New Car - are my calculations correct ?

Discussion in 'Money Management & Banking' started by hillsguy, 8th May, 2006.

Join Australia's most dynamic and respected property investment community
Page 2 of 2
  1. Nigel Ward

    Nigel Ward Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    989
    For an Aussie, I have a strange take on home ownership...

    I don't intend to buy a PPOR unless I can buy it for "cash" and immediately draw out 80%+ and put it back to work in my investments...

    It is just too inefficient for me to have a massive non-deductible P&I loan on an asset that generates no income...:eek:

    I'm really lazy by nature, so I want my money working super hard...so I don't have to. :rolleyes:

    So on that basis 0% :D :p

    But I really do understand the emotional pull of having your own place.

    Also, to state the obvious, your PPOR will presumably grow in value and is excellent collateral for borrowing against...therefore it's not too bad to have a significant % of your wealth in your home...

    Cheers
    N.
     
    Nigel Ward, 10th May, 2006
    #21
  2. Glebe

    Glebe Well-Known Member

    Joined:
    29th Sep, 2019
    Posts:
    819
    Location:
    Central Coast NSW
    Nigel I'm of the same opinion. Except if you're lazy I must be slothful!

    I just hope my wife can hold off on the PPOR as long as I can.
     
    Glebe, 10th May, 2006
    #22
  3. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,414
    Location:
    Sydney
    We are in the nice position of having bought a PPOR, paid it off (in 3 years), and no longer live there (it became an IP).

    We now rent a place that we want to buy (indeed, we decided we wanted to buy it 3 years before we moved in to rent it ... long story), but we are in no hurry to actually buy right now.

    ... I figure we are currently paying in rent, less than a quarter of what we would be paying in interest if we bought it ... we have no maintenance costs, and the owner comes and does the gardens and lawns for us once a month (we have people stopping out the front of our place to smell our roses as they walk by :D ).

    It's a nice position to be in ... especially while the market is certainly not strong, and indeed intrerest rates are on the rise.

    My attitude is that I've already bought one PPOR and paid for it ... I have no intention of doing it again ... my investments can pay for the next one.

    As for cars ... well I'm similar to Nigel there too - our 13 year old Daihatsu Charade (bought new) has still only done 105,000km ... we fill up the tank with fuel once every 2 months or so (high oil prices ? didn't notice !!). Nice living near a rail line (and I calculated I did more km in cabs than I did in my own car last year). :D

    Once my investments have paid for somewhere for me to live, and also pay for me to enjoy life, then they can also pay for me to have a nice car. Until then, I don't have time to enjoy it - so why waste the money.

    Then again, if I had to commute every day, I'd probably want a nice car too. Nah ... I'd change jobs if I ever had to commute :rolleyes:

    Tell you what ... the 30 second commute from the bedroom to the office in the morning can be a real drag sometimes :p :p
     
    Simon Hampel, 10th May, 2006
    #23
  4. Tzaki

    Tzaki Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    52
    Location:
    Canberra
    I have a Honda Jazz that is owned by my company, so the purchase cost and running costs are held in that company, offset by income in that company. Ask your accountant to set up a structure to help the assest pay for your car. ;)
     
    Tzaki, 15th May, 2006
    #24
  5. hillsguy

    hillsguy Well-Known Member

    Joined:
    25th Aug, 2015
    Posts:
    502
    Location:
    Adelaide
    If only I had my own company ! :)
     
    hillsguy, 15th May, 2006
    #25
  6. investor__

    investor__ Member

    Joined:
    1st Jul, 2015
    Posts:
    11
    Cars and PPOR as non deductible purchases seem like a waste to me. We have an agreement that we will get a new second hand car when the 10yr old Rav hits 200,000 kms. Only 9000kms to go.

    Jane
     
    investor__, 27th May, 2006
    #26
  7. hillsguy

    hillsguy Well-Known Member

    Joined:
    25th Aug, 2015
    Posts:
    502
    Location:
    Adelaide
    Ever heard of ENJOYING the journey ? :p
     
    hillsguy, 27th May, 2006
    #27
  8. Simon

    Simon Well-Known Member

    Joined:
    23rd Jun, 2015
    Posts:
    507
    Location:
    Newcastle
    Have you factored in the CGT exemption?

    But I do understand the benefits of renting a PPOR and buying IPs and it works as long as one is analytical enough.

    The certainty of owning a PPOR and the CGT exemption are important to us. Esp as we own the property outright and have 80% debt fully deductible used for investments. I guess this gives us the best of both worlds.

    Good topic.
     
    Simon, 27th May, 2006
    #28
  9. Nigel Ward

    Nigel Ward Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    989
    You're right Simon...but remember the CGT exemption is only relevant when you sell... and that means you've lost the benefit of having "your own place"...altho no doubt you've enjoyed the security along the way...

    Horses for courses
    Cheers
    N.
     
    Nigel Ward, 28th May, 2006
    #29
  10. Simon Hampel

    Simon Hampel Founder Staff Member

    Joined:
    3rd Jun, 2015
    Posts:
    12,414
    Location:
    Sydney
    Even more so ... only relevant IF you sell, or IF you don't move out.

    If you either A) intend to stay there forever, or B) think you might move out but not sell ... then the CGT exemption has a more limited benefit.

    In these cases you will possibly (depending on circumstances) be better off either renting, or else, buying the property through a structure, which gives you better tax planning for the future (and asset protection along the way).
     
    Simon Hampel, 28th May, 2006
    #30
  11. shake-the-disease

    shake-the-disease Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    54
    Location:
    Melbourne
    My PPOR is the best investment I've ever had, made hundreds of thousands tax free. Yes I intended to live in it forever, but forever for me was 8 years. I had a 90% deducable car loan over the same period and it cost me plenty.

    So my view is deductability is way less important than the asset itself being bought. Good debt = good asset. PPOR debt is IMHO good debt.
     
    shake-the-disease, 7th Sep, 2006
    #31
  12. Dr Lobster

    Dr Lobster Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    81
    Location:
    sydney nsw
    Without my PPOR I would not have been able to purchase my IPs or my managed funds.
     
    Dr Lobster, 7th Sep, 2006
    #32
  13. Chris.R_WA

    Chris.R_WA Well-Known Member

    Joined:
    1st Jul, 2015
    Posts:
    88
    Location:
    Perth, WA
    Ditto Dr Lobster :)
     
    Chris.R_WA, 12th Sep, 2006
    #33
Page 2 of 2
Property Tax Specialists – Enquire Today

Price Accounting provide investor + developer tax services world and Australia wide for your property and all tax issues. Contact Paul@PFI below for our new client pack and quoted pricing + client portal access. Trusts, Co and SMSF are our specialty.