Eliminate Your Biggest Depreciating Asset - Look to a Novated Lease for Your Next Car

07 February 2014

A car is vital to most people as a convenient form of transport. Trading in or selling and buying a new car every few years can be a depressing exercise as you see the worth of your asset, in this case a car, drop in value tremendously.

One way that you can more effectively manage your need for a car is to consider leasing it by using salary-sacrificing options via a novated lease.

Who Pays For A Novated Lease?

A novated lease is explained best when you understand that the employee is responsible for all financial obligations from their salary package, with the employer making the actual payments on their behalf.

This means that income tax is payable only on the amount of the salary remaining AFTER the deduction of the lease payments are made.

If the employee leaves, then the employee continues to pay for and use the leased vehicle, while the employer has no further involvement with the lease in any way.

An employee can either continue to make the payments or transfer it to their new employer.

This gives a novated lease added flexibility that can be good both for the employee and the employer.

Who Decides The Vehicle Details?

The employee has full control over the type, value, style and options on the vehicle. This is a major advantage over a company car, where the employer and leasing company have a small range of vehicles that you have to choose from or a specific vehicle will be issued to you without any input from you.

Each salary package will have a nominated amount that the employer will contribute each year to the leased vehicle. Employees have the opportunity to select a car of a higher value then this amount covers, but will need to make up the difference themselves.

This means that you can get the right vehicle for your needs and because there are none of the limitations that an employer provided company car has, such as where and when it can be used and who can drive it, the choices are all yours.     

What Happens When The Lease Is Up?

When the lease is about to expire, you have several options. The vehicle can be handed back or an offer can be made to purchase the vehicle outright. The choice is entirely yours and does not affect the lease for a new vehicle.

The depreciated value, or residual payout figure of the vehicle on the novated lease is explained in the initial contract, so you will have an idea of the payout price so that you can make a decision that suits you or your family’s needs at the time.  

A novated lease is a good option if you are looking to purchase a new car but want to take advantage of paying less tax and managing your fuel costs.

Speak to your employer today to see if this is something they offer and if it’s a good fit for you and your family’s situation.