Motorbikes for your business?

Thursday, 17 May 2012 15:44

OK, so you know about the benefits of owning a motorbike when it comes to personal use and pleasure.  But what about using a motorbike for business purposes?  If you’re part of a company which is looking to widen or upgrade its commercial fleet, have you stopped to wonder if motorbikes would make a useful addition to this fleet?

Of course, a motorbike may or may not be suitable to form part of a novated lease agreement, although this will depend on the employee you want to set up the agreement with.  But you never know – some people love motorbikes and would consider this a real job perk.  So, this is a matter for discussion and negotiation.

But what about the fleet proper rather than vehicles that are involved in novated leases?  Will motorbikes work for your company?  This will depend on your business, but in some cases, a motorbike has a few advantages over regular cars.  Here are a handful:

• Parking space: if your company building is located in the middle of the city or even if it’s in a business/commercial hub in the suburbs, you probably only have limited parking space dedicated to your team.  Motorbikes will help you make the most of this limited parking space, as you can get two, three or even more motorbikes into the space taken up by one car. 
• Speed:  Motorbikes can nip past queues of traffic and don’t add to congestion as much as cars.  They’re also very manoeuvrable.  If your business requires an employee to take paper documents, samples, small pieces of equipment and similar items across town, and you need to do this in a hurry, then motorbikes are just the thing for the job.  What’s more, motorbikes don’t have the parking hassles at the other end when they’re doing the drop-off or pickup. There’s no spending time looking for a park, or hardly any, as it’s usually easy to find a space for a bike.
• Economy:  Motorbikes don’t use as much fuel as four-wheeled vehicles, especially in the case of small scooters and lighter bikes (large cruisers such as BMWs and Harley Davidsons are another story, but these are not very likely to be added to a commercial vehicle fleet – but you never know!).  And if you get hold of electric bikes (i.e. battery powered bikes), the fuel bill is even lower.  With the way petrol prices and even diesel prices are going, this is certainly worth considering. 
• Image: Motorbikes fit very nicely into the image of being energetic, funky, friendly and down-to-earth, and possibly a bit eco-friendly, too.  These are qualities that a lot of companies would like to project, so this might be another reason to add them to your fleet.

Motorbikes don’t just have to be used for courier purposes by commercial companies.  Other businesses can also make use of motorbikes: security work (especially if the job involves patrolling an area), deliveries of any sort (as long as the things to be delivered can fit into the pannier bags) and anything than involves house calls or face-to-face visits. 

So will a motorbike suit your business?  Well, that’s totally up to you, but if they are and you need finance to add them to your fleet, pick up the phone and have a chat.

The right Residual Value or Balloon Payment for you

Thursday, 24 March 2011 14:16

When you have made the decision to either take out a lease, be it ‘novated’ or otherwise, or a commercial hire purchase you are inevitably faced with the decision about the size of this ‘end payment’ and what impact it has on you now and in the future.

The impact is an obvious one. The higher the residual (or balloon), the lower your monthly payments will be and the lower the residual (or balloon), the higher the monthly payment will be. Simple! You would think…

So, where do you set this figure?

Firstly there are some minimum guidelines set out by the ATO, which are:

Secondly, and most importantly ask yourself honestly how many kilometers you will be driving each year. Forget about how many of them will be business kilometres for your FBT calculation, you need to know how many kilometres will the car have travelled at the end of the lease, when the residual (balloon) will be due.  This will have a direct impact on the end value of the car; the lower the km increases the balloon, the higher km will decrease it. 

The ‘average’, if this figure actually exists, is somewhere between 15,000 and 20,000 km per annum for a working person who uses their vehicle for business and pleasure. Approximately 60,000 - 80,000 at the end of a 4 year lease/CHP.

‘Ideally’ the value of the car will be equal to the residual and then you can go on your merry way and start the process all over again with your new car.

The good news is that if you have kept the kilometers down and looked after your car, then there is a chance that your value will be more then the residual and you will come out with a ‘profit’ perhaps a deposit on the next vehicle to keep the cost down even more.  But sadly for far too many people, they end up in the worst case scenario, where the value if the car is much less than residual and they have to come up with the balance before they can move on to the next car and often this amounts to thousands of dollars.

I have seen this happen in many, many cases. Even worse is that people manage to get the financier to fund this ‘shortfall’ in the new car. All that does is defer the obvious pain for, say, another four years and usually the amount is then even greater.

Not so long ago, it was a practice by unscrupulous Dealers, Brokers and Lenders to convince people to take out 5 year loans, with 50% residuals, particularly with high end prestige vehicles. They are not alone in this conspiracy, many car buyer are too focused on the immediate purchase ’rush and prestige of owning a new car’ with only a monthly budget in mind - that they ask for the worst case scenario.

There are still some people are still paying off the balances! There is not a car on the market that is worth 50% of its value after 5 years, particularly in the Prestige market!

Far better is to be sensible and rational and set as low a residual as possible which will then give you a chance to sleep easy during the course of the loan. It is an ever changing depreciating asset and a useful transportation tool. You can’t curl up to a car at night.

The simple and painful adage is, “If you can’t afford the combination of a sensible residual and the associated monthly payment, then you cannot afford the car you are aspiring to. Buy something cheaper!”

Do your homework, check what cars are selling for with those km’s on them remembering that you must compare ‘apple with apples’. The right kilometers, style, model and engine size car (and not expensive accessories) and base your thought/figures around that.

Finance Terms to Remember

Wednesday, 23 March 2011 10:45

In this day and age of the internet and moving market prices on everything from milk to homes it is sometimes wise to sit back and revisit the basics. This is true in the motor vehicle financing area as well. When we decide that we need a new vehicle we also have to decide how to pay for it. This can be confusing if you don’t know what each of the basic financing terms mean to you and your situation.

A CAR LEASE (or FINANCE LEASE) is a commercial finance product which enables you to have use of a vehicle and all the tax and personal advantages of ownership, while the financier actually retains the ownership of the vehicle.

The entire price of the vehicle is leased in this situation. Generally there is a ‘residual value’ payable at the end of the term which has the effect of reducing the monthly payments when compared to a secure loan. This residual should be similar to the value of the car at that time. Be aware of falling for too high a residual. This may have the effect of lowering the monthly payments, but there is nothing worse than having a payout of say $20,000 when the value of the car is $12,000 because you will have to come up with the $8000 difference! Far better to have a lower residual and higher payments and if you cannot afford it, buy a cheaper car!

In terms of tax deductions, your claim is generally for the monthly payments

A COMMERCIAL HIRE PURCHASE (CHP) is a commercial finance product where you hire the vehicle from the financier for a fixed monthly repayment over a set period of time.  At the end of the term when the total price of the vehicle (which includes all interest and/or ‘residual’ (called a balloon payment in this type of finance)) is paid you take ownership of the vehicle.

 A deposit can be used in a CHP to reduce the payments or final payouts.

In terms of tax deductions, your claim is generally for the interest paid and the depreciation per annum.

A CHATTEL MORTGAGE is a commercial finance product where the customer takes ownership of the vehicle (chattel) at the time of the purchase after the Financier advances funds to you for the purchase.

The financier takes a “mortgage” over the vehicle as security for the loan, by registering a Fixed and Floating Charge with the ASIC. When the contract is complete the charge is removed and you have clear title to the vehicle.

People/companies who are registered for GST can claim the GST in their BAS and there is no GST applied to each monthly payment.

A NOVATED LEASE is a method of salary packaging a car, which an employee leases a car which the employer agrees to pay the monthly payments in pre-tax dollars while they are employed with the company. 

This leasing option allows for finance mobility for the owner and control over the maintenance and fuel purchasing.

A PERSONAL LOAN is simply that – a personal finance product where the financier lends the customer unsecured funds to purchase a car for a set period of time with either fixed or variable rates.

This product is best for those looking to finance a vehicle out of the normal lending criteria’s (used vehicles, small value vehicles and private use vehicles).