Congratulations for going electric. Now, how do you fuel your EV dream financially? Read on to explore the different financing options to get you on your journey to low cost, low emission motoring. The different financing options covered in this article are:
What is a novated lease? A novated lease is a way to finance a car that combines salary packaging with car leasing. It involves three entities: you, your employer, and a novated lease provider. Here's a breakdown of how it works:
Potential benefits of a novated lease Utilising a novated lease means you will reduce your taxable income and could save significant amounts of money compared to other financing options. Historically, novated leasing triggered additional fringe benefit tax payments for employers for any portion of time that the vehicle was used for personal use. Many employers weren’t prepared to cover this additional tax and either passed it on to the employee or chose not to offer car leasing schemes. However, from 1 July 2022 fringe benefit tax was eliminated on EVs under the luxury tax threshold (currently $89,332). This change has rapidly increased the uptake of employers offering novated leases for EV, and the uptake of such leases by employees. EV financing options The above chart is based on a three-year term, with the lessee taking full ownership at the end of the lease, for a Tesla Model Y RWD. It includes registration, CTP and insurance costs but excludes other costs. For full-time employees, novated leasing is likely to be the cheapest option for acquiring an EV. Especially for those in higher tax brackets. Additional benefits may also be possible by salary sacrificing other costs associated with ownership such as electricity and maintenance. If you are self employed then it may be advantageous to purchase your EV through your business given no FBT is payable on it for personal use; you should discuss this further with your accountant. For most people, car financing to purchase an EV is likely to be the most expensive option. Downsides While there are many benefits to a novated lease there are also downsides to consider before you decide. Including:
Data and assumptions Notes:
(1) Based on three-year lease/ownership period for a Tesla Model Y. The vehicle is fully owned by the consumer at the end of this three-year period in all examples. (2) Novated lease costs based on the average of quotes provided by two leading novated lease providers – Fingo and Novated Lease Australia. The cost includes registration, insurance and an end of lease payment to take full ownership of the EV after 36 months. (3) Purchase price as per Tesla website. Includes stamp duty, GST and the first year of green slip, registration and insurance costs. (4) Registration, green slip and insurance based on actual 2023/24 costs for a Tesla Model Y. (5) Mortgage example assumes all the upfront cost of $66,092 is added to the home mortgage at an interest rate of 6.3% (being the average Australian home loan rate per money.com.au). Interest and principal is then assumed to be repaid over three years in line with the CBA home loan calculator. Car finance costs as per carclairty.com.au, including a $12,000 upfront deposit and no end of term payment. In this case, Car Clarity quoted an APR of 8.8% but this could differ depending on your credit rating. Final word EVs are becoming a compelling choice for many drivers. Quicker acceleration, smoother driving, superior technology, minimal fuel and maintenance costs, no CO2 emissions, no air pollution…the list goes on. The price of EVs has dropped significantly in the past two years. Many models are now comparable in cost, or even cheaper, than their gasoline or diesel counterparts. Novated leasing can further enhance affordability by leveraging tax benefits, making EV ownership a more realistic option for a broader range of drivers. If you are an in the upper tax bracket you can now acquire a Tesla Model Y using a novated lease for close to the same price as a Toyota Corolla using traditional car finance!! Comments are closed.
|
AuthorWrite something about yourself. No need to be fancy, just an overview. Archives
April 2024
Categories |
|
Quick Links |
JOIN OUR MAILING LIST
|