Join Australia's most dynamic and respected property investment community

How terrible is leasing a car for serviceability?

Discussion in 'Property Finance' started by Tim86, 20th Jan, 2016.

  1. Tim86

    Tim86 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,085
    Location:
    Brisbane
    Im considering doing a lease on a new ute because of the 3000 per year saving I would get over buying it in a traditional way.

    However Im wondering what impact that would have on my serviceability.

    It would be salary sacrificed in a way, with 580 per fortnight coming out of my pay pre tax.

    If its a 5 year lease does that simply mean that the bank will deduct that lease amount from my pre tax income? Logically youd think thats all they would do. Or do they have their own calculators where you get extra screwed over if you lease with pre tax dollars. For example do they do something stupid and deduct the pre tax dollars from post tax serviceability rather than deducting like for like?

    Or do they calculate that at any given time you may leave your job and therefore no longer be eligible for the lease, so they deduct more from your serviceability in order to account for a potential pay out that you may be liable for, or again deduct based on after tax dollars being spent for the lease, as in a new job youd no longer be eligible to use pre tax dollars?

    Thanks for any guidance.
     
  2. Tim86

    Tim86 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,085
    Location:
    Brisbane
    Oh and as the lease includes all vehicle costs like insurance rego etc.... do they take that into consideration when calculating serviceability. For example do they only deduct the portion that is the interest and principal payment, but not the bit that is fuel cost etc...

    My thinking is a normal person with a car would be up for all those costs anyway. However they dont deduct your fuel usage from your serviceability.

    But i guess the difference is this is an ongoing payment that your obligated to pay whereas a normal person could just get rid of their car...
     
  3. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,099
    Location:
    Melbourne, Nationwide
    All those extra costs you just mentioned (rego, insurance, etc) are normally considered as part of the living expenses calculations by lenders. They don't deduct this separately in their calculators so there's essentially a double dipping of these costs.

    Leases are a disaster for serviceability especially if you're already approaching the limits...
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,765
    Location:
    Perth WA
    Leases impact serviceability a lot, mainly b/c car running expenses are usually accounted for in your living expenses, but a lease turns them into a liability so the bank effectively double dips on those expenses.
     
    Tim86 likes this.
  5. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    883
    Location:
    Melbourne
    I highly doubt that $3,000 pa figure as well.

    If you use the car for income producing purposes you can claim the costs, 'pre tax' whatever the financing method.
     
    Tim86 likes this.
  6. Tim86

    Tim86 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    1,085
    Location:
    Brisbane
    The replies from my tax implications thread seemed to be a bit less convincing about whether or not I could claim the cost of the ute.

    I manage my own properties and do building work on them etc... so it is in use for income generating activities.

    My dad seems 100% convinced that I can claim it for that usage. He does.

    But anyway if it effects the serviceability that negatively then the $2000 or so PA savings would kind of be like saving $1 but costing you $5 down the track. Especially because I have lots of refinancing to do over the next 3 years.

    Think I'm just going to have to use some of the home loan monies to buy the car.
     
    tobe likes this.
  7. JetstreamVic

    JetstreamVic Active Member

    Joined:
    29th Dec, 2015
    Posts:
    29
    Location:
    Melbourne
    You can claim whatever you want on tax, it's just audit time when you start to have some issues
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,161
    Location:
    Gold Coast
    string ?

    ta

    rolf
     
  9. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,143
    Location:
    Canberra and Sydney
    They sure are!

    I see it quite a bit with public service clients - they have a decent gross salary......but that quickly changes when you see the whopping sal sac deduction for their new vw :-(

    Cheers

    Jamie
     
    Tim86 likes this.
  10. hammer

    hammer Well-Known Member

    Joined:
    28th Aug, 2015
    Posts:
    413
    Location:
    Darwin
    Cars are money pits. Buy the cheapest reliable one you can afford ( like a triton runout or bottom of the range hilux - NO CHINESE CRAP), pay it off super fast, then keep it for at least 10 years. Limit your debt to good things like businesses and property.
     
  11. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    883
    Location:
    Melbourne
    buy the cheapest one your ego can afford.....
     
    markson, York, Bubica42 and 4 others like this.
  12. Gargamel

    Gargamel Member

    Joined:
    18th Jun, 2015
    Posts:
    20
    Location:
    Brisbane
    Don't do it
     
  13. Kegs86

    Kegs86 Active Member

    Joined:
    23rd Dec, 2015
    Posts:
    28
    Location:
    Vic
    On the other edge of the sword, Does having a fully paid for vehicle, including rego, maintenance and fuel have a positive effect on your borrowing capacity??
     
  14. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,099
    Location:
    Melbourne, Nationwide
    No, unless it's paid for via a car allowance from your employer which appears on your payslip as a salary credit.
     
    Tim86 likes this.
  15. Magnet

    Magnet Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    251
    Location:
    Sydney
    Don't do it! We have 2 lease cars a Hyundai Santa Fe and an I20. We love the cars and the fact that budgeting for expenses is all done without a second thought but our ability to borrow has been well and truey stuffed. The bank asks every loan application about the lease and when it is due to end. We are looking to buy our 3rd IP at the moment and I won't be at all surprised if the bank says no this time. It could mean no More IP's for the next 2 years which would really suck.
     
    Tim86 likes this.
  16. tobe

    tobe Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    883
    Location:
    Melbourne
    A letter from your employer for a fully maintained company car can add $5,000 after tax to your income with some lender calculators.
     
    Kegs86 and Jess Peletier like this.
  17. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,106
    Location:
    Melbourne
    Could you not just tell your leasing company to stop cost payments whilst you obtain finance?
    What I mean by this is call them and tell them to adjust so your just paying the finance component of the vehicle like a normal car loan. You just then pay running costs yourself until finance has been obtained and then call them and have it added back.

    Obviously this is a bit of stuffing around but it's only because there calculators do not have an option to note it's a packaged vehicle so remove vehicle running costs from living expenses.
     
    House likes this.
  18. alexm

    alexm Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    304
    Location:
    Sydney
    Even though i've got a few very expensive cars and bikes, this statement is true.

    Whatever floats your boat though.
     
    Tim86 likes this.
  19. Magnet

    Magnet Well-Known Member

    Joined:
    22nd Jun, 2015
    Posts:
    251
    Location:
    Sydney
    Not a bad idea. I'm sure it can be done. I'll ring Maxxia tomorrow & canvas this. We would only need to opt out of extras payments for a month of payslips. That's what I love about this site. Several heads are better than one!
     
  20. albanga

    albanga Well-Known Member

    Joined:
    19th Jun, 2015
    Posts:
    1,106
    Location:
    Melbourne
    I package my car and can control my budget. For example this year I overestimated my Kim's and some things have not cost as much so my account is in surplus 2k. I can quite easily tell my employer not to make payments for the next 6 weeks. The leasing company won't care as they have adequate funds for the required payments.
     
    Tim86 likes this.