A novated lease bundles not only the vehicle purchase price and finance costs but also the running costs of the car such as fuel, servicing, insurance, roadside assistance and yearly rego into one affordable monthly payment. The payments for novated lease ATO vehicles are deducted from your pre-tax salary.
It reduces your taxable income and potentially gives you more spending money. It’s a great way to save time and money.
It’s tax-effective
Unlike other forms of car finance, novated leasing allows you to claim your vehicle running costs on tax. It’s a way to reduce your taxable income and increase your take-home pay. It’s a great option for employees who are considering changing careers or relocating.
A novated lease is a three-way arrangement between you, your employer and your fleet provider. Because lease financiers buy thousands of vehicles every year, they can negotiate significant discounts on cars and servicing. These benefits are passed on to you, and they can be quite significant on a $40,000 vehicle.
Additionally, novated leases typically include all of the associated costs with your vehicle. It includes fuel, maintenance, registration, insurance and tyres. It creates a single payment, which some employees prefer.
At the end of your novated lease, you can either buy your car (paying what’s called the residual value) or upgrade and switch to another car. If you choose to trade in your car, the novated lease company will often offer you more than what’s left on the residual – again, this profit is tax-free.
While novated lease ATO vehicles can help you save money, it’s important to weigh up the pros and cons carefully before committing. Not everyone will benefit from a novated lease, especially if you’re not earning a lot of money. For those people, other forms of financing may be more suitable.
It’s flexible
If your employees are unable to afford a new car through conventional means, novated leasing can be the solution. By combining the lease and running costs into one payment, you can offer them a way to get behind the wheel of the vehicle they want without spending their entire salary.
Another benefit of novated leasing is that it offers minimal risk to you as an employer. Employees are liable for the lease and all associated car running costs only while they work for your business, and this arrangement isn’t transferable to a new job.
It is an ideal way to attract and retain high-quality staff, and it also shows that you care about your employees’ financial well-being. It can be difficult to attract top talent in this current economic climate, and being able to offer a competitive novated leasing package is an excellent way to stand out from the competition.
As the payments are taken out of pre-tax income, it can reduce an employee’s taxable income and leave them with more money to spend on other things. There are many other benefits, including wholesale fleet pricing, a dedicated car concierge and on-the-road assistance. That is why it’s such a popular choice for workers who want to get into their dream car. Employees can even choose to have a fully maintained or non-maintained arrangement, which bundles all the car’s expenses into a single payment.
It’s convenient
The cost of running a car can be huge. The purchase price is just the start of a long list of associated costs throughout the year, including insurance, registration, servicing, and tyres. It is why salary packaging your car with a Novated Lease or a novated loan can be so convenient and cost-effective. It gives you an easy-to-manage budget that includes your lease payments plus your yearly vehicle expenses in one payment – no more bill shock.
A novated lease involves an agreement between you, your employer and a finance provider for a fixed period (often 1-5 years). Your novated leasing company will take a finder’s fee from the financier, add a small markup to the interest rate as their “go-between” charge and then charge you a monthly management fee.
The beauty of novated lease ATO vehicles is that it is paid out of your pre-tax income, which can save you on the annual incremental tax rates you pay when you own or buy a car with a regular car loan. In addition to your lease payments, your novated leasing package will usually include a fuel card, servicing, tyres and comprehensive insurance. It also allows you to trade in your current car, and at the end of the novated lease term, you can either pay the residual amount on your car and keep it, or you can upgrade to another vehicle and use the money from the trade-in for your new lease.