What are the Basics of Novated Car Leasing?

Buying a car on your own can be costly and a risk of your financial capabilities are not that stable. Purchasing a new car is not just between a seller and a buyer.  It is a combination of these and the several options on how you can afford to purchase your own car. One of them is novated leasing.

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Novated car leasing is not as complicated as you think but is also not as simple as you may assume. Some may think that these may put you into a situation in paying for something that you do not actually own, in this case a new car, that will help you save money in a very serious way. To make things simple, novated lease is paid before tax, while a regular loan is paid after tax.

In Australia, a novated car lease is a process in acquiring a brand new car with your employer considered as a factor and included in your purchase agreement. It is a way to pay your vehicle through your salary package. Your employer pays for your car payments, from your salary out of your pre-taxed earnings, thus saving you a lot of dollars in the process.

So how does a novated lease works?

Novated lease terms can be as short as two years and can also be stretched to 3-5 years. After that, you can either trade your now old car to a new model together with a new novated lease agreement approved by a novated leasing company and your employer. You can also consider paying for a buy-out fee to keep the car and make it legally yours. Novated leases help you lower your taxable income while a regular loan will leave you with the amount that you have after you have paid tax. This is why novated lease sounds so appealing for many.

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What makes a novated lease different from a car rental?

Car renting is paying for a sizeable amount of money to be able to borrow and use a good running Hyundai or either a battered Toyota, depending on where you secure and get your car rentals. Novated car leases on the other hand allows you to enjoy a brand new car, something you can call your own, but can be purchased/acquired through lighter payment terms with your employer as your guarantor. Your vehicle payment as well as the running expenses that you incur while using the car is taken from your pre-taxed salary.

The benefits

You are paying for your car as well as the running costs of your car using pre-taxed dollars.

You increase your buying power when your secure your novated lease through fleet companies rather than getting one through a dealership.

The flexibility of changing your car after your lease expires. You can pay for the remaining residual and keep the car or get another new car to be leased for another 2 or 3-5 years.

Getting your own car, with valued added savings is possible, if you’ll get to understand and explore the basics and benefits of novated car leasing.

 

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