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:
- Tax deduction for the new Mazda 3 of $6,800 per year
- 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.
