Ask Paul: Should I lease a car or buy it outright?


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Dear Paul,

I'm 60 and the sole income earner. I work for a not-for-profit and have salary packaging.

My husband has no income and received a small inheritance - enough for a new mid-range car with a little left over.

ask paul clitheroe should i lease a car or buy it outright

We've been on one income all our lives, paid our mortgage and have no debt.

Raising five kids, we always just managed.

My salary package has offered a novated lease on a new car, but the deductions would not leave enough to pay bills.

Am I better off leasing or buying outright? I have five more years before retirement. - Lorral

Well, Lorral, if a novated lease would not leave you enough money to pay the bills, I am pretty sure that can't be a great idea!

Cars fit into my "necessary evil" category. Most of us need one for work, kids and our lives but, goodness, they are cashflow eaters. Personally, I'd be buying a low-cost, cheap-to-maintain, reliable secondhand car and spending as little of my money on it as I could.

My suspicion is that working for a not-for profit, your salary will have you in the lower tax scales.

You can check this online easily and see what benefit there is in a novated lease, but without knowing your exact package, I am pretty sure that a cheap secondhand car bought outright may be your best option.

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Paul Clitheroe AM is founder and editorial adviser of Money magazine. He is one of Australia's leading financial voices, responsible for bringing financial insight to Australians through personal finance books, the Money TV show, and this publication, which he established in 1999. Paul is the chair of the Australian Government Financial Literacy Board and is chairman of InvestSMART Financial Services. He is the chair of Financial Literacy at Macquarie University where he is also a Professor with the School of Business and Economics. Ask Paul your money question. Unfortunately Paul cannot respond to questions posted in the comments section. View our disclaimer.
Money magazine
May 17, 2023 4.45pm


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Dave Goff
May 17, 2023 5.16pm

I agree with Pauls' suggestion to buy a reliable second hand car, especially if either your employer pays you mileage or you can claim work related mileage on your tax return.

James Henderson
May 24, 2023 8.25am

I am a retired financial planner and drive Uber. I have costed leasing and rejected as a viable option for even a new hybrid Corolla.i$36000 on road or at least ,$300 per f/n over 5 years which the dealer refused to disclose. If you go lease then you need to fully understand the excess you will have to pay for panel repairs if you go lease through non novated lease companies.

Then looking at 2nd hand most dealers are adding $10000, which means you would be paying like in property a percentage above for dealers handling costs above the true value.

Helen Chen
May 29, 2023 4.25pm

I am looking at the exact decision right now. For the same vehicle, it might work out better if you go for novated lease if you are after a new EV. Only because of the current FBT exemption that goes with new EV's (until June 2025). However agree with Paul, a reliable second-hand car is definitely the option to go if cash flow is an issue.