Buying cars using credit/finance...

[blueoval]

Im leasing my car thru my company via novated lease. It was a better tax deduction for me at the time. My lease runs out next year and I will be buying out the car to keep. I think my outlook on it is, I would much prefer to pay more on a car than give it to the tax man. That said, Im considering leasing another car but for the mrs. I'll have to wait and see how the sums add up first.

[FPV+fteT3]

Geez a tough crowd. Fact is if you need a reliable car or need to do a lot of km to get to work, doctor, etc and you don't have enough money you can borrow and buy a decent reliable car. You know you will be paying interest when you take the loan but on balance if its something you decide either you need or want and can live with the repayments go for it.
If you have a stable job and can afford the payments enjoy your new car if that is what you choose to spend your money on. Opinions and sniping by people on how others should spend their money is one of my pet hates if they are spending your money you have the right to have input into how its spent if they are working and spending their own money its really none of your business what its costing them or how they can afford it.
All this BS about paying cash or walk is really crap if you have to travel any distance for work and need a car and have no money to buy a reliable car its a no brainer or you could choose not work and be on the dole or buy a $500 POS and be late for work every day or not make it (at least you paid cash ) and be on the dole anyway when your boss gets sick of your late and no show excuses.

[99AUXR]

To many different factors and it varies case by case, but people shouldnt be concerned about how others live or pay for things.

I my F6 is my first financed car as I really wanted to pick a tidy one up, I wasnt in the market for a new car but just saw it and though sure as I knew the previous owner so I talked to dealer and made him match finance from another company and also removed mechanical insurance which worked out to be $6500 over the period of the finance

So Im happy I have my F6 always loved them since I was kid, and its costing $137pw.

In my opinion I think going a dropping a large amount of cash on expensive car isnt the smartest thing to do. Best case scenario the car is owned by a business and depreciation is a very big win here in NZ. Otherwise its alot of money that could be used elsewhere and capital gains could most likely offset the interest.

[Express]

I checked to see if I had some spare cash in my pocket then chose the tasty sandwich option.

[98TLS]

Cant see what all the fuss is about really sure theres absurd interest rates but you would have to be a muppet to sign up surely.Traded my XR8 ute on the GTP and chucked in a few $1000 rest i financed at a very good interest rate,choices were keep the ute and scratch away trying to save the cash or simply when i found the car i wanted do what i did...easy choice for me anyway life is to short a point rammed home to be awhile back when a very good friend doing all the right things in life went to the doc with lower back pain then died 3 months later from cancer.End of the day its all personal choices i guess.

[Smoke Pursuit]

Simple. Do what your comfortable with and what you can afford. Some people prefer to finance their cars and invest their cash in other things like property, while others prefer to own no property but own their car outright. No one is stupid for going either way and alot of it comes down to what you want to drive. Some people are happy driving a $5,000 car they own then say buying a new $20,000 car on hock.

[Trump]

I guess the crux of the argument is whether using credit to pay for a (rapidly) depreciating item is a smart move.

Originally Posted by Express

I checked to see if I had some spare cash in my pocket then chose the tasty sandwich option.


image

Exceptionally well played

[Smoke Pursuit]

Originally Posted by Loud_Noises

I guess the crux of the argument is whether using credit to pay for a (rapidly) depreciating item is a smart move.



Exceptionally well played

The thing is it all comes down to circumstance. It might be a smart move for some, but not others. Theres no golden rule!

[99AUXR]

Originally Posted by 98TLS

life is to short a point rammed home to be awhile back when a very good friend doing all the right things in life went to the doc with lower back pain then died 3 months later from cancer.End of the day its all personal choices i guess.

Amen brother! & sorry to hear about your friend.

[98TLS]

Originally Posted by Loud_Noises

I guess the crux of the argument is whether using credit to pay for a (rapidly) depreciating item is a smart move.

Or i guess you could decide your here for a good time with no insight to how long that time is and pay a little more more the privilege,right or wrong the kick i get from going out to the shed and looking at my GTP far outweighs any thoughts i may have about finance.. nor its depreciation over a couple of years bother me.I dont advocate running around financing everything but a car...**** if its THE car (whatever THE car is to the individual) then why not,enjoy.Houses are not way up there on my fun list but are on my partners and fair enough to,thing is i signed up for 20 years paying off a house so have no problem signing up for 2 for THE car.

[pottery beige]

not a problem if managed properly

have loaned, have played redraw, have played cash

flipping cars on finance / no tax benefits is recipe for pain

[theBlake]

Originally Posted by Qwerty321

Exactly. If you can't afford to pay full price, you can't afford the car. Don't even let financing it come into mind, just forget it even exists.

Not necessarily. I finance my beer and petrol money every week. All my income goes against my home loan, therefore everything I spend is 'borrowing', Thus I never save up for anything.

When I wanted to get a new car, I just wrote out an application for a $30k home loan for a 10 year term, fixed rate for 3 years (then 3, then 3, then variable). I chose 10 years because I figured I would keep the car for 10 years.

I could have saved up that $30k over a few years but then my home loan debt would be more.

Its a nonsense argument that many people make like "dont borrow against the house for a car, because you are paying it off over 30 years". You will pay it off over the term that you decide to pay it.

Such finance juggling takes some discipline, but so does all personal finance management. Those that cant control their spending, generally don't end up in a situation where they can cash out equity in such a manner.

However, to answer the original question, I don't believe in borrowing money for cars. Thats creating "bad debt". IMO my strategy is not borrowing, its spending my savings, it just looks different on the balance sheet.

[xtremerus]

If everyone HAD to pay CASH for cars to be on the road, we would rid Australia of all congestion problems.
50% would not be on the road.
And most of those left on the road would be great POS.

[Qwerty321]

Originally Posted by theBlake

Not necessarily. I finance my beer and petrol money every week. All my income goes against my home loan, therefore everything I spend is 'borrowing', Thus I never save up for anything.

When I wanted to get a new car, I just wrote out an application for a $30k home loan for a 10 year term, fixed rate for 3 years (then 3, then 3, then variable). I chose 10 years because I figured I would keep the car for 10 years.

I could have saved up that $30k over a few years but then my home loan debt would be more.

Its a nonsense argument that many people make like "dont borrow against the house for a car, because you are paying it off over 30 years". You will pay it off over the term that you decide to pay it.

Such finance juggling takes some discipline, but so does all personal finance management. Those that cant control their spending, generally don't end up in a situation where they can cash out equity in such a manner.

However, to answer the original question, I don't believe in borrowing money for cars. Thats creating "bad debt". IMO my strategy is not borrowing, its spending my savings, it just looks different on the balance sheet.

My reply was more focused on those buying from second hand car yards. I realise now that in Aus the mainstream may be able to afford new cars, but here in kiwi land almost all cars are bought second hand, and only the properly rich buy first hand. When people say they "financed" their car over here, it usually means they bought some second hand car at exorbitant interest rates from car yards, which we can all agree is a massive mistake. So that's why my reply was just a straight up "Don't do it!". Guess what I said doesn't really apply to most of your situations

[FlipXW]

I bought my ranger with cash. Now I'm looking to buy a property and I wish I didn't. I could have bought an Amarok on 0% finance and got myself into a much more decent property now. Even though I wouldn't 'own' the Amarok.

[tranquilized]

Having a no finance blanket rule is ridiculous. For many of us financing a car purchase is the smarter way to go. Actually if I was to make a broad generalisation I'd be more inclined to say it's crazy to waste valuable cash reserves on something like a car - that cash could be put to better use like in FlipXW's case.

I financed 100% of my VF Calais though my business. That business charges my other business a weekly fee for the book work I do while my business partner travels the globe, and not coincidently that weekly fee covers the car repayments. It really does feel like a free car - no chance I was going to dump any of my own cash into the purchase.

[Qwerty321]

Jeez, is it just me or does all this business accounting stuff sound a lot like tax dodging through loopholes

Sounds like everyone's doing it, and I've been missing out... That's it! Time to start a business and get my free Calais!

EDIT : Oh wait. I live in a different currently with different tax codes and accounting stuff to all of you I heard the australian agency was way more lenient than IRD but damn. You guys get it too easy lol.

[Express]

Originally Posted by Qwerty321

Jeez, is it just me or does all this business accounting stuff sound a lot like tax dodging through loopholes

A loophole is not a tax dodge.

A loophole is knowingly provided by Government to allow concessions to help promote business growth.

[Qwerty321]

Originally Posted by Express

A loophole is not a tax dodge.

A loophole is knowingly provided by Government to allow concessions to help promote business growth.

Isn't a loophole basically the government blatantly allowing/turning a blind eye to a tax dodge for businesses as a way of incentivising people to start up their own businesses and employ others rather than being employed themselves, which in turn helps the economy etc. etc.

Either way, it's still a lot harder on this side of the ditch. Guess that explains how you guys have so many new cars on the roads and kiwi's are still driving jap imports from the mid 2000s. Would be pretty sweet to basically get a free car with loopholes. I'm getting jealous just thinking about it

[99AUXR]

Not really Im a kiwi and my parents and everyone I know who owns businesses puts new car purchases under their business and claim depreciation. It happens allot over here, hell one guy who is employed by a local business has his own company more or less to claim car repairs and depreciation and a few other loop holes.

IMO it doesnt happen here because most kiwis right new cars off with their tall poppy syndrome and dont think how allot are actually making it work.

I also know someone who has a GTP listed as a company vehicle so saying it doesnt happen is incorrect.

I must say thank god the NZ goverment clamped down on the LAQC loophole regarding tax credits because that was a joke

https://en.wikipedia.org/wiki/Loss_A...ifying_Company

So let me paint a picture if a block of land was to convert to dairy farm and the losses made that year for the business could then be claimed by the shareholders, thank god thats fixed.

[Qwerty321]

Originally Posted by 99AUXR

Not really Im a kiwi and my parents and myself included and everyone I know who owns businesses puts new car purchases under their business and claim depreciation. It happens allot over here hell one guy who is employed by a local business has his own company more or less to claim car repairs and depreciation.

IMO it doesnt happen here because most kiwis right new cars off with their tall poppy syndrome and dont think how allot are actually making it work.

I also know someone who has a GTP listed as a company vehicle so saying it doesnt happen is incorrect.

I heard you had to do stuff like keep a log book to claim running costs and if even if you do claim stuff like depreciation you'll still end up paying a large chunk of your car off with your own money. Nothing like the "free car" some people are describing here. Please do enlighten me if I'm wrong. I'd rather a new car over a tall poppy syndrome any day.

Also, surely creating a business purely for the purpose of writing off repairs and depreciation is ethically wrong. Like I know the ethics is highly subjective and he's doing nothing illegal, but idk man, it doesn't sit well with me.

[99AUXR]

Its certainly not a free car but it doesnt cost anywhere near what someone with hard earned would walk in and have to put down just due to the tax advantage of depreciation which can be claimed 100%.

As for running cost I was meaning what no one ever talks about but it certainly occurs and is illegal is putting the repairs down as something else when its a private vehicle not own by the business.

As for ethics when It comes to tax tbh I dont feel bad at all. I like all kiwis pay income tax and when I see millions being wasted on referendums and more millions on possible flag changes I just shake my head at the money being wasted so many areas it could actually be used better. Thats my view anyway.

But just remember the vehicles arent free, its an exaggeration but they are more affordable.

Edit: I will also add Im unsure on how Australia works but any company vehicle that is used for private use is subject to Fringe Benefit Tax (FBT) which must be paid. I know a few years ago IRD went around allot of the camp grounds down here are took registrations and checked what company vehicles had been paying FBT and dealt with the others accordingly.

This is where the logbook technically comes into place as its supposed to be kept to keep track of Kms of private use and Kms of business related use. However most people just state its 100% business use.

And I forgot to add the GST component of the original purchase price of the vehicle is also claimable.

[STEALTHY]

Originally Posted by Loud_Noises

I guess the crux of the argument is whether using credit to pay for a (rapidly) depreciating item is a smart move.

If people are buying cars as an investment that will grow in value, well theres no help for them anyway (not counting a few rare cars that 'might' go up).

[Venomous1]

Cars I bought over finance I have never sold and would probably have never owned had I not used finance.

[sleepisforthedead]

I chose to spend most of my cash reserve on renovations instead of my Ranger.. so increased the value of my property 35% which was a 200% return on investment.. put 11k into the Ranger to allow me to offload it if situations changed, and played hardball with the finance until I got exactly what I wanted, don't regret financing it at all.

[Big_Daz]

I financed my Mazda 6, I don't buy into the whole "if you cant afford it with cash, don't buy it" crap when it comes to cars and houses... What has worked for me with cars is don't buy/finance a car that will stretch you... I always pay more than the minimum payment and tend to pay the things of early anyway..

When it comes to Smaller stuff (Tv's, furniture, etc) then Yes, if you cant pay in cash, don't buy it, and stay right the hell away from those GE/Gem/HSBS Interest Free things that are a trap...

My SSV Redline will be salary packed on a novated lease through my Work so I guess you could say "Financed" as well..

My wife has a 2010 CRV that she bought brand new with Cash because she had been saving for a long time and got her license late (1st car). She absolutely loves the thing and is happy to keep driving it which is fine by me because anything we get when we trade/sell it eventually is all ours... She is also able to Salary Package/Salary Sacrifice through her work so come next year when we upgrade her to something else we might go down that road as well if its worth it...

[Stefan]

Originally Posted by Big_Daz

When it comes to Smaller stuff (Tv's, furniture, etc) then Yes, if you cant pay in cash, don't buy it, and stay right the hell away from those GE/Gem/HSBS Interest Free things that are a trap...

I buy all my TVs and junk through these, pay it out in 6 month or 12 months and no interest is charged.

No way I'm dropping cash on a Tv or Computer.

How is it a trap?

[theBlake]

Originally Posted by Stefan

I buy all my TVs and junk through these, pay it out in 6 month or 12 months and no interest is charged.

No way I'm dropping cash on a Tv or Computer.

How is it a trap?

the $5 a month fee, actually works out to be higher than interest in some circumstances, like for example

$1000 over 12 months interest free, = $60 in monthly fees
$1000 borrowed from my Mortgage offset account @4.14% and repaid in equal instalments = $22.52 interest
$1000 over 12 months borrowed at 10% interest rate = $55 in interest.

[Big_Daz]

Originally Posted by Stefan

I buy all my TVs and junk through these, pay it out in 6 month or 12 months and no interest is charged.

No way I'm dropping cash on a Tv or Computer.

How is it a trap?

Sorry Stefan, I was in a huge hurry when I typed this reply... It CAN be a trap is what should have been said.... And it can, people go out, get ton's of crap on it then don't think about paying it back and end up getting screwed by 20odd% interest...

If you can do it the way you do it, then great... Your doing it the right way...

[tranquilized]

Originally Posted by theBlake

the $5 a month fee, actually works out to be higher than interest in some circumstances, like for example

$1000 over 12 months interest free, = $60 in monthly fees
$1000 borrowed from my Mortgage offset account @4.14% and repaid in equal instalments = $22.52 interest
$1000 over 12 months borrowed at 10% interest rate = $55 in interest.

That's a good point - I think it's even more than $5 a month in fees with those plans actually.

I was running a GE interest free account for years. Just got used to paying $100 a month every month, and would rack up a computer or tv or a bed or any other consumer type good purchase on it every year or so, doing the math to ensure each purchase was fully paid off before the interest free period ended. Found it a good way to buy the boring household stuff everyone needs without dumping any large sums of cash up front. Would have paid a several hundred in fees but I guess nothings actually free hey...