Most people cannot imagine living without the freedom and convenience that ownership of a vehicle provides. But owning a car is not free from hassles. You either need to take a loan or make a sizeable payment upfront. Is there an alternative? Yes, you can own a car of your choice with novated lease.
Novated lease is a method of salary packaging a car. Under this system the employee leases the car and the company owner takes on the employee’s obligation of paying the monthly lease rental from the employee’s pre-tax salary. In short, a novated lease is a three-way agreement between the employer, employee, and the lease company.
Australian businesses offer employees novated lease as part of a financial package agreement. This type of alternative salary-sacrifice arrangement has become very popular with the employees.
What Is So Special In This Type Of Auto Finance Arrangement?
It is a slew of benefits that attracts people to novated lease arrangement.
Savings On Tax
* Tax authorities will consider your car as a company vehicle. So, you benefit on tax.
* Goods and Service Tax (GST) credits on the initial vehicle purchase.
* GST credits on running costs including all costs incurred on tires and fuel.
* Lower taxation provided by fringe benefit tax when you package the entire lease through your pre-tax salary.
Savings On Purchase Price
* You can benefit from corporate fleet discount programs.
* Fleet management will afford your savings on running costs when your car gets discounts on servicing and maintenance.
* The vehicle will be of your choice.
* You have the option of building equity on your vehicle. If at the end of the lease period, the car’s market value is higher, you benefit from the difference.
* Even if you leave your present job, you can still novate the lease to your next employer, so the vehicle remains with you.
How To Compute The Costs Involved In Novated Leasing?
The costs that lead up to the total amount take into account the cost of the vehicle plus accessories, the lease term, the prevailing interest rates, and the computed market value of the car at the end of the lease term.
The process is simpler than you think. Typically, it consists of the following steps.
* Obtaining a quote from a dealer.
* Submitting a credit application.
* Confirmation of the credit approval by the car dealer.
* Completion and submission of lease documents with necessary inputs from your employer.
* Delivery of the vehicle.
* Notification to your employers and arranging of payroll deductions.
Once you take the delivery of the vehicle, do not forget to take all the benefits the dealer has offered with this form of auto financing. These can include roadside assistance and motor club membership. Most car dealers have extensive network of maintenance facilities where you can negotiate substantial discounts on labor cost and spare parts.
Novated lease is packed with benefits. Do not miss the opportunity to save money as well as all the hassles to keep the car on the road.
Novated Lease in Australia is a tax effective way to use your income tax to save thousands of dollars off and reduce your tax at the same time. A Novated Lease is something you should consider.