Thinking about your next car?
Choosing between used and new can be a big decision. Weighing up the pros and cons of each car type is an important factor.
It’s a common question for anyone considering a novated lease. Both options can help you save on tax and running costs. But which will suit your life, goals, and budget better?
1. Purchase Price
Used cars usually come with a lower price tag, as the main depreciation hit at the start of a cars life has already occurred.
For you, this means lower finance payments and insurance costs. So, if you want to keep your monthly expenses down while still accessing tax savings, a used car lease can help manage cash flow.
New cars often have higher purchase prices, however manufacturer bonuses, fleet discounts, and drive-away deals can narrow the gap over your lease term. Plus, you can't beat that new car feeling!
Keep in mind, when driving your next car with a novated lease, no upfront or down payment is required.
2. Warranty and Maintenance
A new car comes with a full warranty, giving drivers reassurance that what they're driving is manufacturer backed. Servicing is predictable, and you with a novated lease you bundle all your running costs into your pre-tax payments to simplify your budget. This means no out-of-pocket expenses for the life of your lease.
Used cars may still have some factory warranty left, even dealerships can offer warranties on used cars. You can package extended warranty and servicing into your lease to help achieve savings and reliability in your car.
Just keep in mind that as cars age, they may need more repairs, so it’s worth factoring in potential maintenance costs later in your lease.
3. FBT Implications
For EVs, the current FBT exemption applies to both new and used vehicles if they meet the eligibility criteria. This makes leasing a used EV particularly affordable, as you save on upfront costs while paying no FBT on running costs. This also offers drivers the opportunity to dip their toe into EV ownership at a lower cost.
For non-EV vehicles, the taxable value of the car affects your FBT liability. A used car with a lower value can reduce your FBT costs while still allowing you to bundle fuel, rego, insurance, and servicing into your lease.
When looking at novating your current car with an Associate Lease, the older the car the better! This is because FBT is calculated on the market value of the car.
4. Resale and Long-Term Value
Generally, new cars experience a steep drop in value immediately after purchasing it. There's the saying "you lose 20% of the value of the car when you drive it off the showroom floor". This is due to the steep initial depreciation new cars experience within the first year. This rate of depreciation slows down over the life of the car.
A used car has a more stable resale value. This is because the used car has already undergone the initial depreciation hit.
5. Lifestyle Fit
Consider how the car fits into your lifestyle. New cars offer the latest features, lower risk, and a clean, fresh feel.
Used cars can give you flexibility and lower costs, especially if minor wear and tear doesn’t bother you. Consider how 'old' your used car will be, is it one year old or 5+ years old?
Remember your vehicle can be up to 15 years old at the end of your lease. Something to keep in mind when selecting the year of your car.
The best choice isn’t just about the car itself. It’s about what fits your lifestyle, budget, and goals while making the most of your novated lease.
- Want the lowest monthly payments? A used car could be the way to go.
- Value peace of mind and the latest features? A new car may be worth it.
- Leasing an EV? New or used can both be powerful cost-saving tools under the current FBT exemption.
Choosing whether to salary package a new or used car is about fitting your car into your life and financial goals in the simplest, most tax-effective way possible.
Ready to explore your options? A quick chat with a novated leasing consultant can help you run the numbers, compare real examples, and find the right fit for you.