Published on September 24th, 2018
If you are thinking of upgrading your car or buying a brand new vehicle, you need to do some smart planning well in advance so that you could buy your new car with basically tax-free dollars.
In case you are thinking in terms of purchasing the latest model or a new car, novated leasing could be your best choice as it could get substantial savings for you in on-going operational costs and acquisition too.
1. What Do You Understand By Novated Leasing?
Novated leasing involves an effective three-way agreement between an employee, his employer, and a car leasing company wherein the employer would be regularly deducting lease payments directly from his employee’s gross salary.
As all these payments are done using pre-tax dollars, there is bound to be substantial savings on the car costs.
Novated leasing term generally extends from two to five years and you could be making regular payments every month.
The car would certainly be registered in the employee’s name and is actually supposed to be the employee’s financial responsibility.
2. What Comprises A Typical Novated Leasing Package?
Thanks to a novated lease, you would be capable of paying for the entire operating expenses of your car by using pre-tax dollars including fuel, repairs and maintenance, registration, roadside assistance membership etc.
You would be able to get the car of your preference including the model, make, and color. You could acquire an agreement for novated leasing depending on the salary packaging of your employer.
The first step involves verifying and confirming your eligibility by talking to your pay office. You must consult a financial advisor about the tax value related to novated leasing and if that is viable under your current circumstances.
3. What Kinds Of Novated Car Lease Are There?
A. Novated Operating Lease
This would let you use the car for the entire lease term but at the end of your lease, you would be having no obligations or no access to the car you were using.
The car has to be returned and handed over to the authorities concerned. It would go through an official inspection. After scrutinizing the car and finding it in otherwise, good condition apart from the usual wear and tear, you would have no more obligations.
B. Novated Finance Lease
This sort of lease would necessitate guaranteeing the vehicle’s residual fees, upfront.
When the lease term comes to an end, suppose the valuation seems to be less as compared to what you had paid upfront then you are supposed to pay for the shortfall.
You must keep in mind that you would require paying this and not your employer.
C. Fully-Maintained Operating Lease
This involves the inclusion of the entire running costs in your salary package.
D. Non-Maintained Operating Lease
This kind of a vehicle lease considers you responsible for payment of all running costs including repairs and overall maintenance of the car. Just the lease repayments would be deducted from directly the pre-tax income.
E. Budgeted Finance Lease
This option could be availed by you via certain financiers that let you budget for precisely your maintenance expenses. You are free to set restrictions on the amount you want to spend.
After understanding what novated car leasing is all about, now you could opt for it but from a reputed and reliable company.