then make the ballon (residual) payment this amount. This will reduce your monthly repayments by quite a bit.
    Purpose of which is to save cash on the side towards the cas purchase of your next car. The balloon will then equal the trade in value and will nil out. You will then be left with the cash at end of year 4 to buy a car outright and won't be stuck in the finance loop anymore..
     
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  7. Emoi

    Emoi Well-Known Member

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    Last edited: 5th Aug, 2015
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  8. Dan Donoghue

    Dan Donoghue Well-Known Member

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    Well I can't advise you on the payment method but you said you don't care about new or used and you would like something a little but luxury.

    I can recommend a 2010 Subaru Liberty GT. Lots of leather and creature comforts and the best part is the fuel crisis has killed their value, you can pick one up for 20K, these were almost 60 new (unfortunately for me I was one of the suckers that bought one new but you live and learn). On the downside be prepared to use about 12 litres / 100K's. It's okay on freeways (about 8L/100) but around town having a turbo kick in at 2,300 rpm means you are burning through your fuel.

    [​IMG]
     
  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    There are cars our there NOBODY wants...Falcons and Commodores. My son had your dilemma recently and decided against a new car in favour of a cheapie so he could save for a property. He paid just on $2300 for a car that seems to look and run very well...8 yrs old 102,000km and logbooks that support the k's. He spend $400 of getting some basic defects working (remote lock, electric window + a gas strut). He works in car sales and they are at best a $2K trade-in if they have under 120,000. Then it drops lower... Everyone wants smaller engines etc. That's why they will stop production soon. Sales are headed one way.
     
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  10. EN710

    EN710 Well-Known Member

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    We are buying our first car and pay cash - but this is because we're in no hurry (waiting time 4 months) and my income is not that high.
    With 300k+ income, I'm wondering if novated lease a good choice.
     
  11. jafeica

    jafeica Well-Known Member

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    Gumtree, do a filter for cars between $2k-$4k, less than 150k kms, newer than 2002. Save that search. Plenty of good cars 10 years old that will run for a while yet.
     
  12. chylld

    chylld Well-Known Member

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    Bought my "junior dream car" last year for ~$160k. Was presented with a 1.99% finance deal by the dealer and was mighty tempted but decided to pay cash instead as I didn't want even the slightest dent on serviceability - did some more topups a few months after and upgraded PPOR this year.

    Interestingly, even though I was presented with the finance form, I didn't sign/return it, but it still came up in the credit check for my PPOR purchase =\ (didn't affect it tho as the bank just wanted to check if it went ahead)
     
  13. thesuperman

    thesuperman Well-Known Member

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    Over $300k income & limited cash? Makes you wonder how people making so much money can't save any cash....
     
  14. thesuperman

    thesuperman Well-Known Member

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    Isn't that illegal for them to run a credit check when they haven't gotten a signed approval from you to do that?
     
  15. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    A novated lease is useless if the logbook shows low work kms. Even then a NL is just a fancy package form of debt finance that is overpriced. The car, the options, the aftermarket extras and the insurances and the finance extras and the finance rate itself. 4 years later you have shelled out tens of thousands for something with zero true equity.

    Ever wonder how dealers offer 1.99% finance ?? The price you pay for the car is almost non-negotiable. They aren't in the business of lending to lose.
     
  16. AndrewTDP

    AndrewTDP Urban Planning Consultant Business Member

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    Business owner or employee?
     
  17. chylld

    chylld Well-Known Member

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    The dealer had passed on my details to the finance company (Branded Financial Services P/L) so I had a pre-populated application form on hand, but we never submitted a signed copy of it. However my details were all that was needed to hit my credit file apparently.

    Usually the car dealer gets some commission from the finance company but in this case they said there was none. As a result when I changed my mind to pay cash they had zero issue proceeding with the price we had negotiated :)
     
  18. Be Developer

    Be Developer Property Developer Business Member

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    @Bran

    Pay cash if possible. Few good cars under 20k. Will get you from point A to point B with some comfort.
     
  19. chylld

    chylld Well-Known Member

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    Holden Cruze was a big surprise for us, hired one in Tassie for a week and loved it. Better refinement, comfort and handling than our 4-series.

    2013 automatic examples can be had for $13k
     
  20. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    Cash.
    Simple, over and done with.
    No more paperwork to deal with.