Novated Car Lease
Novated Lease is a car finance option that allows your employer to pay for your behalf from your pre-tax income for the term of the lease or as long as you're employed. More and more companies are making it a centerpiece of their attraction strategy today. Novated lease is not something new, in fact it has been around for over 15 years. However in the past, a novated lease was solely available to top executives in white-collar jobs. As more employers sought more ways to attract and retain people, novated car lease has worked its way down the corporate ladder and a lot of employers now offer salary packaging to all staff who can afford it.
What are the Steps Involved in a Novated Car Lease?
- You choose a car and organize a lease through a supplier or your employer may have their own car leasing company that they'd like to deal with.
- After the Deed of Novation is signed for the term of the lease, this means your employer takes on the responsibility of making your lease payments.
- Your employers makes the monthly car lease payments on your behalf through salary deduction.
- When your lease term is up you can either pay the residual in order to own the car outright, trade in the vehicle or refinance the residual with another lease or loan.
Despite that your employer is making the monthly lease payments for you, the car lease is in your name. At the end of the day, you are solely responsible of the car lease, including if you change jobs and your new employer will not take over the lease payments.
What are the Benefits of a Novated Lease?
- One obvious benefit is the reduction of income taxes
- A Novated car lease can also increase the your (employee) spending power
- The opportunity to make money on the difference between the residual and the market value of the car
- Compared to getting a fleet company car, a employee can choose the car he wants, control the maintenance and take the car with them if they switch employers. There are also no restrictions on personal use and the company is not stuck with an unwanted car.
