Novated Lease Benefits – 7 Reasons to Save & Simplify
Considering changing your car? Looking for a cheaper way to finance a car? Wondering what is the deal with a novated lease?
If you are an employee – paid a salary or wage by your employer or own a company and you pay yourself a salary, then financing via a Novated Lease is the best way to reduce your payments and get a tax deduction with NO business use.
Novated Lease Explained:
It is a form of finance available to employees where the employer agrees to join with you and the financier to lease the car over a term of 12 to 60 months. You in turn agree to pay for the lease and the running costs of the car from your salary. And this is where the magic of GST and tax savings is born!
Check out our FAQs for lots more detail on how a novated lease works.
Novated Lease Benefits: Reasons You Need to Know
1. Reduced Cash Flow – Low Cost
Unlike a Secured Car Loan, a novated lease has a residual at the end of the term. As such the repayments are reduced because you don’t pay off the total value of the car over the term of the lease.
The best thing is that at the end of the lease you can sell or trade-in the car for a replacement car in order to payout the residual value at the end of the term.
As an example, on a Mazda 3 Neo Hatchback with a drive away price of $23,490:
• Finance repayments on a secured car loan over 3 years = $26,832
• Finance repayments on a novated lease over 3 years = $21,112
• Cash flow benefit (before tax savings) over 3 years = $5,720
2. Bundled up costs to run the car
The most significant tax savings come from the tax deductions for the running costs of the car such as:
• Comprehensive insurance
• Fuel
• Servicing & maintenance
• Registration & CTP
• Tyre replacements
• Roadside assistance
• Even car washes
Using the same example as point 1 the inclusion of the tax deductions delivers a whopping cash flow benefit (AFTER tax savings) over 3 years of $14,300.
This assumes a salary level of $60,000 per annum before tax. If you are in a higher tax bracket than this example, then the cash flow savings are even greater.
3. Car Choices
You get to choose the car that suits your lifestyle. From small to large, sports car to ute the choice is yours.
You can also choose new, demo or used. Maximum age of the car at the end of the lease term is 10 years.
We do recommend new or near new cars just so you can enjoy the protection of the manufacturer’s warranty period and lower cost of servicing and maintenance that comes with newer vehicles.
4. Discounts and more discounts
As a customer of One Car Group we can help you secure new car discounts through our national buying network. In most instances we can get your car at fleet pricing.
Through our wholesale dealer division, we can secure you better pricing on near new used cars. Low kilometre near new prestige used cars are a great way to drive a prestige brand without the sticker price of a new one.
And when it comes to servicing your car you will also be entitled to pre-approved work through 2,200 service providers at pre-negotiated discounted parts and labour rates. More savings for running your car.
5. Convenience of a fuel card
Forget about needing cash or a credit card when you fill your car. We provide a super convenient fuel card so you can pay for your petrol or diesel and have it charged against you novated lease fuel budgets.
As the fuel is subject to an income tax deduction and free of GST you will never have to worry about the price of fuel as you will enjoy 30+% lower after-tax cost for each litre.
Try our CALCULATOR to see how much you can save on fuel.
6. Flexible Budgeting
Not only do you get the cash flow savings and tax benefits, but we help you budget for most of the costs to run your car.
Budgets are set up to match your payroll cycle (weekly, fortnightly or monthly) and funds are set aside in each pay to cover the weekly, monthly and annual costs of your car.
As you budget during the year this avoids a panic when the $1,000 annual registration bill arrives each year 😊
7. Moving on from your current job
If it is time for you to move to another employer, you can:
• Transfer the lease to your new employer so you can enjoy the cash flow benefits; OR
• If your new employer will not accommodate a novated lease, then pay the lease finance directly to the finance company and still enjoy the cash flow savings of the finance
Additional Resources:
• Novated lease calculator – estimate the cost and tax savings
• Are novated leases worth it?
• Why finance pre-approval for a novated lease is a good idea
• Novated leases for small businesses
• Frequently Asked Questions
