Novated Lease Myths Dispelled

Novated leasing is fast becoming the number one way for people to own a new car in Australia. However people are a little sceptical of choosing this type of lease arrangement over traditional car finance. Let’s look at some of the top 5 myths and shed some light on the real facts!

 

Myth 1 – I earn too much for a novated lease to be worthwhile

Fortunately, this is incorrect and many Australians would benefit greatly by leasing a car in this fashion. Some people think a figure of $70,000 automatically cuts them off. In fact, if the Fringe Benefit Tax (FBT) rate is higher than your marginal tax rate, you’ll make some great savings on tax!

 

Myth 2 – It’s too complicated to work out what I need to repay

Again, not true. Any good novated lease company worth their salt will do the hard yards for you. In fact, they often provide a calculator on their site to help you see how much money you could save over the term of the lease. All car repayments are made in one low monthly charge which covers running costs as well.

 

Myth 3 – I need to travel a lot of kilometres for it to be of any benefit

There are a new set of FBT rules associated with vehicle leases and there are savings to be had even for drivers who clock up less than 10,000km per year.

 

Myth 4 – I’m young, novated leases are risky and I don’t want to be locked in

Young people are really taking to these types of car salary packaging arrangements and given the fact you can choose just about any new car you like, you can choose a car to fit your lifestyle and budget. Don’t be worries about only being able to choose between a few bland base model vehicles!

 

Myth 5 – I need to use the car for business use

This is one of the biggest myths people believe. It’s certainly not true. Novated leases are specifically for people who don’t use their car for a lot of business driving if at all. Forget worrying about keeping a log book, receipts or other records because you’re worried about the tax man.

 

There are many advantages in going with a novated lease including getting a fuel card you can use across over 90% of Australian petrol suppliers, one low monthly repayment made out of your pre-tax salary covering rego, servicing and other running costs. Speak to Fleetcare or try their novated lease calculator to see how much you can save.

12.03.2012

In this post I’d like to share the impact of the US job market on the foreign exchange rates, and how you can use this information to get better rates.

Why Is The US Job Market Important to Foreign Exchange?

It’s no secret that the United States is the backbone of the global economy. In spite of the rise of China, it remains the biggest economy power in history, and therefore an essential barometer of the health of the global economy as a whole.

For instance, the 2008 Great Recession was preceded by the collapse of the housing market in the US, which caused shocks to the financial system in Europe and elsewhere. Given this then, the workforce of the United States is crucial, as it comprises the engine of this towering economic power. If the US workforce is in bad shape, chances are the global economy is not doing great either.

How Does This Affect The Foreign Exchange Rates?

How then does this affect the foreign exchange rates? Because the strength of the US dollar (and risk appetite in general) is connected to the health of the US economy, and the US job market in turn makes up the US economy. In short, if the job market is doing well, chances are the US dollar will be performing strongly too.

For example, just last Friday the Department of Labor released the latest Non-Farm Payroll figures (indicating the monthly number of jobs created in non-agricultural sectors) telling us that 227,000 total jobs were created in the US last month. This is a great performance, and the US dollar immediately jumped against rivals including the UK pound following the release, indicating just how important Non-Farm Payrolls are as an economic barometer to the US. Similarly, if the Non-Farm Payroll next month were to disappoint, it’s quite possible the US dollar might dip.

How Can You Us This to Get Better Foreign Exchange Rates?

Knowing the importance of US job creation figures can help you get better rates, because it has such a huge influence on the rates. For instance, if the Non-Farm Payrolls are predicted to increase one month, that could help you get a better rate in the ensuing jump in the US dollar.

Similarly, if you’re concerned you might lose out, you might set up a forward contract prior to the release of the latest figures to protect you. It’s about being more aware, and therefore getting a better rate rather than jumping in blind!

What is a Contract for Difference (CFD)

A contract for difference or CFD for short is an instrument where the buyer receives or pays the seller the difference in an asset’s price over time, giving the CFD holder an economic interest in the company without any direct ownership of the shares.

You can buy contracts for difference on particular shares and forex pairs.  The difference is represented by the change in value of an asset, between the time the contract is opened and when it is closed.  So a CFD contract is an agreement between two parties to settle at the difference between the opening price and closing price of an asset specified in the contract at a particular point in time.  Inother words, a CFD is opened at a specific current market price at a point in time and closed at the reigning market price and the investor is entitled to the difference.

A CFD is made of a contract of a standard quantity of a particular underlying asset, usually a listed share but can also be an index, foreign exchange pair or commodity. In the case of a CFD share this usually means that one CFD contract is equivalent to one underlying stock in the company.

What are CFDs: Leveraged Trading Products

CFDs are leveraged products which means that they are traded on margin implying that you don’t have to pay the full price of the underlying market exposure. The only requirement is that you pay into your account sufficient monies to cover the initial margin. Therefore you might only need $10,000 to purchase CFD contracts up to a value of  $100,000.   If you investment rises to $130,000 which equals a 30% rise in value of the investment – you will actually stand to make a 300% ROI (return on investment), as you only deposited $10,000 initially.

Buy and Sell Financial Assets with Equal Ease

One important characteristic of a CFD is that you are able to both ‘buy’ or ‘sell’ an instrument meaning you can open both ‘long’ and ‘short’ positions.  A ‘long’ trade  involves purchasing the contracts and selling them again at a future date, hopefully after the price has risen.  Therefore “long” positions stand to make money in a rising market.  A ‘short’ position is the opposite – selling contracts first and buying them back later, in the expectation of a fall in price.

So how can your broker permit you to ‘short’ a stock you don’t own?

In the background, your DMA CFD broker will usually borrow stocks on your behalf thus allowing you to sell them even if they don’t belong to you.  If you manage to buy them back at a lower price, you will make money. Therefore “short” positions make money in a falling market.

To conclude CFDs are powerful trading products that will benefit active traders and investors who are looking at making their money work harder for them.   However, contracts for difference also need to be traded with care as they are leveraged trading instruments that may result in substantial losses if the market trades against you.

Debt consolidation - or balance transfer?

Debt consolidation loans have given many borrowers a good way of simplifying their budgets and making their finances that bit easier to deal with. But these days, a lot of people are using balance transfer credit cards to do much the same thing.

At a basic level, the two are quite similar: they both allow people to consolidate multiple debts into just one debt, whether that’s a new loan or a balance on a new credit card. They also both give borrowers a chance to rethink how quickly they’ll be able to repay their debt.

But in other ways, they’re very different. A few things to keep in mind if you’re thinking of taking out a debt consolidation loan or transferring your credit card debts to a single card…

Debt consolidation loan

You could pay all your debts off in one go if you took out a new loan and used it to pay them off. As with loans of all kinds, you should only do this if you’re sure you can afford to stick to the repayments all the way through, right up to the day the last one’s been made.

A lot of people consolidate their debts like this so they can reduce their monthly payments as well – if they can arrange a longer repayment term, each monthly payment can be a fair bit smaller, since they’re repaying the debt more slowly. It’ll cost more in the long run if they do this, though, as interest will have longer to build up. If you want to know more about debt consolidation loans and other approaches to debt, you could visit DebtAdviceNow.

Balance transfer credit card

If you’re carrying a few different credit card debts, it might make sense to transfer them all to a single card. A lot of balance transfer credit cards give people quite a lot of time (up to two years, in some cases) in which they’ll pay no interest on the transferred debt at all.

Even though it comes with a balance transfer fee, this can still save people a lot of money. It can also give them a real incentive to make larger monthly payments than just the minimum, so they can be confident their debt will be gone before the interest starts accruing again.

There are two main types of car insurance: third party and fully comprehensive. Those with older vehicles will commonly look at getting third party vehicle insurance because it works out best – the car is often worth too little to repair so any damage may lead to a write-off. However, there are times that fully comprehensive cover works out better.

Third party insurance is the minimum that you require. When you have an accident that is your fault, this type of insurance will cover the costs of the other party, whether it is to fix their car, to pay for injury or to pay for damage to an object. This will avoid any legal implications.

However, third party does have its limitations, which is when you need fully comprehensive cover. This will cover you as well as the third party and means that if you have an accident that was your fault, you do not need to worry about covering the cost of the repairs to your vehicle. You will also get the valuation of the car if it is totaled at any time.

The fully comprehensive cover will also cover the cost of any injury that you or your passengers receive from an accident. This means that you avoid legal implications if your passengers find that they cannot work due to an accident that you have caused. Your own car is also covered against fire and theft – something that the most basic third party cover will not insure against (you need third party fire and theft for this). You will also find that the insurance covers some of the items in your car, such as your sat-nav or a radio.

As well as being able to drive your car, many comprehensive cover will also cover you to drive someone else’s car. While this will only be on third party insurance and you need to get their permission first, it does mean that you have access to other vehicles if you require it – such as in an emergency. However, not all insurances will cover this so you will need to check first of all.

Something else that many comprehensive vehicle insurance companies will offer is access to a courtesy car, whether the accident was your fault or not. This is beneficial if your vehicle is off the road and you need to get around. There are often limitations to this but it is worth considering. European cover is also something that you can gain through fully comprehensive cover. However, like with whether you can drive someone else’s car, you will need to check about these first of all.