The Pros and Cons of Vehicle Ownership Back

On November 15, 2022
If you’re in the market for a new car, you might be asking yourself whether leasing or buying is your best option. Fortunately, we have put together a simple guide outlining the pros and cons of vehicle ownership, while addressing the advantages of novated leasing.



Buying a Car


If you’re in the market for a new car, you might be asking yourself whether leasing or buying is your best option. Fortunately, we have put together a simple guide outlining the pros and cons of vehicle ownership, while addressing the advantages of novated leasing. So, let’s get started.


The Pros


Buying a car has some significant benefits that are worth considering. First of all, ownership gives you the freedom to sell your car whenever you like. Similarly, you can make modifications because there is no contractual agreement refraining you from doing so. The takeaway here is that car ownership will provide you with more flexibility.


Another benefit to vehicle ownership is that it can be used as an asset. Further, holding onto your car for a long period of time is often considered a wise financial decision. If you plan on upgrading every 5 years or so, ownership may not be your first preference, however, it is a good way to lower your running costs long-term. 


Lastly, buying a car means you have no limitations on mileage. This benefit is mainly of significance to those who drive unpredictable distances every week.


The Cons


Now it’s time to consider the disadvantages of vehicle ownership. If you have ever bought a car, you may remember the hassle that came along with it. Dealers tend to have the upper hand when it comes to negotiations, and the paperwork is endless. Moreover, when it’s time to sell your car, it can be even more difficult. Often, drivers will sell their vehicle below asking price because the work that comes with finding a serious buyer is ‘not worth the stress’.


When financing a car, the buyer is burdened with high monthly repayments and some not-so-friendly upfront costs. And once they’re behind the wheel, the cost of servicing and maintenance is entirely up to them. 


Lastly, it can be stressful to come up with the money to pay for registration and insurance. Whereas car leasing allows you to budget for ongoing costs so that when the time comes, you already have allocated funds set aside to pay for these expenses.  


Novated Leasing


A novated lease is an arrangement that allows you to sacrifice a portion of your pre-tax salary to pay for the finance repayments and running costs of a new or used car. Like vehicle ownership, this option has some upside and downside.


The Upside


The most significant thing you should know about novated leasing is that it lowers your taxable income, saving you money each year. There are no upfront costs, and you don’t have to pay GST on new cars. In addition to these financial incentives, your novated lease provider will utilise their buying power and give you direct access to large discounts. 


But it isn’t just about saving you money. Novated leasing ensures you will enjoy stress-free maintenance and upkeep, because the cost of running your car is calculated and deducted from your pre-tax salary on top of your repayments. Convenient, right?


Additionally, there are less barriers to entry for drivers looking to get behind the wheel of a high-value car. If you’re wanting to drive a luxury vehicle, novated leasing makes this more accessible to drivers in comparison to financing. And while we’re on the subject - novated leasing means lower monthly repayments.


Once your lease period is over, there’s no need to stress about finding a buyer because your leasing provider will take it off your hands and make the appropriate arrangements. It should also be noted that once your lease period ends, you can pay the residual amount and take ownership of the car, extend your lease, or lease a new car entirely.


The Downside


Despite a multitude of benefits, novated leasing also comes with some challenges. For instance, terminating a lease contract prematurely comes with a fee. If an individual has the desire to end their contract or undergoes a dramatic change of circumstances, like moving overseas, they are obligated to pay a minor fee for exiting out of the novated lease arrangement early. However, you can allow for this by committing to a shorter lease term and extending thereafter, if necessary.


Also, most leasing contracts do not allow for any vehicle modifications and there are caps on the number of kilometers you can travel. Your mileage limitations are agreed upon at the beginning of your contract by calculating how far you travel on a weekly basis. Fortunately, if you find yourself continuously going over, your provider will easily amend your agreement.


Lastly, the costs associated with leasing a car are dependent on a number of variables, which makes it difficult to predict the savings accumulated over a long period of time.


Buy or Lease?


Overall, both options come with a variety of pro and cons. Deciding between vehicle ownership and novated leasing is dependent on individual circumstance, lifestyle, and personal preference. In many cases, some people choose vehicle ownership and car leasing in conjunction with each other, because they have different requirements for the cars they have at home.


We always recommend seeking professional advice from an independent financial advisor.


If you are considering novated leasing and would like to learn more, you can enquire here. Alternatively, call one of our Novated Leasing Consultants to discuss your options on 1800 932 394.


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