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Old 20-09-2006, 10:52 PM   #1
TURBOTAXI
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Default XR6 Turbo lease arrangements - to lease or not to lease.

Hi Folks,
I have been talking to our nominated novated lease provider about leasing an XR6 Turbo.
I am working with a dealer who will supply me with an 03 or 04 ex highway patrol XR6T with 60,000k's with a brand new VSI LPG conversion for $28,000. - That is the delivered cost in my name etc.....

Now I think I would travel about 35,000 - 40,000 k's per annum.

I know on the turbotaxi I have the following costs each week for 750k's:

Fuel $67
Rego + CTP $12.53
Brakes $2.14
oil and filters $7.65
Tyres $7.69
Trans service $1
Coolant $1
front end $1.5
Rear end $1.5
Engine and Trans $11.50 (based on a 100,000k service life)
Turbo and manifold $22 (based on a 100,000k service life)
LPG system (hardware) $5.89
Miscellaneous $20 (globes, auto electrical work, bearings, belts, coolant hose, anything else I have missed etc...)

Thats $161.40 per week or $8392.80 per annum to run the taxi. I may have missed costs - anyone who can think of costs please let me know what I have forgotten. Please also tell me if you think my projected costs are unreasonable. The prices have not included labour- this is the costs of me doing the work on the car (servicing, engine swaps, trans swaps) I have also used known costs of second hand parts. I guess that means thats an even better saving available.

They are offering me the late model XR6T with VSI set up fully installed for less than $200 per week (about $190 out of take home pay) after paying $190 per week I would have no forseeable costs in addition to the lease fee. (it is meant to be all inclusive for the nominated k's per annum)

The bonus is that that price includes full comprehensive insurance.

So for an extra $29 per week I could be driving a swish looking XR6T with factory warranty etc....

What do you guys think? I am struggling with the idea of giving someone $200 per week for a car. Given the only cost I really notice with the taxi is fuel.


Help me to develop the business case to get the car!

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Old 20-09-2006, 11:09 PM   #2
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Quote:
Originally Posted by TURBOTAXI
Hi Folks,
I have been talking to our nominated novated lease provider about leasing an XR6 Turbo.
I am working with a dealer who will supply me with an 03 or 04 ex highway patrol XR6T with 60,000k's with a brand new VSI LPG conversion for $28,000. - That is the delivered cost in my name etc.....
Now I think I would travel about 35,000 - 40,000 k's per annum.
I know on the turbotaxi I have the following costs each week for 750k's:
Fuel $67
Rego + CTP $12.53
Brakes $2.14
oil and filters $7.65
Tyres $7.69
Trans service $1
Coolant $1
front end $1.5
Rear end $1.5
Engine and Trans $11.50 (based on a 100,000k service life)
Turbo and manifold $22 (based on a 100,000k service life)
LPG system (hardware) $5.89
Miscellaneous $20 (globes, auto electrical work, bearings, belts, coolant hose, anything else I have missed etc...)
Thats $161.40 per week or $8392.80 per annum to run the taxi. I may have missed costs - anyone who can think of costs please let me know what I have forgotten. Please also tell me if you think my projected costs are unreasonable. The prices have not included labour- this is the costs of me doing the work on the car (servicing, engine swaps, trans swaps) I have also used known costs of second hand parts. I guess that means thats an even better saving available.
They are offering me the late model XR6T with VSI set up fully installed for less than $200 per week (about $190 out of take home pay) after paying $190 per week I would have no forseeable costs in addition to the lease fee. (it is meant to be all inclusive for the nominated k's per annum)
The bonus is that that price includes full comprehensive insurance.
So for an extra $29 per week I could be driving a swish looking XR6T with factory warranty etc....
What do you guys think? I am struggling with the idea of giving someone $200 per week for a car. Given the only cost I really notice with the taxi is fuel.
Help me to develop the business case to get the car!
Dood I'm a little lost do you own the business ? or your work is offering this for you ? sounds like you own the business , but is not a novated lease where the company you work for pays your lease for you, unless you leave, then its your call ?

All i can say from having many of these setup's and being caught many times over i would not enter into a novated lease agreement with any company movig forward ( unless it was on my terms , being that any diference if we parted ways and the current value of the car / remaining balance was paid by the company if it were not my choice to part ways ) they sound good while the company is paying but if you decide your moving on your stuck with the gap.

Secondly why would you quote the costs on second hand parts / and your own labour , sure this may be the case by why short sell yourself.
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Old 20-09-2006, 11:19 PM   #3
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Quote:
Originally Posted by DOC
Dood I'm a little lost do you own the business ? or your work is offering this for you ? sounds like you own the business , but is not a novated lease where the company you work for pays your lease for you, unless you leave, then its your call ?

All i can say from having many of these setup's and being caught many times over i would not enter into a novated lease agreement with any company movig forward ( unless it was on my terms , being that any diference if we parted ways and the current value of the car / remaining balance was paid by the company if it were not my choice to part ways ) they sound good while the company is paying but if you decide your moving on your stuck with the gap.

Secondly why would you quote the costs on second hand parts / and your own labour , sure this may be the case by why short sell yourself.

I probably knew exactly what I was talking about and made no sense to anyone else! I work with the public service, part of our employment is that we can use McMillan Shakespeare to do a salary sacrifice on cars, laptops etc.... I had though "novated lease" was the right phrase, I may well be wrong.
The reason for using my labour and second hand parts is that that is what I do with my car. When I am comparing what a new XR6T would cost to what I currently spend I have not taken into account the fact that I do the work and use second hand parts on my car. This probably makes my car look cheaper. If I was to lease the XR6T these tasks would be performed by someone else at no additional cost. so for $160 per week driving my old car I am doing all the work on it using cheap parts where possible. For $190 a week I am driving an XR6T and not having to do the work on it, and enjoying factory warranty.

Does this make more sense?
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Old 20-09-2006, 11:21 PM   #4
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Is your employment fully supplemementing it?
How much cost p.a. needs to be bourne on yourself to avoid FBT?
Whats the pay out (residual) on you at the end of the term and how long is the term?
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Old 20-09-2006, 11:27 PM   #5
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Quote:
Originally Posted by TURBOTAXI
Does this make more sense?
Yes, it sounds like the company / public service are allowing you to salary sacrifice and enter into the novated lease allowing you to update your ride.

the car will probably have a 40% residual but may be wrong so check into that as well.

I will go by be careful if you ever leave as the cars in your name, also the best person to add it all up is your accountant ? maybe a call to him / her.
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Old 20-09-2006, 11:37 PM   #6
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Quote:
Originally Posted by Smoked
Is your employment fully supplemementing it?
How much cost p.a. needs to be bourne on yourself to avoid FBT?
Whats the pay out (residual) on you at the end of the term and how long is the term?
The term can vary from 1 - 5 yrs with the residual varying depending on the length of the lease. I think at 4 years it is a 35% residual - so I would need to get $9800 for the car then.

Quote:
Originally Posted by DOC
Yes, it sounds like the company / public service are allowing you to salary sacrifice and enter into the novated lease allowing you to update your ride.

the car will probably have a 40% residual but may be wrong so check into that as well.

I will go by be careful if you ever leave as the cars in your name, also the best person to add it all up is your accountant ? maybe a call to him / her.
I will give the accountant a call and see what he says, I just thought the idea of an extra $29 per week to drive a factory turbo car with factory warranty was a good idea.
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Old 20-09-2006, 11:44 PM   #7
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My second question still remains, how much do you need to pay on the vehicle to avoid Fringe Benefits Tax? Probably better directed at an Accountant, but its worth considering.
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Quote:
Originally Posted by The-ShowStoPPa
...dont get me wrong this 3.8v6 is pretty special, it does come with the popular shake rattle and roll option and the auto compliments this with the ever popular snap crackle and pop feature
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Old 21-09-2006, 12:26 PM   #8
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Yeah I agree, definately worth getting an accountant involved. Unless you know what you are doing, its very easy to miscalculate and end up paying the price.

I looked at a similar lease through work. Basically, the more you earn, the better such a lease agreement is. On the wage that I am, it was not worth it. Also, I got the impression that you could not mod the car at all, which was out of the question for me.

Plus, there is an allocated amount for each thing. The thing that worried me the most was petrol, as their petrol allowance within the lease was very conservative and if you drive a car like the XR6T should be driven, then its a catch.
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Old 21-09-2006, 12:52 PM   #9
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If you are able to salary sacrifice and run a novated lease, this is very tax benificial. Dont forget when you "pay" for the car you will not pay GST and you should get the FULL fleet discount. If you want to know these figures (the fleet discount) PM me. I can help. As a guide, my BF XR8 retail price was 61K. I have a few options in it. My lease finance amount was 49K. I have a 15K residual at the end of the 4 years but I can either pay that myself or sell the car. It should be worth than 15K by then. The new tax cuts have made it slightly less benificial to novate, but I would rather have a new car in the garage than hand over almost 50 cents in every dollar to Johnny!

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Old 21-09-2006, 12:58 PM   #10
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Quote:
Originally Posted by xr8ted
Also, I got the impression that you could not mod the car at all, which was out of the question for me.

Plus, there is an allocated amount for each thing. The thing that worried me the most was petrol, as their petrol allowance within the lease was very conservative and if you drive a car like the XR6T should be driven, then its a catch.
You can mod the car, but it must be legal. But that may also depend on the leasing company. A mate of mine is novating a troopy. Man, you should see the mods on that thing!!

And your fuel budget etc is not a problem. remember you pay for everything in pre tax dollars. EG, put $100 worth of fuel in and pay $60. That is how is comes out. And the lease company will give you fuel cards, I have 3, that you get fairly good discounts on. You never pay what the pumps says.

They tally up all your expences for the month, take of the discounts, and then take the money out of your account. Very simple once you get used to it.

Cheers.
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Old 21-09-2006, 01:40 PM   #11
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There are 5 reasons to take out a Novated lease

1. Lessen you taxable income - all lease cost will come out of your pre tax income lessening the amount Johnny H gets

2. Fleet discounts on purchase price, fuel, maintenance & tyres.

3. You don't pay GST on the purchase price of the vehicle OR the running costs - in fact the only GST you pay on the whole lease arrangement is on the payout price at the end of the lease....add that up - its thousands

4. Your choice of vehicle, not what the company want to you to have.

5. Build tax free equity in the vehicle which you profit from when you sell it at end of lease. Work it out so that the pay out price is less than market price. Your lease residual value may be $15k at end of lease the market price might be $20k. Buy it out for $15 and sell for $20 = $5000 in you pocket tax free.


Choosing the right vehicle and lease term is CRITICAL. Choose a car which will hold it value well but not cost the earth to maintain or to buy (Someone say XR5?)

Choose the shortest lease term you can afford. If you need to end the lease early this will reduce any gap b/w the pay out price and the cars value plus you can always put another 12 month lease at the end of the first one.

People only get into trouble with leases when:

Your circumstances change the amount of klms they do which effects the FBT liability. Read up about FBT - its worth thousands and the klm concept is easy to understand. (PM if you don't get it).

You do heaps more klms than the lease is set up for and you get a big bill at end of lease for the extra fuel etc (you should get a monthly vehicle report showing how the budgets are progressing.

They enter into a lease then want to get out it before they have done half the lease term. In this situation the payout price of the lease may be more than the value of the vehicle. This is only because of the finance component, interest charges etc.

Having a look at what your proposing I would take a 12 month lease and then assess where your at, at the end of that 12 months. The warranty will be gone by then (ex HWP car remember) and the residual with be a little less than $20k.

I don't work for McMillan - I work for their opposition.
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Old 21-09-2006, 01:52 PM   #12
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With the FBT, I was under the assumption that you are required to put X amount into the vehicle per yer in order to avoid it. Is this correct?
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Old 21-09-2006, 02:07 PM   #13
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There is no way avoiding FBT, the more kays you do, the less FBT you pay... but you have to pay FBT regardless with novated. That is my understanding anyway..
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Old 21-09-2006, 02:16 PM   #14
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FBT is a tax and it gets a little multi-layered depending on what your situation is.

You always are up for FBT on a novated lease because some (or all) of the time the vehicle is NOT used for business purposes - ie you drive it home at night and on weekend.

On a novated lease you substitute one tax for another - You pay FBT instead of income tax and for most people (depending on your tax bracket) FBT is cheaper than income tax.


You can avoid paying FBT if you instead make personal contibutions to the lease costs up to the amount of FBT you are liable for. For every post tax dollar contribued the FBT liabity is reduced by one dollar - your paying SOME income tax then and not FBT.

So - If your monthly FBT amount is $250, you pay $250 towards the cost of the lease out of post tax wages (rather than pre tax) and it cancels the FBT out plus reduces your monthly lease amount by $250.....thats the simple two sentance explanation.

McMillan will be able to explain this much better using number and examples etc. It does get a bit Accountant speak when you really delve into it - I'm trying to keep it simple with as fewer words as possible....which is a challenge.

Novated leasing a car has finance and taxation principles no more difficult to understand than a negative geared investment property. Don't be scared by it. Just ask questions "what happens if...".
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Old 21-09-2006, 02:19 PM   #15
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Should have pointed out that the person contribution thing is done through your employer, they will either offer it or they won't. It's extra work for payroll to do.
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Old 21-09-2006, 02:37 PM   #16
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Quote:
Originally Posted by Outbackjack
You can mod the car, but it must be legal. But that may also depend on the leasing company. A mate of mine is novating a troopy. Man, you should see the mods on that thing!!

And your fuel budget etc is not a problem. remember you pay for everything in pre tax dollars. EG, put $100 worth of fuel in and pay $60. That is how is comes out. And the lease company will give you fuel cards, I have 3, that you get fairly good discounts on. You never pay what the pumps says.

They tally up all your expences for the month, take of the discounts, and then take the money out of your account. Very simple once you get used to it.

Cheers.
Can you do a novated lease on a late model seccond hand car.
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Old 21-09-2006, 02:38 PM   #17
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Quote:
Originally Posted by TURBOTAXI
For $190 a week I am driving an XR6T and not having to do the work on it, and enjoying factory warranty.

Does this make more sense?

Ford do not offer a factory warranty on any LPG conversion, unless it is EGas straight from them.
The dealer selling the car to you may be offering a "harrier" warranty. In this case it is a very flawed warranty, lots of clauses, and it should be approached with caution. This doesn't mean it is bad, but it is certainly not like a factory warranty.
Also, choose your LPG system carefully, or find out which kit they are installing, as there are differences in how they operate, moreso on the installers competence, and the maps run by the LPG interceptor.
Good luck
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Old 21-09-2006, 03:09 PM   #18
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Depends on the leasing company rules and contracts.....but most allow leasing a second hand, late model cars.

For instance my company policy is less than 4 years, less than 100k on the clock.

Its actually a good strategy to do short leases on late model second hand cars because they don't loose as much value.
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Old 21-09-2006, 03:10 PM   #19
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Quote:
Originally Posted by saml
There is no way avoiding FBT, the more kays you do, the less FBT you pay... but you have to pay FBT regardless with novated. That is my understanding anyway..
You are dead right. My lease is about 25K a year. 4K of that is FBT. BUT do the sums if I just payed tax on the 25K..... At least this way I have a new car every 3 to 4 years.
Cheers all.
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Old 21-09-2006, 03:11 PM   #20
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Quote:
Originally Posted by BOOSTEDF6
Can you do a novated lease on a late model seccond hand car.
Yes you can , but when you take into account the GST and fleet dicount removal, it really is not worth it. get a new car with full warranty.
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Old 21-09-2006, 03:15 PM   #21
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Originally Posted by Outbackjack
Yes you can , but when you take into account the GST and fleet dicount removal, it really is not worth it. get a new car with full warranty.
I'm now looking at a new gt-p or a 2oo2 m3, not sure which i'd rather own but i know the m3 will hold it's value alittle better seeing as it's already 2nd hand.
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Old 21-09-2006, 03:16 PM   #22
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Quote:
Originally Posted by Ringo
Depends on the leasing company rules and contracts.....but most allow leasing a second hand, late model cars.

For instance my company policy is less than 4 years, less than 100k on the clock.

Its actually a good strategy to do short leases on late model second hand cars because they don't loose as much value.
So an o2 model with 95K would just scrape in then.
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Old 21-09-2006, 03:32 PM   #23
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Quote:
Originally Posted by BOOSTEDF6
So an o2 model with 95K would just scrape in then.
It would.....just.

Where things can get tricky though is how much money the 2002 95K car is worth.

Like any loan the value of the loan can't be more than than the car is worth. Sometimes the driver has had to make up the gap b/w what we say it worth and what the dealer wants for the car.

Gotta say thought that these situations are usually caused by people who know nothing about cars and don't understand that paying sticker prices on a second hand Mitsubishi 380 5 speed might not be the smartest financial decision they ever made.....get my drift.

Also try to steer away from doing novated leases on fleet models such as Falcon XT / Futura only because the second hand market gets flooded with and 3 and 4 year old cars ex-fleet vehicles which kills the chances of you selling your ex novated lease Falcon XT for any sort of decent money - your competing with dealer and slick salesmen who offer warranties and finance options.

Second hand XR's a not a bad option - plenty of private owners who hold onto them keeping seond hand supply steady, plenty of demand despite fuel prices hurting.

Ideally though you wouldn't novated lease a Falcon/Commodore or Falcon/Commodore variant because of the massive depreciation.

I am leasing a Mazda 6 - 66% residiual value after 3-4 years
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Old 21-09-2006, 04:10 PM   #24
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Quote:
Originally Posted by BOOSTEDF6
I'm now looking at a new gt-p or a 2oo2 m3, not sure which i'd rather own but i know the m3 will hold it's value alittle better seeing as it's already 2nd hand.
Maybe, you really would have to do the sums. At the end of the lease the M3 will have higher kilometres..... And be 4 years older. Dont forget, you will probably be looking at a about a 10K discount on the GTP. This will eat away at the new car depreciation imediatly.

Do the sums.
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Old 21-09-2006, 09:58 PM   #25
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Quote:
Originally Posted by whatthe
Ford do not offer a factory warranty on any LPG conversion, unless it is EGas straight from them.
The dealer selling the car to you may be offering a "harrier" warranty. In this case it is a very flawed warranty, lots of clauses, and it should be approached with caution. This doesn't mean it is bad, but it is certainly not like a factory warranty.
Also, choose your LPG system carefully, or find out which kit they are installing, as there are differences in how they operate, moreso on the installers competence, and the maps run by the LPG interceptor.
Good luck
I was concerned about this. I spoke with FORD and the dealer. They will cover the car, just not the LPG system. If the car breaks and it is proven that the LPG was the cause that would also NOT be covered. They seem to be pretty reasonable people at the dealership.
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Old 21-09-2006, 09:59 PM   #26
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Quote:
Originally Posted by whatthe
Ford do not offer a factory warranty on any LPG conversion, unless it is EGas straight from them.
The dealer selling the car to you may be offering a "harrier" warranty. In this case it is a very flawed warranty, lots of clauses, and it should be approached with caution. This doesn't mean it is bad, but it is certainly not like a factory warranty.
Also, choose your LPG system carefully, or find out which kit they are installing, as there are differences in how they operate, moreso on the installers competence, and the maps run by the LPG interceptor.
Good luck
They are offering a VSI system. All installed and delivered for the $28,000
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Old 21-09-2006, 10:35 PM   #27
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Posts: 537
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Go for it mate, you'll regret it if you dont.
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Engine Mods: K&N Pod in a XR8 Pod Box; Performace fuel pump; 2 1/2" Exhaust
Planned Engine Mods: ; Extractors; Tickford CAI; Twin Mufflers; Shift Kit; Hi-Stall; Cam; ECU Flash
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Old 21-09-2006, 10:38 PM   #28
BPXR6T
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Join Date: Mar 2006
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Ok, I got tierd of reading so apologies if I repeat anything. I have leased my BA XR8. However I have to pay for the servicing, repairs, fuel etc. Its paid in pre-tax dollars via a corporate credit card. So anything I spend on the car helps reduce my taxable income as its deducted from my wage each week by my accountants. Very handy.

Do you know about the FBT exemption available for utilities and motorcycles. It might be worth your while getting a ute. Otherwise you've got to do a certain number of kms every year to get the FBT down to a reasonable level. Chat to your accountant about that.

The typical residual is around 45%. You should probably add that to your weekly running costs. I'm selling my XR8 in preperation for quitting my job. I'll stick with my turbo e-series that I own outright for a bit. There's something to said about being 100% debt free.
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Old 21-09-2006, 11:32 PM   #29
Smoke Pursuit
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If your leasing buy a brand new one, with the fleet discounts these leasing mobs get its probarly going to be not much more a week, plus you could take it over a longer period perhaps if you get a brand new one.
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