If you want to get yourself a new car and you need to know about different vehicle finance options you might want to know about a novated car lease deal. A novated lease is a way to finance any car, used or new or even the car you already have, using a type of salary packaging. There are a few benefits and opportunities for savings doing it this way so here is a guide.
A closer look at how it works
This is an example of an arrangement between your employer, yourself and the financier and has a length between 12 months and 5 years. There is no limit on car type or make unless your employer wants to specify something. It can be used for a new or used purchase or even to help finance the one you already own. The repayments come in part from the income before tax so some people can see more spendable income and pay less tax with a novated lease!
Your employer takes money from your pay to go towards part of the payments for the vehicle and for the costs to run it. On this part of the income, it means you do not have to pay tax on it. Then some of the payment comes from your income after paying taxes. The tax applied to this is called Fringe Benefits Tax. These are taxes applied to any employer benefits you receive that are not in your wage like a novated lease. To offset FBT payments you can set it so your deductions include some from the past tax income. This is called the Employee Contribution Method.
The two main novated lease types
When looking at a novated car lease deal there are several types but the 2 most common seen are self-managed and fully maintained. The latter is where the lease provider helps you at every step from finding a vehicle, putting in an offer, negotiations, creating a budget for your car running costs and so on. They set up the deductions from your pay with your boss and you might even see a fuel card so you do not have to get the money back each time you put in petrol. They also cover services and repairs.
On the other hand, a self-managed lease is exactly that. You control it. You find the vehicle, negotiate offers, make payment and get reimbursed, organise insurance, plan your own budget for running the vehicle and so on. You are also the one to work with your employee on the paperwork to set up payments.
Enjoy having the costs of owning and running your car planned for
A big part of the attraction of a novated car lease deal is the convenience and having your running costs handled. It covers things like registration, insurance, services, maintenance, petrol, tyre changes and even carwashes! You estimate at the start what you think your running costs are a year and that is deducted from your pay for the duration of the lease. If you realise you have under or overestimated you can adjust it at any time.
