WEBVTT - Should you lease an EV? 0:00:01.760 --> 0:00:03.920 Welcome to How Do They Afford That? The podcast that 0:00:03.960 --> 0:00:07.320 peaks into the financial lives of everyday Australians. Oh Michael Thompson. 0:00:07.360 --> 0:00:09.080 I'm an author and the co host of the business 0:00:09.119 --> 0:00:12.120 news podcast Fear and Greed. As always, I'm with Canna Campbell, 0:00:12.440 --> 0:00:16.040 financial planner and founder of Sugar ma'm a TV, the 0:00:16.120 --> 0:00:22.000 financial literacy platform covering YouTube podcasts, Instagram threads, TikTok and 0:00:22.079 --> 0:00:26.520 books like our upcoming book twelve Months to Financial Freedom 0:00:26.560 --> 0:00:29.240 not Long Togo now coming out in September. Are you 0:00:29.280 --> 0:00:30.360 excited about it? Can? I? 0:00:30.360 --> 0:00:32.760 I am? And if you haven't ordered a copy yet, 0:00:33.320 --> 0:00:35.600 you get onto it straight away because this is going 0:00:35.640 --> 0:00:38.640 to really transform your financial future. 0:00:39.320 --> 0:00:39.800 I like that. 0:00:40.400 --> 0:00:42.400 I'm really proud of what we've done. And it's so 0:00:42.520 --> 0:00:46.440 easy to follow along. Everything's broken down into bite size 0:00:46.479 --> 0:00:51.080 baby steps and is just clean and clear, like you'll 0:00:51.120 --> 0:00:53.400 know exactly what to do, but you understand why you're 0:00:53.440 --> 0:00:54.920 doing it and the benefit. 0:00:54.680 --> 0:01:00.200 And no matter where you're at as well in your life, career, money, 0:01:00.480 --> 0:01:01.480 there is something in there. 0:01:01.360 --> 0:01:02.960 For you and you take it at your own pace. 0:01:03.120 --> 0:01:07.039 Yes, yes, anyway, there is a link to pre order 0:01:07.200 --> 0:01:09.880 in the show notes if but you can also just 0:01:09.920 --> 0:01:13.600 find twelve Months to Financial Freedom at wherever you order 0:01:13.600 --> 0:01:17.039 books online, go into your bookshop and tell them to 0:01:17.120 --> 0:01:20.120 order it in for you. Coming out in September. Anyway, 0:01:20.319 --> 0:01:26.240 today's episode Canna is very much I would say, driven 0:01:27.959 --> 0:01:30.480 by the that's a pun, but you won't understand the 0:01:30.520 --> 0:01:32.039 pun until you hear what the topic is. 0:01:32.040 --> 0:01:33.919 Unless you've read the title of the podcast. 0:01:34.840 --> 0:01:38.440 Oh that too, yeah, good point, good point. It is 0:01:38.520 --> 0:01:41.120 driven by the cost of living, right, and the cost 0:01:41.200 --> 0:01:45.760 of filling up a car with petrol or diesel, which 0:01:45.920 --> 0:01:51.320 really really hurt earlier this year when almost overnight prices 0:01:51.480 --> 0:01:58.440 shot up and what was kind of maybe one hundred 0:01:58.440 --> 0:02:03.160 dollars I'm thinking about my car diesel, right, yeah, and 0:02:03.360 --> 0:02:05.920 it was one hundred and ten dollars to fill the 0:02:05.960 --> 0:02:09.320 tank suddenly went up to two hundred plus and it hurt. 0:02:09.600 --> 0:02:16.160 It really really hurt. And perhaps unsurprisingly, electric vehicles have 0:02:16.280 --> 0:02:19.840 seen a big spike this year, and with them, there's 0:02:19.919 --> 0:02:22.000 also a lot of talk about the use of novated 0:02:22.080 --> 0:02:25.800 leases in order to get your hands on an EV. 0:02:28.040 --> 0:02:32.040 My confession is that I've never really understood car leases. 0:02:32.560 --> 0:02:37.400 It's always been a little bit kind of confusing. I 0:02:37.480 --> 0:02:41.320 get the concept I've tried to look into them, thinking 0:02:41.360 --> 0:02:44.200 that it might be a better way for me to 0:02:44.320 --> 0:02:45.920 do it, that I can use it to get a 0:02:45.919 --> 0:02:48.720 new car. I've never actually done it in the end, 0:02:48.720 --> 0:02:50.920 because I can't quite figure out if it's good for 0:02:51.000 --> 0:02:53.200 my budget, if I'm going to get the if I'm 0:02:53.200 --> 0:02:56.000 going to drive enough to make it worthwhile, all of 0:02:56.040 --> 0:02:58.880 these bits and pieces. So today that's what we're going 0:02:58.919 --> 0:03:02.000 to work our way through to figure out whether a 0:03:02.080 --> 0:03:06.400 novated lease is a good idea to get you behind 0:03:06.440 --> 0:03:07.760 the wheel of an EV. 0:03:08.080 --> 0:03:10.000 And of a fuel efficient EV. Yeah. 0:03:10.040 --> 0:03:14.400 Yeah, indeed, Okay, to help save money. Correct, let's start 0:03:14.520 --> 0:03:16.800 at the very beginning. What is a lease? 0:03:17.520 --> 0:03:22.080 So a novated lease is a three way agreement between yourself, 0:03:22.360 --> 0:03:26.560 your employer, and the leasing company. And it's a car 0:03:26.639 --> 0:03:30.920 financing agreement. And your employer makes payments on your behalf, 0:03:30.919 --> 0:03:34.080 which is deducted from your salary, a little bit like 0:03:34.200 --> 0:03:37.960 salary sacrificing. It's taken with pre tax dollars, but it's 0:03:38.080 --> 0:03:40.840 used to pay for the car. 0:03:41.560 --> 0:03:43.880 Okay, that is important that it comes out of your 0:03:43.880 --> 0:03:44.680 pre tax. 0:03:44.520 --> 0:03:47.680 Retax, so you're taking less in your net pay in 0:03:47.800 --> 0:03:49.160 order to package the car. 0:03:48.960 --> 0:03:53.480 In okay, and so how does that actually work? Then 0:03:53.760 --> 0:03:56.080 you make the deal first, or you go to it. 0:03:56.280 --> 0:03:59.320 There are companies that run novated leasing. 0:03:59.720 --> 0:04:04.680 The your employer will normally have a novated company that 0:04:04.880 --> 0:04:07.120 has a list of cars, and you select a car 0:04:07.200 --> 0:04:09.480 from their list available. And that's also really important because 0:04:09.480 --> 0:04:12.040 they may not necessarily have the car that you really 0:04:12.080 --> 0:04:16.320 want on that list, and then the lease company purchases it, 0:04:16.360 --> 0:04:19.039 but you then rent it over a fixed term, which 0:04:19.080 --> 0:04:21.880 is typically between sort of anywhere between two to five years, 0:04:21.920 --> 0:04:23.880 but I believe four years is the sort of sweet 0:04:23.880 --> 0:04:26.560 spot that most people tend to pick. But the thing 0:04:26.640 --> 0:04:30.599 with a novated lease is you're not just packaging the car, 0:04:30.720 --> 0:04:32.719 like the cost of the car, you're also including in 0:04:32.760 --> 0:04:37.120 it the running costs, so the fuel, the electricity, the redgio, 0:04:37.320 --> 0:04:40.400 the insurance, you know, the maintenance like ties. So it's 0:04:40.480 --> 0:04:47.200 all combined very neatly into one regular payment, but you 0:04:47.279 --> 0:04:49.920 more often than not have a balloon, or we call 0:04:49.960 --> 0:04:52.440 it residual payment at the end. So for example, you 0:04:52.480 --> 0:04:55.159 might buy a car for say sixty thousand, but the 0:04:55.200 --> 0:04:57.800 residual amount maybe say twenty thousand dollars after year four, 0:04:57.920 --> 0:04:59.760 year five, depending on the terms and conditions. 0:05:00.120 --> 0:05:05.240 Okay, In terms then of the costs you are going 0:05:05.279 --> 0:05:08.200 to be paying weekly, how much we how much are 0:05:08.200 --> 0:05:09.360 we talking? What what? 0:05:09.360 --> 0:05:10.440 What is in the cost of the car? 0:05:10.560 --> 0:05:12.240 Okay? All right, well, can we break it down then 0:05:12.279 --> 0:05:15.760 slightly a little bit more. What is included in this lease? 0:05:16.000 --> 0:05:19.680 So obviously the least repayments, then of course interest because 0:05:19.720 --> 0:05:23.160 these nobed lease companies I need to make money. Insurance, 0:05:23.880 --> 0:05:26.720 then regio maintenance, and of course a need sort of 0:05:26.800 --> 0:05:29.400 management fees that the no ed lease company may charge. 0:05:29.440 --> 0:05:33.120 And it does feel very simple, but it doesn't necessarily 0:05:33.360 --> 0:05:34.440 mean it's cheap. 0:05:34.920 --> 0:05:40.039 What about fuel, yes, assuming that it's sorry, assuming that 0:05:40.120 --> 0:05:43.640 this is not just a least for an ev yeah, 0:05:43.760 --> 0:05:45.560 and so all of the running. 0:05:45.240 --> 0:05:47.560 Costs, so you'd have to know roughly how much you 0:05:47.960 --> 0:05:50.440 how much driving you do per year, so they can 0:05:50.480 --> 0:05:53.000 work out the right amount of obviously wear and tear 0:05:53.040 --> 0:05:55.480 on the car, how much fuel, how often you need 0:05:55.520 --> 0:05:57.560 to get it serviced, and you know things like tires 0:05:57.600 --> 0:05:59.359 being replaced with brake pads. 0:05:59.600 --> 0:06:03.800 Okay, and then you are paying this weekly or fortnightly 0:06:03.880 --> 0:06:05.440 or monthly or whatever it is coming out of your 0:06:05.480 --> 0:06:08.440 pre tax pay. And then at the end of the 0:06:08.520 --> 0:06:13.400 least period. There is a balloon payment that you have 0:06:13.520 --> 0:06:15.200 to pay if you want to keep the car, but 0:06:15.240 --> 0:06:16.280 you don't have to keep the. 0:06:16.240 --> 0:06:20.000 Car, so no the balloon payment. You've got a few 0:06:20.000 --> 0:06:22.360 different options, and again it comes down to the fine 0:06:22.400 --> 0:06:24.680 pern and getting some advice. So some people will actually 0:06:24.760 --> 0:06:27.159 roll that over and take out a new lease on 0:06:27.160 --> 0:06:31.360 that balloon payment. Some people will hand the car back 0:06:31.400 --> 0:06:33.360 and pay out the difference. Some people will sell it. 0:06:33.560 --> 0:06:35.960 I've even seen a couple, not often, but there were 0:06:36.000 --> 0:06:38.120 situations where people would sell it actually end up with 0:06:38.160 --> 0:06:39.880 some money. But a lot of people tend to roll 0:06:39.880 --> 0:06:41.719 it forward, they'll upgrade the car. 0:06:42.120 --> 0:06:46.800 Okay, all right, Why are people so interested then in 0:06:47.279 --> 0:06:51.440 novated leases for evs at the moment it goes And 0:06:51.480 --> 0:06:54.320 it's a leading question here because I know that it 0:06:54.360 --> 0:06:57.160 does go beyond just the fact that there is demand 0:06:57.240 --> 0:07:00.320 for evs because petrol prices are so high. There are 0:07:00.320 --> 0:07:01.280 some other incentives. 0:07:01.600 --> 0:07:04.680 Well, the government incentives are probably the biggest one here. 0:07:05.080 --> 0:07:08.080 So in Australia, many evs that like or on a 0:07:08.120 --> 0:07:12.560 notivated lease are FBT free, so Fringe Benefits tax is 0:07:12.600 --> 0:07:14.800 not charged when you take a notvated lease on an 0:07:14.840 --> 0:07:19.320 EV and this can significantly reduce the cost because you're 0:07:19.320 --> 0:07:21.960 not having to pay fringe benefits tax, which is which 0:07:22.000 --> 0:07:25.560 is huge. Also, you know, obviously the lower running costs, 0:07:25.960 --> 0:07:30.760 no petrol, less maintenance. There's obviously, again not everyone agrees 0:07:30.800 --> 0:07:33.920 with us the environmental appeal, and you know, it looks like, 0:07:33.960 --> 0:07:36.680 you know, you are being very responsible and respectful to 0:07:36.720 --> 0:07:40.200 the planet. And you know, I've never seen so many 0:07:40.240 --> 0:07:43.360 smug EV vehicle drivers. Like even one of my girlfriends said, 0:07:43.360 --> 0:07:45.640 I've never been proud of the fact I bought a 0:07:45.640 --> 0:07:49.640 Tesla four years ago, Like I'd just sit down that 0:07:49.680 --> 0:07:52.640 freeway feeling really smug. 0:07:52.440 --> 0:07:54.960 Really smug. I mean, but that's also been that's been 0:07:55.000 --> 0:07:57.520 the case since the Prius first kind of drove around 0:07:57.560 --> 0:07:59.560 what twenty years ago or something. There's always been this 0:07:59.680 --> 0:08:01.920 slide kind of look in their eyes, going, I'm doing 0:08:01.960 --> 0:08:03.280 more for the planet than you are. 0:08:04.880 --> 0:08:07.560 Tax and centerves definitely can make something look a lot 0:08:07.600 --> 0:08:12.000 more attractive, but they don't actually, they don't necessarily make 0:08:12.040 --> 0:08:13.400 it the best option for you. 0:08:15.520 --> 0:08:21.560 Who is it suited to Because I'm thinking about me 0:08:22.280 --> 0:08:25.360 and I'm thinking about how much I drive, which is 0:08:25.440 --> 0:08:27.960 not actually that much anymore. I do a lot of 0:08:27.960 --> 0:08:31.320 working from home when I'm coming in here into the 0:08:31.320 --> 0:08:35.920 studio or jump on the train. Really, we're probably kind 0:08:35.960 --> 0:08:39.760 of ten thousand k's per year at most. 0:08:40.000 --> 0:08:43.600 Yeah, I'm probably not too like I would be the same. 0:08:43.600 --> 0:08:45.760 I think I ever worked out between twelve to fifteen 0:08:45.760 --> 0:08:46.360 thousand a year. 0:08:46.559 --> 0:08:49.920 Yeah. Yeah, And so is it suited then to people 0:08:49.920 --> 0:08:52.520 who are doing more? They're doing kind of twenty thirty forty, 0:08:52.720 --> 0:08:56.080 they're on the road all the time for work, they're 0:08:56.120 --> 0:08:58.880 traveling around a lot more. Who is it suited to. 0:09:00.000 --> 0:09:01.840 The most important thing to know and understand what this 0:09:02.120 --> 0:09:04.559 novated lease is is you've got to have stable employment, 0:09:04.640 --> 0:09:07.960 you know, salary obviously to make the repayments. But if 0:09:08.000 --> 0:09:11.840 you leave your employer or you're made redundant, this then 0:09:12.360 --> 0:09:15.679 potentially terminates the novator lease, which means you lose the 0:09:15.720 --> 0:09:19.120 tax benefits and you've also got to pay out the car. 0:09:19.280 --> 0:09:22.080 So if you don't have money set aside for that payout, 0:09:22.600 --> 0:09:25.400 you could put yourself under serious pressure. So if you're 0:09:25.400 --> 0:09:26.600 going to do something like this, you've got to know 0:09:26.640 --> 0:09:28.800 you're going to be staying put with that particular employer 0:09:28.880 --> 0:09:31.840 for quite some time. Then of course, you know, and 0:09:31.880 --> 0:09:34.240 this is the bit of the I guess the I 0:09:34.240 --> 0:09:37.480 wouldn't say polarizing. But the controversial issue with these tax 0:09:37.520 --> 0:09:39.600 incentives is that, you know, a lot of people argue 0:09:39.640 --> 0:09:41.199 that these tax and centers are only for people in 0:09:41.240 --> 0:09:42.840 the top mondal tax rate because they're the ones that 0:09:42.840 --> 0:09:46.520 benefit the most from being fringe benefits tax free. So 0:09:46.559 --> 0:09:48.120 you could say, well, you know, they're the ones that 0:09:48.160 --> 0:09:51.360 will benefit first and foremost. Then of course, people who 0:09:51.520 --> 0:09:54.360 you know, value convenience because it is neatly packaged in 0:09:54.840 --> 0:09:58.800 one repayment rather than having you know, your CTP, your 0:09:59.200 --> 0:10:02.760 ohe CTP third party, but your comprehensive cover the petrol, 0:10:03.120 --> 0:10:06.160 you know, the maintenance. Everything is grouped in the one 0:10:06.240 --> 0:10:08.040 of payments of them, and it makes a lot easier 0:10:08.040 --> 0:10:10.720 to manage your budget, I will admit. And people obviously 0:10:10.720 --> 0:10:14.040 who do need a car, and a reasonably new ish car, 0:10:14.960 --> 0:10:18.480 you know, that's something that this may suit people. For example, 0:10:19.120 --> 0:10:21.080 not that I necessarily agree with this, but you'll see 0:10:21.120 --> 0:10:23.280 a lot of real estate agents tend to drive a 0:10:23.320 --> 0:10:25.880 new car. They don't. You don't tend to see them 0:10:25.960 --> 0:10:28.120 driving around in say a Karl like mine, it's like 0:10:28.240 --> 0:10:30.719 nine years old. Generally speaking, I know it's a huge 0:10:30.760 --> 0:10:34.199 assumption I'm making it. But people who do want because 0:10:34.200 --> 0:10:37.520 it's part of what they do, have a newish, smart 0:10:37.559 --> 0:10:40.080 looking car that with the latest technology. Okay, And it 0:10:40.120 --> 0:10:42.720 was of course, like having predictable expenses, like a good budget. 0:10:42.920 --> 0:10:44.800 You know that they're very they've got the cash photos 0:10:44.880 --> 0:10:45.600 to service this. 0:10:46.080 --> 0:10:49.120 All right, then who should avoid it? And based on 0:10:49.200 --> 0:10:52.640 just what you've said there, if you have unstable employment, 0:10:53.080 --> 0:10:54.320 that's one. 0:10:54.840 --> 0:10:57.400 What else people with a tight cash flow. In the 0:10:57.440 --> 0:11:00.680 other day, someone actually who I know through work was saying, 0:11:00.720 --> 0:11:03.000 you know, should I should I be buying a new car? 0:11:03.040 --> 0:11:04.680 But I knew that they were on a really tight budget 0:11:04.679 --> 0:11:06.640 and had a lot of other things going And I 0:11:06.679 --> 0:11:08.520 was like, absolutely not. This is the last thing you 0:11:08.520 --> 0:11:11.160 should think on your list right now to because we'll 0:11:11.200 --> 0:11:13.320 think about it. You've got to find the repayment. If 0:11:13.320 --> 0:11:16.240 you don't have that money, you know, say two hundred 0:11:16.240 --> 0:11:18.560 and fifty dollars a week, or five hundred dollars a month, 0:11:18.600 --> 0:11:20.079 or seven hundreds a month, whatever it may be, you 0:11:20.120 --> 0:11:22.720 coult to make sure you can service that comfortably. 0:11:22.280 --> 0:11:23.960 So you treat it. You have to look at it 0:11:24.000 --> 0:11:25.839 basically just as as a. 0:11:25.800 --> 0:11:28.560 Loan exactly and didn't think of it as as well 0:11:28.600 --> 0:11:31.480 as a form of like a responsibility. It's a repayment 0:11:31.559 --> 0:11:32.319 to a certain degree. 0:11:32.400 --> 0:11:33.280 Okay, that makes sense. 0:11:33.360 --> 0:11:36.160 But also a lot of people don't realize this will 0:11:36.200 --> 0:11:40.880 impact your credit score, so it will then impact your 0:11:40.920 --> 0:11:43.160 ability to borrow and how much you can borrow. So 0:11:43.240 --> 0:11:46.800 if someone is thinking of you know, looking at say 0:11:47.160 --> 0:11:50.080 moving home and upgrading the home, or perhaps looking at 0:11:50.080 --> 0:11:52.680 a debt recycling strategy, or perhaps looking at buying an 0:11:52.679 --> 0:11:56.120 investment properties planning to take a new loan out, you know, 0:11:56.400 --> 0:12:00.280 a fifty thousand dollars ev on an ovated lease can 0:12:00.320 --> 0:12:03.800 potentially reduce your borrowing capacity by up to one hundred 0:12:03.800 --> 0:12:06.720 and fifty thousand dollars. Now, yes, again we always get 0:12:06.720 --> 0:12:08.560 a mortgage broker and speak to the mortgage broker before 0:12:08.559 --> 0:12:10.800 you go and do this, But that's something you don't 0:12:10.840 --> 0:12:13.640 want to discover when you go to borrow money to 0:12:13.640 --> 0:12:16.360 buy property or you know, to look at debt recycling 0:12:16.400 --> 0:12:19.400 and originally you're planning on doing this at this price point, 0:12:19.440 --> 0:12:22.520 but suddenly your budget gets cut down significantly because of 0:12:22.559 --> 0:12:25.360 this one decision you made three months ago, six months ago, 0:12:25.360 --> 0:12:28.040 a year ago that you're kind of married to for 0:12:28.080 --> 0:12:30.360 the next two to five years. 0:12:30.480 --> 0:12:32.680 Okay, I want to dig a little bit deeper into that, 0:12:32.720 --> 0:12:35.240 because I think it's probably something that a lot of 0:12:35.240 --> 0:12:36.320 people wouldn't be aware of. 0:12:36.400 --> 0:12:38.160 Yeah, a lot of people don't really understand the fine 0:12:38.200 --> 0:12:40.960 print behind these agreements. And this is the problem. It is. 0:12:41.520 --> 0:12:43.800 It's like you're getting something for nothing. You're getting a 0:12:43.800 --> 0:12:46.280 fifty thousand dollar EVY and you're thinking you're doing all 0:12:46.320 --> 0:12:48.280 the responsible things because it's going to save your budget, 0:12:48.559 --> 0:12:51.679 save your cash flow. But there are a lot of consequences. 0:12:51.920 --> 0:12:53.480 Okay, well, we're going to go into a few more 0:12:53.480 --> 0:12:55.520 of those in a moment. Quick break back in a 0:12:55.559 --> 0:13:05.000 sec kin a very simple question today, should you lease 0:13:05.160 --> 0:13:09.320 an ev There's a lot more to this, as we've 0:13:09.360 --> 0:13:13.520 discovered novated leases. They do look good on the surface, 0:13:13.679 --> 0:13:16.800 having kind of one payment per month or a week 0:13:16.880 --> 0:13:18.760 or fortnite or whatever it is coming out of your 0:13:18.800 --> 0:13:20.880 pre tax pay and that covers kind of the cost 0:13:20.920 --> 0:13:25.199 of the car itself and the wear and tear, the maintenance, 0:13:25.240 --> 0:13:27.720 the red oh, the insurance, all of that. It does 0:13:27.760 --> 0:13:30.440 feel very simple, it feels very clean, but there's a 0:13:30.440 --> 0:13:33.000 lot more to it under the surface. As we've now 0:13:33.200 --> 0:13:38.760 discovered risks. The big one that you mentioned before was 0:13:38.880 --> 0:13:42.680 the risk that if your job changes, if you if. 0:13:42.520 --> 0:13:45.880 You lose your job, gett made redundant. 0:13:45.240 --> 0:13:49.880 That you are responsible for, you'll have to make a 0:13:49.880 --> 0:13:54.160 decision whether it's ending the lease yep, and having to 0:13:54.200 --> 0:14:01.080 pay potentially significant fees there the borrowing capacity. That is 0:14:01.120 --> 0:14:05.920 something that I hadn't kind of processed, and you don't 0:14:05.960 --> 0:14:08.839 take that into account until you try and get a 0:14:08.840 --> 0:14:11.760 credit product of some kind, whether it's a loan, you're 0:14:11.760 --> 0:14:14.040 getting credit card or something that all of a sudden 0:14:14.400 --> 0:14:21.120 that they are factoring in all of these liabilities responsibilities. Yeah, yeah, 0:14:21.120 --> 0:14:22.880 and not just the fact that if you've got a 0:14:22.880 --> 0:14:25.640 credit card that's got to say a five thousand dollars 0:14:25.720 --> 0:14:28.880 limit or so that and you say, on it's fine, 0:14:29.080 --> 0:14:32.880 I keep it paid down to zero. It's always at zero. No, no, no, 0:14:32.920 --> 0:14:35.520 that doesn't matter the fact that you actually have this 0:14:35.760 --> 0:14:40.760 five thousand dollars limit available potential debt there. That's going 0:14:40.800 --> 0:14:42.920 to count. Again, and in the same way that having 0:14:43.760 --> 0:14:46.360 a lease on an EV or any vehicle is also 0:14:46.400 --> 0:14:47.320 going to count. 0:14:47.120 --> 0:14:50.520 Absolutely so, particularly people who are looking to refinance as well, 0:14:50.760 --> 0:14:53.760 you know, not necessarily taking on new debt, but refinancing. 0:14:54.120 --> 0:14:56.400 You want to check this with your mortgage broker before 0:14:56.400 --> 0:14:57.040 you go and do this. 0:14:57.160 --> 0:15:00.000 What are the other risks here? Is that potentially, yeah, 0:15:00.160 --> 0:15:03.600 not going to get the mileage out of it, and 0:15:03.640 --> 0:15:06.880 therefore you're actually paying more than the value of what 0:15:06.920 --> 0:15:07.440 you're getting. 0:15:07.600 --> 0:15:10.000 Yes, of course, but then there are actually bigger ones, 0:15:10.080 --> 0:15:13.240 more serious ones. So you know, with the fringe benefit tax, 0:15:13.280 --> 0:15:15.320 I know, well, this is why I'm so glad we're 0:15:15.320 --> 0:15:17.360 doing this episode, because normally I would er away from 0:15:17.360 --> 0:15:20.160 this topic being a depreciating asset that provides, you know, 0:15:20.480 --> 0:15:23.200 for a little benefit other than a lifestyle one. But 0:15:23.480 --> 0:15:26.440 you know, you're playing with your adjustable taxable income. So 0:15:27.320 --> 0:15:32.240 your employer, because you're now packaging a car, can only 0:15:32.280 --> 0:15:38.040 pay super the twelve percent super guarantee on your reduced salary. 0:15:38.400 --> 0:15:40.840 So say I'm earning fifty say I'm earning, say fifty 0:15:40.840 --> 0:15:42.200 thousand dollar a year, and I go and package a 0:15:42.280 --> 0:15:45.760 ten thousand dollars a year car. So ten thousand dollars 0:15:45.800 --> 0:15:47.760 are now being taxed at forty thousand dollars a year. 0:15:48.120 --> 0:15:50.640 My employer only needs to pay twelve percent on the 0:15:50.640 --> 0:15:53.920 forty thousand not on the fifty thousand, So I'm actually 0:15:53.960 --> 0:15:58.800 now jeopardizing what's going into my superannuation and therefore there 0:15:58.840 --> 0:16:03.040 is a consequence or repercussion to my final superannuation account balance. 0:16:05.400 --> 0:16:08.080 Did you know that I did not kill now? Well, 0:16:08.160 --> 0:16:11.800 to be fair, I also haven't tried to take out one. Now, 0:16:11.880 --> 0:16:13.080 that's a good reason. 0:16:13.600 --> 0:16:17.120 And same issue could increase your hex s debts as well, 0:16:17.160 --> 0:16:19.360 not increase your head stets, right, increase your HEX repayments, 0:16:19.400 --> 0:16:22.200 the minimum repayments and also if you qualify for any 0:16:22.200 --> 0:16:25.320 sort of subsidies like childcare, can also impact that as well. 0:16:25.600 --> 0:16:29.640 Okay, all right, the end of the lease. We talked 0:16:29.680 --> 0:16:33.480 before about the balloon payment, and so you need to 0:16:33.480 --> 0:16:34.520 be prepared for that as. 0:16:34.400 --> 0:16:37.600 Well, right, Yes, So you would need to factor into 0:16:37.680 --> 0:16:40.960 your budget to have like a regular savings plan over 0:16:41.000 --> 0:16:44.160 the course of your agreed term so that when and 0:16:44.200 --> 0:16:45.600 they would give you a figure as to what the 0:16:45.640 --> 0:16:47.880 balloon payment would be, so you know in advance, you know, 0:16:47.920 --> 0:16:49.960 I'm going to have a twenty thousand dollars balloon payment 0:16:50.080 --> 0:16:54.280 in twenty twenty nine, and you wouldn't want to save 0:16:54.360 --> 0:16:56.280 up for that so that when that comes you can 0:16:56.320 --> 0:16:58.440 pay the pay off the car, the balloon payment, and 0:16:58.440 --> 0:17:00.400 then obviously you get to keep the car. But as 0:17:00.440 --> 0:17:03.800 I said, some people like to refinance this. They'll go 0:17:04.080 --> 0:17:06.240 to take out the remaining balloon and turn it into 0:17:06.240 --> 0:17:10.240 another lease or a lot of people get caught into 0:17:10.240 --> 0:17:14.239 this trap I'm going to say, where they end up 0:17:14.240 --> 0:17:16.359 just trading the car and getting the latest model. 0:17:17.960 --> 0:17:20.960 A balloon. Payments subject to inflation. 0:17:22.040 --> 0:17:24.040 A good question. I think it obviously would come down 0:17:24.080 --> 0:17:26.119 to the terms and conditions and the fine print. But 0:17:26.560 --> 0:17:29.280 I believe it's fixed in the contract. But they've already 0:17:29.359 --> 0:17:34.000 factored in that anyway, so they're already charging you interest 0:17:34.240 --> 0:17:35.760 that would take into consideration. 0:17:36.920 --> 0:17:38.520 So balloon inflation. 0:17:38.960 --> 0:17:40.720 It was just a joke, Okay, I didn't Sorry that 0:17:40.760 --> 0:17:43.199 went over my head, and I'm hoping the listeners went 0:17:43.240 --> 0:17:44.640 over their head too, so that. 0:17:45.119 --> 0:17:48.280 They should appreciate that that was comedy gold here and 0:17:48.520 --> 0:17:52.640 I'm just not appreciated. Do you think people fully understand 0:17:52.720 --> 0:17:55.160 what they are committing to when agreeing to an ovator? 0:17:55.160 --> 0:17:57.440 At least certainly there would be some But there's a 0:17:57.440 --> 0:17:58.160 lot more to it. 0:17:58.280 --> 0:18:00.000 There is so much more. There's so much the devil 0:18:00.119 --> 0:18:02.880 in the detail. And I think also with everything. There's 0:18:02.920 --> 0:18:05.119 so much talk of petrol prices. You know, it's almost 0:18:05.160 --> 0:18:08.560 like the new property topic that people talk about. And 0:18:08.600 --> 0:18:10.560 I think a lot of people are. You know what 0:18:10.640 --> 0:18:12.680 we've seen in the headlines, you know, this knee jerk 0:18:12.720 --> 0:18:16.000 reaction of people getting rid of their cars, you know, 0:18:16.200 --> 0:18:17.800 going and buying an EV. A lot of people are 0:18:17.800 --> 0:18:19.960 now on wait lists for EV. So there is there 0:18:19.960 --> 0:18:23.040 has been Potentially when you see these figures, it would 0:18:23.200 --> 0:18:28.040 potentially indicate there's been an emotional rational reaction to the 0:18:28.080 --> 0:18:31.879 petrol prices and shifting towards EV. I'm not judging that 0:18:32.000 --> 0:18:36.400 at all, but perhaps some people need to do things differently. 0:18:36.440 --> 0:18:39.600 And ironically, I'm in a similar situation too. I have 0:18:39.640 --> 0:18:42.520 a car. I own it outright, it's nine years old, 0:18:42.560 --> 0:18:44.960 and it's getting towards the point where time's like, I 0:18:44.960 --> 0:18:48.280 think we need to change. But now I'm wondering. And 0:18:48.320 --> 0:18:50.320 I never would have thought about getting an EV because 0:18:50.320 --> 0:18:53.600 I have got three kids, I need you got three 0:18:53.640 --> 0:18:57.040 big dogs, I need a big car. But now I'm thinking, well, no, 0:18:57.080 --> 0:18:58.439 I don't need a big car because that's going to 0:18:58.440 --> 0:19:02.440 be so expensive. Perhaps, you know, I need to look 0:19:02.480 --> 0:19:05.040 at my lifestyle and maybe you know, hang in a 0:19:05.040 --> 0:19:07.600 bit longer where all three kids are out of booster 0:19:07.640 --> 0:19:09.960 seats and car seats which take which require a big 0:19:10.000 --> 0:19:13.040 car and make it last a little bit longer, and 0:19:13.920 --> 0:19:17.320 you know, not necessarily by a new car, just yet 0:19:17.359 --> 0:19:19.639 try and hold out and also then see what happens 0:19:19.680 --> 0:19:22.520 to fuel prices as well. They may come back a bit. 0:19:23.080 --> 0:19:24.960 So I think it's one that you need to enter 0:19:25.000 --> 0:19:28.640 in very very carefully, looking at all your options, doing 0:19:28.680 --> 0:19:32.399 your research, and you know, even looking taking time to 0:19:32.400 --> 0:19:34.600 look at the actual car, because there's also lots of 0:19:34.640 --> 0:19:37.480 information coming up about how long these cars actually really 0:19:37.480 --> 0:19:40.479 do last, how many kilometers they state, versus how much 0:19:40.560 --> 0:19:41.600 the evidence is showing. 0:19:42.160 --> 0:19:45.119 And we did remember we had Trent Nikolic in the 0:19:45.160 --> 0:19:48.560 studio last year when we were talking about. 0:19:48.720 --> 0:19:51.199 What to look for, said to me, don't get an 0:19:51.200 --> 0:19:54.800 ev with what my lifestyle is actually about. But you know, 0:19:54.840 --> 0:19:58.720 I think you just like, hold up, do your research, 0:19:59.160 --> 0:20:01.800 ask all the question, look at the fine print, and 0:20:01.880 --> 0:20:06.000 really question whether it's the right time what you really want. 0:20:06.240 --> 0:20:08.240 And perhaps so there are other ways to help bring 0:20:08.240 --> 0:20:10.240 down your petrol prices rather than just rush out and 0:20:10.240 --> 0:20:11.080 buy a new ivy. 0:20:11.600 --> 0:20:14.720 Okay, if people want more information from you and want 0:20:14.720 --> 0:20:17.719