It wasn’t all that long ago that cars acquired through work were specifically linked to either a work requirement (for example, if you were a sales person needing to go out to visit your many clients) or as part of your remuneration package if you were in a managerial role. The good news is that leasing a car through work is now available to almost all employees and the car does not need to be used for any work purpose at all.
Which begs the question, if I don’t need my car for work purposes, is it worth leasing a car through work?
The answer for anyone wanting to own a car is a resounding YES!
Novated leases provide significant tax benefits and therefore financial benefits in acquiring and running a car through such an arrangement.
A novated lease is a three-way financial agreement between yourself (as an employee), your employer (who makes the payments on your behalf) and the financial institution (bank or finance company). A fully managed novated lease also incorporates the running costs of a car (fuel, insurance, servicing, roadside assistance, etc).
The benefit in this arrangement is that your lease payments as well as all the ongoing running costs for your vehicle are made from your pre-tax salary. This has the effect of lowering your taxable income which in turn provides you with significant savings which amount to thousands of dollars over the term of the lease.
A novated lease also allows for a balloon payment at the end of the lease term – this is known as the residual amount. This option is not available if you were to take out a personal loan or a car loan from one of the main financial institutions.
By having a residual amount, it has the effect of improving your cash flow over the term of your lease. At the end of the lease term, you can either sell the vehicle and pay out the residual amount or you can refinance the residual for another term (with significantly lower repayments as the residual amount is only a fraction of the original purchase price).
So if you intend on purchasing a car, there is no more cost effective way of owning one other than through a novated lease.
Talk to the team at One Car Group today to see how you too can avail yourself of such an opportunity.
Check out our FAQs for further information.