3 minute read
Banking
Banking Paul Modra, Executive Manager – Member Value and Distribution, Police Credit Union
The comparison: a loan versus a lease
The Police Credit Union has undertaken an analysis of the figures in the car loan versus novated lease issue.
Police Credit Union CEO Costa Anastasiou ordered the analysis to guide police members in their decisionmaking.
As an economist, he saw that novated leases were, in many cases, not a financial advantage to their lessees.
“With so many vehicle finance options on the market,” he says, “it can be hard to sort out the best deals.
“Drawing not on hearsay but on reallife examples, we know that you can be up to $26,000 better off over a five-year term, simply by opting for a car loan.
“Our number crunching has found that salary sacrificing can be more expensive over the longer term, compared with a car loan over the same time frame, even when using pre-tax dollars and reducing your taxable income.”
Mr Anastasiou knows of many police officers who, from the novatedlease option, have turned to Police Credit Union for a loan.
“We’ve worked with them to develop solutions suited to their needs,” he says.
“Although initially delighted with his new car, he soon found he didn’t have as much take-home pay.
“We came up with a finance solution that dropped his fortnightly payments from $1,364 to $451 – and gave him an asset at the end.”
Mr Anastasiou said he understood that police officers would already have grasped the lease-versus-loan issue.
Nonetheless, he and his team wanted to be doubly sure to provide their police members with any fact or facts they might not have considered.
“My team and I just have this special regard for police,” he says, “and our commitment to them is as strong as ever. We never forget that it was serving police officers who, as members of the Police Association committee of management, established Police Credit Union 50 years ago.”
The loan option – facts for the decision maker • Pocket pain – in addition to having less cash in hand, you’ll have more complex tax affairs to deal with. (Approvals for a novated-lease agreement can also take far longer than a car loan application, which could see you drive off in a new car on the day you apply*.) • Balloon blowout – a novated lease leaves a large lump-sum payment at the end if you want to buy the car, with some balloon payments higher than market value. (A loan with a low interest rate and no penalties for extra or early repayments is a far smarter option.) • Lease limitations – a novated lease might force you to buy from a dealer or choose a specific insurer. (Check fine print for restrictions on kilometres you can travel and servicing clauses. A Police Credit
Union car loan means no restrictions on driving distances and you choose your insurer and mechanic.) • Hidden hazards – be wary of lease clauses about additional mileage and
“wear-and-tear” costs. (Even if your personal circumstances change, the leased car remains your responsibility, along with extra unbudgeted costs, so be prepared to dip into your pocket if you underestimate your annual mileage.) • Making modifications – Police Credit
Union car loans offer flexibility to add aftermarket accessories to suit your needs and lifestyle, while a lease prevents changes to a car’s design or performance.
To find out more about a competitive car loan with Police Credit Union, call 1 300 131 844 or head to www.policecu.com.au. And, to see how a car loan could be the best option for you, contact Platinum Relationship manager Glenn Lewis on 0421 243 741.
