Tax Effective Way to Buy a New Car?

Question


Hi Scott

A friend of mine, who is in real estate and whose mum is an accountant, suggests that it is more tax effective to buy a new car on a three-year finance deal with an agreed buyback figure than to drive a cheaper older car. My friend seemed to get a good tax return for her earnings due to this. Am I better off doing this than driving my older (but almost fully owned) car?

Chris

Scott's Answer


Hi Chris,

What a load of rubbish.

Car dealers (and finance companies) have come up with all sorts of marketing gimmicks to get you to buy brand-new cars, which fall in value by 30 per cent as soon as you drive them off the car lot. That’s on top of the finance cost, of course.

You’ll always be better off buying a three-year-old car for cash, downloading the logbook app from the ATO, and claiming your expenses through your business. That’s what I do. Even better, small businesses can claim an accelerated depreciation of $20,000. Honk, honk!

Scott