Thinking of splurging on a luxury car? You know, the kind that you mentally drool over behind the glass, or creepily touch and take pic upon pic with you sitting or standing next to it the moment you get up close and personal with it. Before you get your hands on a car loan to finance it, here are three essential things you need to know about buying a luxury car.
Luxury car comes with a hefty price tag
You must probably know this, but that’s not the tag we are talking about. There are additional fees for the price you see advertised to you. These fees come through what is known as Luxury Car Tax (LCT). This basically means that if you buy a car for more than $64,132 you will have to pay an LCT rate of 33%. If your car costs you $80,000 you will have to pay $5,225 in terms of LCT. If you are planning to buy your car from a private individual, you can breathe easy as no luxury tax will apply to you. However, you will have to keep in mind the additional stamp duty that varies from state to stare that will accompany your LCT.
How is it calculated?
You will need a calculator and maybe a bottle of your favourite liquor to help soften the blow. Let’s say you saw your executive luxury car on a showroom floor in all its beauty for the price tag of $100,000 inclusive of Good and Services Tax (GST). At this point, government fees and dealer charges are not included. You will have to subtract the value of your vehicle from the threshold for a luxury car which will be $100,000 - $64,132 = $35,868. Remove the GST by dividing $35,868 by 1.1 which leaves you with $32,607 that is liable to LCT. This amount is then multiplied by the LCT rate of 33% and added to the original price to get the amount that is advertised.
You want to get your car insured
Attracting a hefty price tag on luxury cars is no child’s play. However, Leaving it uninsured will leave you sobbing like a child. Comparing car insurance options is advisable as it can help find the best deal for your vehicle. The best cover to protect your baby will most likely be comprehensive car insurance, which could be an additional cost that will be worth every cent.
Some comforting news
If all of this has left your head spinning, there is some comforting news. If you are buying a luxury vehicle for business purposes, you can claim back up to $3,000 for one all-wheel drive or four-wheel drive vehicle per year. Investing in a more fuel-efficient car can help you in the long run because this will make you pay fewer LCT fees. If your car has a combined highway and city cycle fuel economy rating of 7.0l/100km could possibly pay more in terms of being held to a higher LCT threshold. Don’t let the numbers deter you from driving your dream car. Speaking to a financial advisor can help you plan how you will pay off your wheels without the stress of being drowned in debt.