Saturday, August 9, 2008

End of Novation Period - What Options? Part 4

Say you no longer want the car and simply want to hand it back. There is an option for you. Note: This option is very rarely used as it does not favour the driver in any way.

Option 4 - Hand the Vehicle Back

If the vehicle is handed back to the financier at the end of the Novated Lease period, the financier then auctions the vehicle for the best price offered (no reserve).

What Happens after the Auction?

The money raised from the sale (less costs) is used to pay out the residual amount plus GST of your Novated Lease. If there is a difference between the net funds (from the auction) and the residual amount plus GST, this amount is treated in either of the following ways:

a. Any shortfall between the net sale price and the residual amount plus GST is still the responsibility - and liability - of the driver. (you still owe them money!)

b. Any surplus between the net sale price and the residual amount plus GST is retained by the financier. (They keep it!!)

You do have a variety of options available to you at the end of a Novated Lease. You can keep the car or not. Whatever option you choose, remember that the residual value must be paid.

End of Novation Period - What Options? Part 3

If you don't want to keep the car you novated - maybe you want to move on to bigger and better things - you have another option at the end of your Novated Lease period.

Option 3 - Upgrade the Vehicle

Under this option you can trade in your existing vehicle and upgrade to another vehicle. A new Novated Lease is then set up for this replacement vehicle.

Two points need to be made here in regards to the trade-in amount of your existing vehicle:

a. If the trade-in value is less than the residual value plus GST on your existing novated lease, then the short fall is still due and payable by you (the driver) to the financier.

b. If there is a surplus amount between the trade-in value and the residual amount plus GST, then this surplus is paid directly to you (the driver) and cannot be used to reduce the purchase price of the replacement vehicle.

End of Novation Period - What Options? Part 2

If you want to keep the car you've got a Novated Lease on but can't afford it at the end of the lease, you might consider option 2.

Option 2 -Refinance the Residual Amount

If the driver wishes to retain the vehicle but can't afford the residual amount plus GST, he/she can arrange to have this amount refinanced over a further period - again Salary
Packaging this new Novated Lease from their salary.

End of Novation Period - What Options? Part 1

At the end of the novation period, the agreed residual value plus GST needs to be paid to the financier.

There are four options available to you.

Option 1 - Offer to Purchase the Vehicle

If the driver wishes to keep the vehicle, he/she makes an offer to purchase it from the financier for the agreed residual amount plus GST. This amount has been pre-determined and accepted by both parties in the initial contract. The offer is generally accepted by the financier. Funds are transferred to the financier and clear title of the vehicle is then passed to the driver.

Sunday, July 27, 2008

Mercedes SLR McLaren Roadster

The very stylish Mercedes SLR McLaren Roadster hit the 'Car Catwalk' recently and was an instant 'head turner'. With its sleek lines and semi gull-wing doors, it had car enthusiasts salivating with a desire to take it for a burn on the German autobahn. This is the fastest automatic car in the world and one which Mercedes can be truly proud of.

My brother - the car connoisseur - actually had a part in its creation. I asked him some in depth questions about his work with McLaren....

Me: "So Pete... what was your role in the development of the SLR Roadster?"

Pete: "Design, development and supply of the body sealing system. That means the rubber bits around the doors and the roof. This was a bit more complicated than usual due the hinge position of the doors on the upper A-Pillar; and the fact that the door design is mainly carried over from the coupe and was never originally designed to be a convertible. Because the planned production volumes are low - maybe 800 cars depending on customer demand - the parts are produced more or less by hand in Metzeler's prototype workshop."

Me: "Did you have any say in the design of the car?"

Pete: "As a system partner we try to influence the body design to allow the best sealing performance, that means a lot of simultaneous engineering, and required a lot of visits to McLaren's Engineering centre in Woking (just outside London) to coordinate with the Engineering people there. This is also where the Formula 1 team is based and where the F1 cars are built and engineered. You can take a look at and follow the link to Mclaren Technonogy Centre which in itself is an amazing place."

Me: "How long were you working on the car?"

Pete: "I started on the project in Feb/March 2006 and the first production cars were built at the beginning of June 2008. We supplied prototype parts at various stages for development cars, and I was at the Daimler test facility in Laredo Texas twice to support testing and development."

Me: "So do you reckon I could afford one??"

Pete: "In Europe the base price is around 495,000€ - there is a long list of extras and customers can personalise their cars as well.. I don't think there are any plans to sell them in Australia officially and I really don't think you could afford one."

Me: "Fine then.. Guess I'll have to stick to my Rav 4. Thanks little brother.."

Pete in Germany with his 'baby'...
ENGINE 5439cc, eight cylinders
POWER 617bhp @ 6500rpm
TORQUE 575lb ft @ 3250rpm
TRANSMISSION Five-speed auto
FUEL 14.5mpg (combined) CO2 348g/km
ACCELERATION 0-62mph: 3.8sec
TOP SPEED 207mph

Saturday, July 26, 2008

"Vehicle Salary Packaging - How Can it Save You Money?" - Summary

Putting it All Together
We've talked about the three ways of saving money when you salary package a vehicle via a Novated Lease. You can save money on:
- the purchase price;
- on GST; and
- on the salary packaging.
Now lets put it all together with a realistic example.
Say Mr. A. Person wants to buy a Ford Focus TDCI (Hatch) with a recommended retail price (On Road and with accessories) of $31,800.00.
The Novation company, with their access to fleet discounts etc. is able to purchase the car for $28,100.00.
Saving 1: $3,700.00
The Tax Invoice price for the vehicle of $28,100.00 includes GST of $2450.00. This GST is claimed by the finance company as an Input Tax Credit. (So is not included in finance contract.)
Saving 2: $2450.00
By Salary Packaging the vehicle under the Employee Contribution Method your net take home savings are approximately $4135.00 per year.
Saving 3: $4135.00 x three years = $12,405.00
Total Savings: $18,555.00
When you analyze a Novated Lease agreement the savings are quite considerable. Why would you go out and buy a car yourself - paying the total price and putting a great deal of your savings into the purchase - if you are able to novate one? The more I learn about this, the more I'm convinced its the way to go.

Thursday, July 17, 2008

"Vehicle Salary Packaging - How Can it Save You Money?" - Part 3

Saving Tax
The third way to save money when you salary package a vehicle via a Novated Lease is through the effect it has on:
- reducing the income tax you pay: and
- the subsequent increase in your take home salary.

By Packaging the operational costs as well, the savings can be quite considerable.
In the above example (Quote dated 17/07/08) savings could be as much as $4,775.34 each year - totalling approximately $19,000.00 over four years!

*Table provided by Supanova shows an example of possible annual savings for this particular scenario.