If you’re in the market to buy a new car, you’ll probably know that sale season hits in June. End of financial year or EOFY car sales are the talk of the town, and there are usually some serious bargains to be found.
EOFY car sales can be very attractive, with big savings and lots of extras thrown in. So are they actually worth it, or are there hidden catches?
Let’s look at whether you should be shopping for a new set of wheels this June or not.
Why do EOFY car sales exist?
Historically, monthly car sales volumes are about 30% higher in June than any other month. But why is that, and why are there always EOFY car sales?
Most manufacturers and dealers are keen to hit their financial year (July to June) sales goals, so might reduce prices to encourage greater sales as the year closes. Why wouldn’t they try to finish the year on a higher sales number if it means a little bit of discounting?
Most dealers and salespeople have targets monthly too and if the average of those across the year isn’t quite what it should be they can be extra keen to close more sales in June.
In addition to this, car manufacturers will often do a stock take at the end of the financial year and measure their performance against their network’s sales, revenue, and profit targets. These manufacturers often offer dealers wholesale discounts as an incentive to sell excess stock.
So EOFY car sales are essentially a result of different areas of the supply chain coming together to try and shift old stock before starting with a “clean slate” for the following year.
EOFY car sales for employees and business owners
Let’s say you want to buy a new car, but think you might be able to get a better tax break or other benefits by incorporating the car into your work in one way or another. Both employees and business owners often have options available to them other than just buying a car outright as an individual.
The most common of these are taking advantage of instant asset tax write offs, chattel mortgages, and novated leases.
Instant asset tax write offs
Every business owner – whether potential car buyer or not – should keep top of mind their ability to take advantage of the $150,000 instant asset tax write off scheme. This was introduced as part of the government’s coronavirus stimulus package.
To take this up, the car must be in use by the end of June in order to claim the tax write off.
This tax break is not a cash hand-out, but a deduction that reduces your taxable profit. If your business spends $100,000 on a car (net of GST) with a tax rate of 26%, you receive a 26% deduction – $26,000. The cash outlay will therefore still be $74,000.
A chattel mortgage is a type of business loan that you can use to buy a car or other movable asset. Similar to how you might buy a house. One major consideration is that to make use of a chattel mortgage, the car must be used for business more than half the time.
A chattel mortgage:
- Is a fixed term loan, which means there’s a set and agreed-upon time period in which to pay back the loan amount
- The interest rate is determined at the start of the agreement and remains the same for the entire loan period
- You borrow the money to buy the car, and you own it outright
- The car is the security (also known as collateral) for the loan
Read more about the technical details of a chattel mortgage and how to finance a car if you’re self-employed.
A novated lease is when you incorporate a car (and sometimes its running costs too) into your salary package as part of a salary sacrifice arrangement. This isn’t a given with every employer – only some offer it.
The lease a three way agreement between you, your employer, and the leasing company or financier. Most cars bought with a novated lease are new or only gently used.
How does it work?
Basically, you “borrow” the car from the leasing company and pay it off in instalments. These instalments are deducted from your salary. At the end of that lease period you’re usually left with an amount left owing on the car.
This is known as a residual balance, and can be paid off by:
- Starting a new lease and trading in the current car for another one
- Extending your lease by taking out finance on the residual balance
- Paying the residual balance in full
Find out more about novated leases here. You’ll want to read up, because taking a novated lease can help you to save money through tax. And who doesn’t want to save money?
Are EOFY car sales actually worthwhile?
In short, you can get a real bargain in EOFY car sales. Look into the different buying options, and try to be open minded about what car you’d like.
Because dealers and salespeople are under pressure to sell last year’s stock and meet targets, you might be able to get your hands on a really good buy. Particularly if you’re flexible and don’t mind buying an unusual colour or the previous year’s model.
Insurance for your EOFY car sale bargain
If you’ve just bought or are about to buy a gorgeous new car, the next thing to do is take out comprehensive car insurance. After all, no matter how much of a bargain it was, you still want to protect yourself financially.
Over to you
Have you bagged yourself a bargain in an EOFY car sale before? Tell us about your mega-savings in the comments.