EOFY – Is it Really a Good Time to Buy a New Car?
The end of financial year is associated with discounted bargains and fantastic deals.
Business owners are getting their taxes in order and shopaholics are in full force. You know you’re about to be bombarded through sales and ad campaigns advertising “never to be repeated prices”. After all, there’s never been a better time to buy a car than EOFY!
It’s no secret that now is also considered the perfect time to invest in a new car May/June is the biggest-selling period of the year. In fact, June 2017 showed there were 134,171 new car sales. And this figure is only on the rise.
Great offers and extended warranties entice buyers come end of financial year. But is it the best way to get a good deal? Leasing a new car through a novated lease, also known as salary packaging, can provide the same benefits as purchasing at EOFY sales.
The debate between buying and leasing is an old one. If you’re considering a new car to save tax, here’s why a novated car lease may be a viable option:
To reap the tax rewards, buying a new car in June makes financial sense.
Private business owners looking to balance out their taxes have an added incentive for EOFY purchases. Vehicles are written off as a tax deduction to help minimise the tax bill, driving better returns and deals with the taxman.
There are also generous depreciation concessions for small businesses. Depending on the price of the vehicle, the entire amount may be claimed as an immediate deduction. Tax deductions can be made on the running costs of the new car too.
Vehicles bought under a novated lease also offer significant tax benefits. Car leasing saves you tax on both the car and its running costs, making it achievable to obtain new wheels anytime of the year. For employees or business owners, this is a financially smart opportunity.
What is Deductible?
If you’re an employee or business owner, novated leases have the potential to save you money.
Car payments are paid with pre-tax dollars, so your money-in-pocket goes further. Vehicle-related expenses are also paid with your pre-tax salary. This is especially beneficial as you’re lowering your taxable income, whilst organising all your car expenses into one easy-to-manage payment.
Car leasing can offer the following deductions:
- Running Costs: Everything from fuel to repairs and available parts. You’ll also get a fuel card, which enables you to track fuel usage.
- Insurance and Maintenance: If you buy a car under a novated lease, all operating costs, including insurance, regular servicing, maintenance and repairs are paid using your pre-tax income.
- Other Expenses: Automatic registration renewal, car detailing and replacement tyres are deductible.
Car dealers and top brands are eager to close their books on a financial high. This leads to aggressive activity to lure customers and hit crucial sales targets.
Despite these sales being highly attractive to car buyers, it can result in rushed decisions. EOFY is a good time to slow down, compare the market and review the deals you’re offered. If they don’t suit what you’re after, you can go to another dealer to match a competitor deal.
For some buyers, it makes more sense to access these opportunities all year round. EOFY sales are time-restrictive. Novated leases offer cost-effective incentives 365 days a year. You can reduce your finance amount through salary packaging a car, which may be just as valuable.
Car Dealer Tricks
Car dealerships throw in “free” incentives to sweeten the car buying deal. And because the end of financial year is such a competitive time, these selling tricks are intensified.
Additional ‘free’ accessories are an example. $500 worth of extras may sound appealing, but how much of it do you need? These sales tricks can make you believe you’re getting a great deal, but don’t let them blindsight you into a purchase that isn’t quite what you need.
Offering items such as free comprehensive insurance, servicing or roadside assistance is another gimmick car dealers use. They’re usually a means to get you back into the dealership or make more money from you. There’s almost always a better deal around the corner!
Dealerships may also entice you with the drive away cost. A great price doesn’t mean cheap running costs though. The average Australian covers more than 13,716km each year. Thus, a car with high running costs significantly outweigh the drive-away costs.
Buying vs. Novated Leasing, which is Right for You?
If you’re weighing up whether to buy through EOFY sales or a novated lease, you’ve come to the right place. easifleet can help find the right solution for your situation. Speak to one of our staff about how car leasing can benefit you.