Hi, I'm a locum Optometrist who does itinerant work (for different companies in different locations when they need me). I've just recently purchased a new car. Currently, in the process of setting up loan structure as i am financing to maximise the benefits as a travelling optometrist. Someone has mentioned to agree to a 'lease contract' so as to tax ddeduct the whole amount of the vehicle? This is opposed to actually owning the vehicle at the end by paying it off? Thoughts?

Have you already bought the car? Is this some sort of "lease/buyback" arrangement on the car???

here is what I tell people who ask me whether to lease or purchase a car: it doesnt matter. mostly.

Under a lease arrangement you dont "own the vehicle, and your lease payments are 100% deductible

Under a chattel mortgage or hire purchase, you own the vehicle and hence the things that you claim are:
1: interest on the finance
2: depreciation on the capital cost of the vehicle

what you need to bear in mind is that over the lifespan of the vehicle, you will ultimately claim 100% of ALL the expenses. Lease expenses tend to be consistent hence the total tax deduction each year will be the same.
HP and depreciation expenses tend to be higher in the first couple of years hence the tax benefit will be greater earlier on in the life of the vehicle

I advise people to look at the TOTAL cost of ownership.

so calculate total amount paid for the lease over the period of the lease

then calculate the total interest plus purchase price of the vehicle

whichever one of those is the smaller number is probably going to be the best one to go with, because the tax benefit is secondary to the actual COST of the thing.

good luck
Brendan

The word "lease" doesnt necessarily determine what the nature of the contract is. Nor does the work lease make it tax deductible Andrea. If you have a lease you are essentially hiring the car from the finance company. If there is a large payment at the end it is normally referred to as a residual payment. How they work out the payments is not really important: the issue is the amount they want you to pay weekly. This is going to vary according to the size of the residual payment. big residual = smaller lease payments.

I think that perhaps you are correct in that the arrangement you are talking about is a chattell mortgage. the term "balloon" is most commonly used in a mortgage situation, If you enter into the mortgage, then you will need to calculate the interest portion and the depreciation on the vehicle......and thats where a good bean-counter comes in handy. You can do it yourself, but in my experience the additional cost of getting it done by an expert outweighs the time and headache of figuring it out for yourself

hope this helps
Brendan

I would think that you would be filling out the individual application section. you nominate that the car is predominantly for business use.