FIFO Car Buying Guides: Is It Better To Lease Or Finance?
March 10, 2024
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Could you be looking for information concerning FIFO car buying? Well, when it comes to getting a new car, there’s more to consider than just the model and colour. One of the most crucial decisions you’ll face is whether to lease or buy the car.
This question has sparked numerous debates and varying views. It has made it essential to navigate through the information available. And here is one piece that is worth your time. Our goal is to equip you with a comprehensive understanding of this decision.
We’re here to clarify any uncertainties. We’ll give you the insights you need. It’s all about making the best choice for you. Your preferences and financial well-being matter.
So, let’s take a look at this frequently asked question: Is it preferable to lease or finance a new car? But right before that…
What Is the Difference between Car Leasing And Car Buying?
When it comes to acquiring a vehicle, the decision between car leasing and financing involves several important distinctions. Here’s a breakdown of the key differences:
1. Ownership
When it comes to buying, you own the vehicle and can keep it for as long as you desire. On the other hand, when leasing, you essentially rent the car from the dealership for a specific period.
2. Monthly Payments
Many opt for leasing due to significantly lower monthly payments, typically around 30% less than purchasing.
3. Up Front Costs
Purchasing often requires a substantial down payment, while leasing generally involves minimal upfront costs, sometimes even none at all.
4. Length of Possession
Ownership means you can keep the car as long as you want. Leasing is for a set time, usually two to five years.
5. Vehicle Disposition
Upon ownership, you have the freedom to sell or trade in the vehicle. In contrast, with a lease, you return the car to the dealership at the end of the term.
6. Future Value
The age-old advice to “buy appreciating assets, lease depreciating assets” suggests that vehicles, which typically depreciate, are better suited for leasing.
7. End of Term
Financing eventually leads to no more payments once the car is fully paid. This means, that with a lease, payments continue until the vehicle is returned.
8. Mileage
Leasing comes with mileage restrictions, between 20,000 to 30,000 kilometres per year, with overage fees for exceeding the limit. Ownership allows unlimited mileage.
9. Wear and Tear/Maintenance
Rough handling of leased vehicles may incur additional charges, as the dealership aims to sell the car post-lease.
10. Customization
Leased cars must be returned in their original condition, while owned vehicles offer the freedom to customize without constraints.
Factors To Consider When Making The Decision
When deciding whether to buy or lease a car, one should consider several key factors. Here are the main aspects to ponder:
1. Monthly Affordability
Leasing often yields lower monthly payments compared to auto loan payments. It involves paying for the vehicle’s depreciation during the lease term rather than its full purchase price.
Buying a car allows the eventual recouping of money through resale, potentially resulting in lower overall expenditure. However, if the primary concern is the smallest monthly payment, leasing may be the preferable option.
2. Anticipated Usage and Mileage
Leased cars typically come with mileage restrictions, with additional charges for exceeding these limits. It’s crucial to assess one’s expected mileage to determine if leasing remains cost-effective over buying. This would especially apply to individuals who anticipate frequent or extensive driving.
3. Preference for Vehicle Updates
People who desire the latest car models may prefer leasing because of the ease of swapping vehicles.
On the other hand, individuals comfortable with driving the same car for a long may prefer to buy one. This leads to greater long-term cost efficiency.
Advantages of car leasing
1. Reduced Monthly Expenses
Leasing can alleviate the financial strain of monthly expenses. Typically, it involves a smaller down payment compared to purchasing. This lower upfront cost enables some individuals to opt for a more luxurious vehicle than they might otherwise afford.
2. New Car Every Few Years
Returning a leased car at the end of its term provides the opportunity to acquire a brand-new ride. This allows for experiencing the latest advancements in car technology every few years, offering a fresh driving experience.
3. Hassle-Free Maintenance
Many new cars come with warranties lasting at least three years. When signing a three-year lease, most repair costs may be covered. Leasing arrangements have the potential to eliminate significant, unexpected expenses related to vehicle maintenance.
4. No Concerns About Resale
At the end of the lease, you return the car. You might need to pay end-of-lease fees. These fees could be for excessive wear or extra miles.
5. Tax Deduction Opportunities
For individuals using the car for business purposes, leasing may offer more tax deductions compared to a loan. This is because the ATO permits the deduction of both depreciation and financing costs. It’s important to note that the ability to write off expenses may be restricted when leasing a luxury automobile.
Disadvantages of Car leasing
1. Absence of Ownership
The mileage limitations of a lease can restrict the extent and distance of driving. Additionally, individuals wishing to make modifications to their vehicles should be aware of potential associated fees. For instance, there might be additional expenses at the end of the lease to reverse any alterations made.
2. Lack of Autonomy
The inability to sell or trade in the car to offset the cost of a new vehicle is a notable constraint. Also, initiating a new lease upon the expiration of the current one maintains the cycle of monthly payments. It also endures a lack of control over certain aspects of the vehicle.
3. Incurred Fees and Additional Costs
Various fees specified in the lease contract encompass charges for excess mileage, vehicle modifications, and additional wear and tear. Also, an early termination fee applies if one concludes the contract prematurely, along with an acquisition fee.
Upon the contract’s conclusion, there may be a fee to cover the dealer’s expenses for cleaning and selling the car. Also, unless you include gap insurance, there may be expenses related to uncovered accidents.
Advantages of Buying
1. Freedom from Restrictions
Unlike leasing, there are no obligations for fees related to mileage and wear and tear on the car. As the owner, you have the autonomy to schedule service and repairs according to your timeline.
2. Complete Autonomy
Ownership grants you full control over enhancing your car and altering its appearance. Supposing you financed the purchase. Once you pay off the loan, you have various options.
You can keep the car until the end of its lifecycle, trade it in, sell it outright, or pass it on to a family member. The decision is entirely yours.
3. Potential Tax Advantages
For individuals using the car for both business and personal reasons, the Australian Tax Office allows the deduction of costs and depreciation associated with business use. Maintaining meticulous records to support your filings is essential. Therefore, a thorough understanding of the requirements is crucial.
4. Long-Term Cost Efficiency
In the long run, purchasing a car and retaining it for an extended period proves to be more cost-effective.
These benefits highlight the advantages of ownership, encompassing freedom from limitations, complete control, potential tax incentives, and long-term financial efficiency.
Disadvantages of Buying
1. Significant Depreciation
New cars can experience a depreciation of 15%–25% in value within the initial five years of ownership. We perceive this decline as a disadvantage for those considering their car as an investment. However, for individuals who intend to retain a car for some time, this may not be a significant concern.
2. Driving Expenses
The total cost of driving a new car every year amounts to $18,715. This comprehensive figure encompasses expenses such as fuel, insurance, and maintenance.
The Rise of Car Sharing Among Perth’s FIFO Workers
Perth’s fly-in and fly-out workers are playing a role in the burgeoning car-sharing economy in the city.
As the sharing economy gains traction, a substantial number of individuals are opting for more flexible transportation arrangements.
Others are leveraging the vehicles not used regularly to generate additional income. Since its recent introduction, the car-sharing industry has experienced adoption in Perth. It has surpassed the uptake in any other Australian city.
The growth of car sharing in Perth is as a result, limited car-sharing options. And escalating demand for innovative transportation modes. Despite trailing behind major Australian metropolises, the number of car-sharing platforms operating in Perth is steadily increasing.
Mobile apps such as Uber and Ola provide short-ride options. Car Next Door offers customers access to vehicles for short durations. For longer-term arrangements, traditional rental car companies and the online platform are viable options for users.
Traffic congestion in Perth is expected to worsen. Commuters might spend 60% of their time stuck in traffic by 2031. This is likely to lead to a surge in the use of car sharing as an alternative transportation option.
Tax Deductions Guide for FIFO Workers in Australia
Managing the tax payable assessment as a fly-in, fly-out (FIFO) worker in Australia can be complex. Here is a comprehensive list of tax deductions that all FIFO workers should consider when filing their returns:
1. Meals
While meals are a private expense and not deductible for FIFO workers, there are exceptions. When travelling for work outside your regular arrangement, your meals can be part of your travel expenses.
Supposing your employer offers a meal allowance under an industrial award or agreement. You can claim the cost of meals during overtime as long as they are under $31.90 per meal per day.
2. Travel
Travel related to your regular FIFO arrangement is not tax-deductible, including travel to the airport and flight costs.
However, you can claim travel expenses if your job necessitates temporary travel to another location for work-related activities.
Using your vehicle for work allows you to claim vehicle expenses. But not travel expenses to the airport or transit for DIDO workers, which is a private expense.
Car expenses can be tax-deductible if you drive between separate jobs on the same day. Or commute to different workplaces for the same employer on the same day.
3. Uniform and/or Protective Clothing
Purchasing a work uniform with your employer’s logo is eligible for a tax deduction. Note that you can’t claim ordinary clothing worn with the uniform as work expenses.
Protective clothing, like safety gear and reflective vests, used for work is tax-deductible. Sun protection equipment, such as sunscreen and hats, used for work purposes also qualify for tax deductions.
4. Tools & Equipment
Work-related tool and equipment purchases under $300 are fully claimable. While those exceeding $300 require depreciation claims over the item’s useful life.
It’s essential to specify the percentage of usage for work and private purposes when claiming tools and equipment expenses.
5. Other FIFO Work-Related Tax Deductions
Fees for license renewals may all be eligible for tax deductions. Such as compulsory medical assessments, self-education relevant to employment, and first aid course expenses.
There are other general tax deductions available to all Australian FIFO workers. They include seminar and conference fees, purchasing reference materials, professional publications, tax agent fees, monetary donations to charities, and more.
Frequently Asked Questions
Do Auto Leases Charge Interest?
Yes, auto leases do charge interest. This functions similarly to an interest rate in a traditional loan, affecting the overall cost of the lease.
The interest is fixed for the duration of the lease agreement. It does not fluctuate during the lease period.
How Does Auto Debit Work?
Auto-debit enables users to schedule recurring payments for automatic deduction on specified dates.
Do I Need A Good Credit Score To Lease A Car?
Yes! Anyone looking to lease a car should have a credit score that is at least considered good.
Can You Lease a Car With Bad Credit?
Yes! It is possible to lease a car with bad credit. However, it may come with certain challenges, such as less competitive lease offers.
It’s important to explore various lease offers. Consider enlisting a co-signer and saving for a substantial down payment to enhance lease approval.
Conclusion
The decision to lease or finance a new car is a significant one. It involves careful consideration of individual priorities and financial circumstances. Both options have their merits, and neither is universally superior.
Leasing offers flexibility and the opportunity to drive a new vehicle more frequently. While financing provides long-term ownership and the potential for equity. By weighing the pros and cons and aligning the decision with your budget, you can choose the path that best suits your needs.
Whether you opt to lease or finance, assessing your situation is key to making a well-informed.
It’s time to improve your financial burden with Mad Man Motors! Why settle for temporary possession when you can own your dream car outright? With Mad Man Motors Finance, you can kiss goodbye to endless leasing payments and hello to the pride of ownership.
Don’t let leasing hold you back. Experience the open road with the freedom and flexibility that only comes with car ownership. Join the countless satisfied customers who have made the switch to Mad Man Motors Finance and start driving towards a brighter, more secure future today.
Don’t wait any longer. Take the wheel of your financial destiny and choose Mad Finance for your next car purchase. Visit our location or contact us now to get started!
