Affects of vehicle depreciation

[PinHead]

bought the wife a new Corolla early last year..will keep it until just prior to the warranty expiring and get her a new one...the car will be 3 years old...probably have about 30000k on it by then...a bit of wheeling and dealing..should not lose too much.

Company bought a 4WD Hilux...paid cash...I try and avoid any form of finance or accounts with the business..any materials I buy are paid for at the time of purchase...keeps the paper war to a minimum and if the work does slow down I don't have large accounts to settle. Last year, I had a builder go bust..lost 11K plus 3k legals on the episode...due to not having accounts I was able to withstand it. I could also claim all the GST on the purchase as well as all running costs involved which helps a bit. Not sure how long I will keep the HiLux for...will decide that later.

I do have to say...more than happy with both Toyotas and the service we have received from the dealer we bought them both from.

[ar-we-ther-yet]

without going into a ""war & peace novel "" size reply mate,,,chattel mortgages allow you to claim:

depreciation,,(in most cases at tier 1 level,,23.5%), interest that accrues to the account,,wear and tear,,running costs,, and it becomes an asset to the company,,ie YOU OWN IT,,, GST rebates are allowed immediately upon delivery,, or can be claimed back each quarter/financial year end

to put it in reality,,,your monthly claim on the vehicle SHOULD BE 150% of what your repayments are MINIMUM,for the first 12 months,then they decline along with the depreciation value each year,,,,by the end of the third term,,,your normally line balling in values,,,so you upgrade and start the ball game all over again,,, there are of course a host of other advantages over hp/lease,,, but its wise to check with your accountant here prior to making your decision,,,

as a footnote,,,business style loans have a 94% preference to chattel mortgages,, according to the RB release 2004/2005 financial report,,,,,but keep in mind,, the larger your fleet,,,and the larger your company also has a predominant factor in what style of loan structure you may decide on also,,

new cars always have a cheaper interest rate,,,,why,,,because they have better loan security values due to no loss in deprciation when initially purchased,, and are generally dearer to finance,,,

the old catch 22,,, you finance 50 grand,,,your rates going to be better than if you financed 10,,


oh and thats another thing,,,, always finance 100% of yor business asset,,,,if you have a trade/deposit,,have this value reverted to your first installment,,, (like having a residual upfront and at the back end of your loan),,you still finance the same value,, but your doing yourself additional benefits which includes tax,,,,,THIS also relates to interes rate,,, don't be foolhardy and jump into a loan at say 8%,,,,when you could be cutting your own throat and missing out on tax enefits that would have been greater if written at 9,,(as an example only)

so much for a quick reply

Thanks mate clear as mud
I guess that's why i get to drive around in a new 4X4 and not have to pay much income tax ......not a bad trade off.

[lippa]

my first busisness car i bought was a lease, pain in the bum no benifit heap of shit!!!!!! then i bought wife a new prado on a chattle mortage. 1st biggest bonus. you collect the gst back in one hit!!!!!!! and as uncle chop chop said, by the time calculate the depriation and other running expenses vs repayments, you can have positive equity in the vechile. a good accoutant is the difference imo in having positive or negitive equity in a car. but in saying that, ya have to buy smart as well, my prado for instance has excellent resale value. compared to say, a nissan maximas or holden ss commodore

cheers

lippa

ps chop, please feel free to correct me or elaborate!!!!!

[choppa]

my first busisness car i bought was a lease, pain in the bum no benifit heap of shit!!!!!! then i bought wife a new prado on a chattle mortage. 1st biggest bonus. you collect the gst back in one hit!!!!!!! and as uncle chop chop said, by the time calculate the depriation and other running expenses vs repayments, you can have positive equity in the vechile. a good accoutant is the difference imo in having positive or negitive equity in a car. but in saying that, ya have to buy smart as well, my prado for instance has excellent resale value. compared to say, a nissan maximas or holden ss commodore

cheers

lippa

ps chop, please feel free to correct me or elaborate!!!!!

no need to correct ya mate,,,,,you've basically pointed out the same points as above posts,,,

i think i need to discuss prado with you though,,,,,,,now i know someone who has a great little mazda ute,,,,and he tells me on good authority,,,,,,,,,,,,,,,,,,,,,,,,,,,,

[Kopey]

Always makes you wonder, say a VT Commodore costs $32000 new back in 99 then 7 years later with 200000ks on the clock, a few dents and scratches my mate picked this one up for $3000!! Crazy how we pay so much for them new. They're all made from the same metals and plastics.

[lippa]

[quote author=lippa link=1162502258/15#17 date=1162594883]

i think i need to discuss prado with you though,,,,,,,now i know someone who has a great little mazda ute,,,,and he tells me on good authority,,,,,,,,,,,,,,,,,,,,,,,,,,,,

you can keep the courier,,, mate!!!!!!

[choppa]

bought the wife a new Corolla early last year..will keep it until just prior to the warranty expiring and get her a new one...the car will be 3 years old...probably have about 30000k on it by then...a bit of wheeling and dealing..should not lose too much.

Company bought a 4WD Hilux...paid cash...I try and avoid any form of finance or accounts with the business..any materials I buy are paid for at the time of purchase...keeps the paper war to a minimum and if the work does slow down I don't have large accounts to settle. Last year, I had a builder go bust..lost 11K plus 3k legals on the episode...due to not having accounts I was able to withstand it. I could also claim all the GST on #the purchase as well as all running costs involved which helps a bit. Not sure how long I will keep the HiLux for...will decide that later.

I do have to say...more than happy with both Toyotas and the service we have received from the dealer we bought them both from.

its an interesting point pinhead,,, one that the finance managers get a bit off regulary,,, however an ASSET PURCHASE vs a FINANCE PURCHASE has ""fors and againsts""as well

depreciation,,running costs,, wear and tear are all still claimable,,, but you will find that you drop to tier 2 or 3 on these (depending on your company structure) as you purchased the asset outright,,, this is sometimes balanced by the number of vehicles you have in your fleet,,but to the average small business operator,,not to finance can mean in most circumstances a LOSS of benefit compared to financing

keep in mind,, if you have the CASH to pay for the asset,, you can still maintain your running expenses of the company in a number of smart ways as well,,,lets say you finance an item at 30k,,,at 8%,,,, YOU HAVE 30K TO PAY ALSO IN CASH,,

weigh up the advantages of what your claiming back in the 3 year period, opposed to the 5 that you write the loan over,,, then do 1 of 2 things,,,

1 PAY CASH

2 FINANCE,,,place your cash money into a short term investment,,, returning 5.75 to 6.15%,,, and have your monthly repayments debitted to pay the finance committment,,,,

you reap the benefit of the FULL tax benefit,,, you reap the benefit of the asset,,,, and it still in turn pays for itself PLUS returns a small benefit with the accruable interest on the investment,,,(this is just one idea,,,theres hundreds)

assett purchasing against finance purchasing has a multitude of benefits,,,,its a fact though,, that on average,, your always smarter to finance

choppa

[choppa]

Always makes you wonder, say a VT Commodore costs $32000 new back in 99 then 7 years later with 200000ks on the clock, a few dents and scratches my mate picked this one up for $3000!! Crazy how we pay so much for them new. # #They're all made from the same metals and plastics.

kopey,,, picture a 15 to 20 k daewoo,,,they depreciate that fast that once you've signed the contract,, the dealership refuses to buy them back,,, regardless of age or km's

[PinHead]

choppa..I always pay cash where possible...not interested in investing and getting the interest to pay the loan etc etc...that may be smarter however my way is easier..give them the money..I take the car..done deal...I hate paperwork therefore the less transfers of funds etc and tracking of same the happier I am.

[Poodroo]

Oh well, in the end I have managed to pay my Pajero off and it may not be worth much now but it at least owes me nothing now which I think is a pretty good feeling. I have no intentions now of getting into more debt. Next update will only happen if I win a substantial amount of money and seeing as I never put lotto in I consider my chances to be in the "bucklies and none" area.(Probably the same if I put lotto in)

Poodroo

[Roughasguts]

poodroo, I have a solution to our Pajero value problem.

If all the Pajero owners refuse to sell or trade our vehicles for less than 15K.
The Pajero will become as rare as hens teeth and this should drive there prices up.

Or make them worth less than they are now.

[Poodroo]

poodroo, I have a solution to our Pajero value problem.

If all the Pajero owners refuse to sell or trade our vehicles for less than 15K.
The Pajero will become as rare as hens teeth and this should drive there prices up.

Or make them worth less than they are now.

Sounds like a great idea Roughasguts. Let all Pajero drivers unite and make a stand against depreciation.

Poodroo

[Dezmo]

poodroo, I have a solution to our Pajero value problem.

If all the Pajero owners refuse to sell or trade our vehicles for less than 15K.
The Pajero will become as rare as hens teeth and this should drive there prices up.

Or make them worth less than they are now.

Think I will have a Prado then thanks LOL!!

Actually, I have a 2001 Prado in the driveway already. When i bought it last year with 65,000km on it somebody lost circa $28,000.00 depreciation on it (60% of purchase price). Obviously i will still be stung by depreciation too, but i am trying to keep the kms down (only at 73,000km), so hopefully the depreciation shouldnt be too terrible over the next few years....

Suppose i will only find out when i go to sell it...

[Poodroo]

Actually further to depreciation and something I didn't really take into consideration when I posted this thread was the good old fuel prices and how they affected the price of vehicles in particular the larger vehicles with 6 and 8 cylinder engines in them. When the price of fuel peaked at over $1.00 per litre it was then that I started to notice a lot of 4wd's (Not only Pajeros) on the side of the road at silly prices. Made me think that when the engine gives up in my old faithful is it really worth spending $6,000 + on having it reconditioned when I can look around and find later models complete and registered for much the same sort of price? HAve we finally reached the throwaway car era? Looks quite possible.

Poodroo

[Sportfish_5]

Choppa ---- Had much to do with Associate Leases through salary sacrifice ?