To lease or finance? That is the question

September 29, 2021

You’re probably aware that most car dealerships offer dealer financing – but did you know there is also a wide range of financial and other benefits to leasing a vehicle? It all depends on your lifestyle and budget, but we’re here to help guide you in making the decision that best suits your personal situation.

Leasing vs. Financing: Let’s break it down…

So, what exactly is a novated lease?

A novated lease is a simple arrangement between you, your dealership, and your employer. It’s a popular salary packaging tool that can serve as a tax-effective way of freeing up your cash.

How does it work?

Put simply, your employer pays for your car lease and all your car running costs out of your salary package through a combination of pre-tax and post-tax salary deductions. One convenient payment is drawn from your salary each pay.

Once your lease period is up, you can choose to return your vehicle and start a new novated lease, keep your car by extending the current lease, or purchase your car at the remaining residual value.

The perks?

  • Available for new and used
  • You can drive any car you want, without compromising your lifestyle.
  • You don’t pay GST and it reduces your taxable income, so you could save thousands on the purchase and running costs.
  • It’s convenient, with all the car’s running costs – including petrol, insurance, rego and servicing – bundled into one regular payment, drawn from your salary each pay.
  • Access to discounts on finance, fuel, maintenance and repairs.
  • It’s simple to set up. The whole process takes 2-5 business days from processing your lease application to delivering your vehicle (*provided it is in stock).
  • With Torque Toyota, you get competitive interest rates with full transparency of all fees and charges.
  • A great option if you like to keep up with the latest in automotive technology and upgrade your vehicles. Plus, no need to deal with car depreciation when you sell.

Why might it not work for me?

  • Fringe benefit taxes may apply. Although these should be offset by lowering your taxable income and reducing the overall running costs – we recommend seeking professional financial advice.

What about dealer financing?

A great alternative to paying cash, or taking out a personal loan, is applying for finance through your dealership.

How does it work?

Dealers have existing strong relationships with the banks and lenders and can help find you the perfect loan that suits your budget and lifestyle. No need for time-consuming calls and paperwork: Your dealer manages everything for you.

The perks?

  • Available for new and used
  • A quick, easy and convenient process. You can literally find a car, finance it, and drive away all in one day – with your dealer managing all heavy lifting for you.
  • A lump-sum balloon payment payable at the end of your loan enables you to lower your regular repayments, helping with your cashflow and allowing better access to your money throughout the loan period.
  • Refinance, trade-in, or re-purchase options are available at the end of your loan term, so you don’t need to save up to pay your balloon payment – further freeing up your money.
  • It gives you leverage to negotiate the purchase price of your vehicle.

Why might it not work for me?

  • There aren’t really any reasons why dealer financing shouldn’t work, but as always – we recommend doing your research and seeking advice based on your own financial situation.

We hope this helps shed some light on the main differences between leasing vs. financing! Got some more specific questions? Reach out to our friendly and knowledgeable Torque Toyota Business Managers today, who can help with all your business and personal finance needs.