Is a Novated Lease Worth it in 2020?

If you would like a tax deduction on your car, lower finance payments and bundle up your running costs then the answer to the above question is …..

….. YES a novated lease is worth it in 2020.

If you pay income tax as a PAYG earner, then a novated lease is an excellent way to gain an income tax deduction with no business use.

Here is an example to demonstrate the financial benefits of a novated lease

  • Julie earns $70,000 per annum before tax
  • She is purchasing a new Mazda 3 for a drive away price of $25,990
  • She wants to drive it for a few years and then upgrade (just like her iPhone 😊)
  • Her bank has quoted her repayments of $840 per month on a 36-month term ($250 establishment fee, $12 per month administration fee and interest rate of 8.49%)
  • Other running costs are about $400 per month (fuel, servicing & repairs, tyres, registration, insurance, and roadside assistance)

=> The average monthly cash flow Julie needs is approximately $1,240

If Julie were to salary package the Mazda 3 via a fully managed novated lease the outcome would be a monthly cash flow cost of $776.

The cash flow savings for Julie using a novated lease is approximately $5,500 per year.

How do the cash flow savings come about?

With a fully managed novated lease Julie gets the following benefits:

  1. Tax deduction for the new Mazda 3 of $6,800 per year
  2. Benefit of a residual at end of lease term minimizes the monthly repayments

At the end of the lease term Julie can upgrade to a new make and / or model and privately sell or trade her car to payout the residual value.

Check out our FAQs for further information in regards to novated leasing.

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