The benefits of novated leasing

A novated leasing is a tax effective way to purchase a motor vehicle. The finance and running costs of your vehicle are paid for by your employer who recovers these costs from your pre-tax salary. The associated tax benefit is what makes novated leasing an increasingly popular method of financing a car.

Novated leasing comes in a finance only arrangement and a fully maintained version. A finance only novated lease is an agreement entered into with a financier. The running costs, salary deductions and fringe benefit tax (FBT) requirements are managed by the employee and their employer.

Entering into a fully maintain novated lease allows these aspects to be managed by a company specialising in novated leasing. This simplifies the process and reduces the administration costs to the employer. A fully maintained lease also provides the employee with an estimate of the tax advantage they will receive.

How does a fully maintained novated lease work?

 

A fully maintained novated lease incorporates the finance for the vehicle and budgets for its running costs. These budgets will depend on the vehicle selected, the term of the lease and expected annual kilometres to be travelled.

The total vehicle cost is worked out over the term and then divided into equal monthly amounts. These monthly amounts are invoiced to the employer and recovered tax effectively from the employee’s salary.

Who can have a novated lease?

 

Generally speaking novated leasing is available to any employee with their employer's permission.

Where do I start?

 

Speaking with a novated leasing provider is the easiest way to get a better understanding of the process and the potential tax benefits. However, it is a good idea to do some research first. Start by investigating potential vehicles that suit your needs. It is wise to select a vehicle that has strong resale qualities as this will reduce the total cost of the lease.

The vehicle can be new or used and can be purchased from a dealer or private seller. It helps to have an idea of the annual kilometres you expect to travel and how long you intend to own the vehicle.

How much tax benefit can I receive?

The tax benefit from a novated lease is via savings in income tax and GST. This saving will depend on a number of variables including the price of the vehicle, the term of the lease and the intended kilometres travelled.

Although, a better tax advantage is generally gained the more kilometres travelled, significant savings can still be made for those who travel less kilometres. Below is an example of such circumstances.

Oliver has an annual salary of $90,000 and travels only 7,000 kilometres per annum. He is looking to lease a brand new $26,000 Corolla over a 3 year term. Based on this information his taxable income could be reduced by about $5,000 per annum.

By reducing his taxable income by $5,000, Oliver saves $1,925 per annum in income tax. Oliver also receives $500 of GST claimed back by his employer each year. The combined tax benefit for Oliver is more than $7,000 over the three year term.

If Oliver travels 20,000 kilometres per annum, he receives a much greater tax advantage. His taxable income is reduced by about $7,000 per annum and his employer can claim $700 per annum of GST on his behalf. This results in a tax benefit of over $10,000.

Novated leasing may not work in all financial situations and independent financial advice is always recommended when it comes to your personal finance matters. However, a fully maintained novated lease has the potential to provide significant tax advantages when purchasing a vehicle.

source: bigpondmoney.com.au

Volkswagen recall 384,000 vehicles

German auto giant Volkswagen will recall 384,181 vehicles in China over gearbox defects after state television criticised it over the issue.

In a company statement, Volkswagen said an electronic malfunction could cause cars to lose power while being driven.

'In isolated cases, an electronic malfunction in the control unit or a lack of oil pressure inside the gearbox mechatronics may result in a power interruption,' the statement said.

Steering and braking would not be impacted, it added.

The vehicles affected include both imported models such as the Audi A3 and domestically-made ones, among them the Magotan and Passat, said the Chinese government's quality watchdog, which on Saturday had ordered the recall.

The move followed a year-long investigation, it added, and the cars involved came off the assembly line between December 2008 and early this month.

Volkswagen said it would replace components in the gearbox of affected vehicles for free.

The recall came after China Central Television alleged in an annual corporate malpractice programme that Volkswagen had used substandard gearboxes in some models, causing acceleration problems and accidents.

Volkswagen, which is Europe's biggest carmaker, said last week it planned to open seven more factories in China, the world's largest car market.

It currently has two passenger vehicle production joint ventures with China's SAIC Motor and FAW Group.

source: bigpondmoney.com.au

Brazil auto sales up but output down in 2012

Sao Paulo — Auto sales in Brazil rose 4.9 percent in 2012 compared with the previous year but production fell 1.5 percent, the first decline in the past 10 years, industry data showed Friday.

“In general it was a positive year although we experienced many difficulties. The sector showed major growth, undoubtedly with lower profitability but with prospects of continued growth next year,” said Cledorvino Bellini, president of the National Association of Motor Vehicle Manufacturers (ANFAVEA).

He told a press conference that sales got a boost from measures adopted by the government to stimulate sluggish economic growth, including a reduction of taxes on industrialized goods.

Brazil boasts the world’s fourth largest car market after the United States, China and Japan.

Meanwhile the Central Bank has cut its inter-bank lending rates to boost growth and consumption in this country of 194 million.

ANFAVEA said 3.8 million units were sold this year, up from 3.6 million in 2011 while production was projected to fall from 3.4 million last year to 3.3 million in 2012.

Bellini explained the decline saying Brazil’s production is for both the domestic market, which rose, and for exports, which failed to expand.

source: interaksyon.com

Italian fund buys 37.5% stake in Aston Martin

ROME — Italian private equity fund Investindustrial has bought a 37.5-percent stake in British carmaker Aston Martin, the companies said in a joint statement on Friday.

“Investindustrial is investing 150 million pounds (186 million euros, $240 million) in Aston Martin in the form of a capital increase for a 37.5-percent stake,” the firms said.

The 99-year-old car-maker will get an injection of Italian expertise and much-needed resources to compete with luxury competitor giants such as the Fiat Ferrari.

There had been a bid from Indian jeep maker Mahindra & Mahindra for the stake in the British manufacturer, whose flashy vehicles feature regularly in James Bond movies.

Aston Martin said it would now proceed “with its extensive and exciting plans for sustainable long-term growth”.

The car-maker rose to fame thanks largely to its DB5 sportscar, a favourite of early Bond actor Sean Connery which returned to the limelight in Daniel Craig’s car chase through Italy in the 2008 “Quantum of Solace”.

The company said production would continue to take place in Gaydom in Britain, where 1,600 workers are based.

Andrea Bonomi, senior principal at Investindustrial, said: “We are delighted to form part of this iconic global, but quintessentially British brand.”

Sales at Aston Martin have been hit along with other small car-makers during the global economic slowdown and it had been looking for key funds for research and development.

Aston Martin said it intended to invest “more than half a billion pounds in its new product and technology programme over the next five years.”

The car-maker is owned by Kuwait-based finance firm Investment Dar, which bought it from Ford Motors for $767 million in 2007.

Investindustrial, owned by Italy’s Bonomi family, used to own Italian motorcycle maker Ducati.

source: interaksyon.com

Buying a Car with Bad Credit: Your Options

No matter how many times our mothers warned us to pay our bills in full and on time, some of us just had to find out for ourselves what the repercussions for making late and partial payments would be. Surprisingly, we’ve found that our credit cards weren’t cancelled and no one came knocking on the door to collect that brand new TV we bought and couldn’t afford. Nope, instead they hit us where it hurt the most. They lowered our credit score. And because they were so sneaky about it, we didn’t even realize it was happening until it was too late!

If you’ve got a broken down car, can’t get to work, and can’t get financing on a new car because of bad credit, don’t panic. There’s a way to drive yourself out of this mess, and while it may not be in a new Mercedes-Benz, no need to worry. You’ve still got that fancy TV.

First things first. Go online and get a copy of your credit report. Pay the extra fee to make sure the report includes your credit score. The score is reported by three bureaus, so get your score from all three (Equifax, Transunion, Experian).

Beg the Bank

Understand your credit score and decide the best way to proceed. Most banks won’t lend to people with scores below 640. However, if you’re within a reasonable range of that, many banks will still give you a car loan if you have a good history with that particular bank. If you’ve got $1000 cash, go to the bank where you have your checking account and see if that’ll do for a down payment. Depending on how close you are to 640, sometimes only $500 is enough. If they say no, don’t lose hope. Keep pressing on.

Buy in Cash

Depending on how mechanically inclined you or your friends are, you might want to check out what’s available within your cash range. $1000-2000 can often get you a decent 10 year old vehicle. Unfortunately, most 10 year old vehicles aren’t always in the best mechanical condition, so this is where knowing someone who’s good with engines will be of help.



If you don’t know a mechanic, usually it’ll cost you about $50 to have one accompany you to the dealership to do a thorough inspection on the car you are interested in. However, you should make sure he doesn’t have a connection to the dealership to ensure you’re getting unbiased advice. Older cars come with a lot of problems, so you might want to avoid this option and consider buying from a “Buy-Here-Pay-Here” dealership.

Buy from a “Buy Here Pay Here” Dealership

You know that annoying radio commercial? “Bad credit? No credit? No problem! If you’ve got $500 and job, you can ride away in a new car today!” These guys are what you’d call a “Buy-Here Pay-Here” dealership. “Buy-Here-Pay-Here” dealerships will finance a car purchase and keep the loan in-house, so you’ll owe them money, not some anonymous bank in Phoenix or Cleveland.

These dealerships get a lot of flak because they are in the business of selling loans, not cars. They’re taking chances on people with volatile credit and know that most of their customers will eventually get behind on their loans. Therefore, the cars they sell only have to last as long as it takes for the owner to default on the loan. If you buy from a dealership like this, make sure not to leave your mechanic at home. But not all Buy-Here-Pay-Here dealerships are dangerous. Some of the more reputable ones will offer mechanical warranties, so keep your eye out for those.

In sum, if you’ve got bad credit and you need a reliable way to get around, do your very best to obtain financing from a respectable dealership. However, if you can’t, purchasing from a Buy-Here Pay-Here dealer is a slightly better idea than paying for an old beater in cash, especially if you don’t have any mechanics in the family.

source: howisavemoney.net