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Once and for all: When does operational leasing stop paying off? - Walla! Of money

2021-12-23T07:32:03.663Z


When should you return the attached vehicle and move to a private vehicle? This question employs many workers, and we bothered, did the digging work for you and came back with results


Once and for all: When does operational leasing stop paying off?

When should you return the attached vehicle and move to a private vehicle?

This question employs many workers, and we bothered, did the digging work for you and came back with results

David Rosenthal

23/12/2021

Thursday, 23 December 2021, 09:21

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When should an employee return the attached vehicle he received from the workplace and buy a private vehicle instead?

The aforesaid issue concerns hundreds of thousands of workers in Israel, who, as part of their working conditions, receive a vehicle from the employer as part of an operational leasing transaction.

Ostensibly, this is a benefit, but in a reality where the employee is required to pay thousands of shekels a month for the use of the vehicle, the question arises when and for whom it pays off.

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Through a car accounting company we examined the issue.

For this purpose, we presented them with the following data: This is an employee who receives from his employer a new vehicle with a volume of 1,000 cc (for this purpose can be a Hyundai I10), which is defined as the main vehicle in the family, as part of an operational leasing deal. also, the employee is required to pay the full tax on surplus expenditures - ie, income tax and national insurance, a rate of approximately - 47%, or in other words, there is no tax rebate to the employee.



according to the company thought a vehicle, in case the employee to pay higher From NIS 2,251 - the total cost of maintaining a private car in the said volume, per month, it is better for him not to renew the operational leasing transaction, but to purchase a private car

How did economists think car came to that conclusion?

  • Return on capital: A

    name given to the decline in value absorbed by your vehicle.

    Thus, every month the value of the new vehicle is reduced by NIS 691, or on an annual basis - no less than NIS 8,294 per year.

    It turns out that after 5 years, a rate of 55% will be shaved off its price.

    Its price as new is NIS 77,900, after five years of use its value is expected to be only NIS 42,845.

  • Insurance:

    Currently, the average cost of a compulsory car policy in the said cc (without new or young drivers), reaches NIS 1,442 per year, or NIS 120 per month. To this amount must be added the comprehensive insurance costs - a not insignificant amount of NIS 2,532 Per year, which deducts a monthly amount of 211 shekels from your account.

  • Do not forget to enter the test: the

    cost of an annual license is currently NIS 1,173 per year, and on a monthly basis: NIS 98.

  • Gasoline in Israel is expensive:

    according to data from a car accountant, a car that covers about 20,000 kilometers every year, consumes fuel at a monthly cost of NIS 779 and on an annual basis - NIS 9,352.

  • The garages also have to make a profit:

    tires, repairs and spare parts - for all of these you will pay a total of NIS 3,655 a year.

    In a monthly calculation, you part with an amount of NIS 304.

In a total calculation of all the maintenance components, it turns out that the cost of maintaining a private car in a volume of 1,000 cc, amounts to NIS 27,009 per year, which translates to NIS 2,251 per month. If you are interested in examining this on a cost per kilometer basis, Shekels per kilometer you will enjoy.



So you have the first part of the equation - a monthly maintenance cost of a private car with a volume of 1,000 cc.

Now, it remains to be seen how much money an employee in Israel pays for leasing such a vehicle in an operational leasing transaction.

These are the data that the company's economists entered into the calculation of an operational leasing transaction

  • Net monthly wage loss:

    According to a marginal tax including social security contributions at a rate of about 35%, the employee pays NIS 1,193 a month for this component.

  • Waiver of the provision: The

    employee is also required to

    waive the

    employer's share in the provision for pension and compensation, at a rate of 13.3%, which deducts another NIS 150 from his account.

  • The state also wants to enjoy: the

    state will not miss the opportunity to shove its hand into your pocket and impose on recipients a vehicle attached to a tax that meets the "value of use", or in other words: NIS 908 paid by the employee to the state coffers.

  • A total,

    as stated, NIS 2,251.

Going into the small details.

Dagan Ronen (Photo: Chen Galili)

But before you rush to cancel your operational leasing deal, you need to take a few more aspects into account.

Through Dagan Ronen, co-CEO of the consumer club of high-tech companies 'high-tech companies', we specify the set of parameters that must be included in the equation of profitability calculation.

  • Range of travel:

    20,000 kilometers per year is the average range of travel, but there are quite a few car users who cover a greater distance, sometimes even double.

    If the employee travels more than 20,000 kilometers each year, the profitability of renting a car in an operational leasing transaction increases.

    On the other hand, if it travels a smaller number of miles, the built-in advantage in such a deal is significantly eroded.

  • Value in use:

    The state imposes on users of the vehicle attached a 'value in use' tax, at a rate of 2.48% of the value of the vehicle as new, which the employee pays every month.

    There are employers who embody this amount for the employee, i.e. pay for this expense.

    In such a case, the profitability of an operational leasing transaction increases significantly.

  • Fuel expenses: The

    operational leasing product is no longer a "uniform" product as it was until a few years ago.

    Today, there are quite a few companies that provide a car benefit to employees, but limit the number of kilometers he is allowed to travel each year or, alternatively, charge the employee the full value of the fuel.

    In such a case, the viability of renting a vehicle in an operational leasing transaction is significantly reduced.

  • Period of time preparing for the use of the vehicle:

    The calculation above gives only a general indication of the viability of the transactions and in order to reach an accurate conclusion - another long line of data must be placed in the equation.

    Thus, for example, one of the essential variables is the planned period of time during which the employee will own the vehicle: after three years, the vehicle absorbs most of the impairment and starting from the fourth year, its effect decreases and lowers the profitability in favor of purchasing a vehicle.

  • Of money

Tags

  • Operational leasing

Source: walla

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