In today’s day and age, we’re lucky: there are so many ways of going about securing a new ride. You’ve got a few different options available if it’s time for you to upgrade your wheels, and two of the most commonly compared methods of doing this are leasing and buying.
So, you understand the main difference between the two: with a lease, you essentially don’t own the vehicle, and with buying a car, you do own it. But what are the little juicy nuggets of information that you only find out when you delve deeper? In this post, we’ll explain!
LeasingCar leases, also known as novated leases, are when you pay a monthly fee to use a vehicle. You don’t own the car; you’re leasing it over an extended period of time. Many car drivers love the flexibility that comes with novated leases, as they get to enjoy driving their car without paying the larger upfront cost that comes with buying a car. There are a couple of different types of car leases:
- Operating lease
An operating lease is more like a rental agreement – you pay a monthly fee to drive the vehicle, and hand it over when the lease ends.
- Finance lease
There are a few variations of finance lease. You can set a monthly lease payment and choose to pay a residual at the end of the lease in order to purchase the car outright; or you can choose to swap the car over and continue paying monthly payments.
Lowering your taxable incomeAs an employee, you can choose to receive your salary as a combination of cash and approved benefits. These benefits are either tax-free or taxed at concessional rates. Replacing some of your cash salary with benefits enables you to lower your taxable income to increase your overall after-tax pay.
BuyingBuying a vehicle is the more traditional method of driving your dream ride around. When you buy a vehicle, you either pay for it outright, or you get a car loan in which you pay a deposit and then pay monthly fees until it’s paid off.
If you’re using your vehicle for business purposes, you’re also able to reduce your payable tax by deducting some of the purchase price and running costs as a business expense.