Novated leases for employees

Under a novated lease, you can use part of your pre-tax income to finance the leasing of a vehicle. Essentially, it’s a three way agreement between you, your employer and the leasing company where your employer makes the lease repayments while you agree to provide a portion of your salary to cover the vehicle payments and running costs. You may also hear it referred to as salary sacrificing.

1. You choose your dream car and beCarWise sources a discounted quote from a dealership.

2. We create a forecast of all of your running costs over the life of the lease. This includes things like finance payments, insurance, fuel, servicing and tyres.

3. We then spread these costs evenly over the lease term, in-line with your salary payments. That way you know exactly what your deductions will be and what they’ll cover.

4. Once your finance is approved, your employer makes payments to the financier on your behalf from your pre-tax salary. That way, your income tax is reduced, saving you more over the long term. And because your employer is registered for GST, they claim the GST back from the ATO, passing those savings onto you.

As long as your salary can cover the payments, you can have as many leases as you like

No. You can use a leased vehicle for business and/or personal use. You can also choose any make or model you like, as long as it’s a passenger vehicle. You can even finance a used car if that’s what you want to do, although some conditions do apply. Contact us to learn more.

Two of the largest benefits associated with a novated lease are significant income tax reductions and GST savings for the life of the lease.Your running costs (fuel and maintenance) are also forecasted over the life of the lease, ensuring there are no nasty lump sum payments if and when any large repairs are required. You can also make significant savings on your insurance, along with a host of other benefits and discounts. 

Novated leasing offers a host of benefits for employers. It helps provide a cost effective transportation solution for all its employees. You can learn more about the benefits for employers here.

Absolutely not. Whether you drive a little or a lot, novated leasing is one of the easiest ways to save on your next vehicle. The amount you’ll save will vary depending on how many kilometres you drive, the purchase price of your vehicle and your gross salary, but rest assured we’ll find you the deal that offers you the biggest benefits.

Terms and Conditions aside, a typical novated lease lasts for between one and five years. Both your finance payments and fuel cards are linked to your employer, so if you do change jobs, the leasing company and your employer need to know. You’ll also need to fill out some forms for us – you can find those here.

If you do change jobs, you’ll have three options:

Continue with monthly payments: With this option, you’ll be responsible for paying all of your monthly payments, as well as the maintenance costs for your vehicle out of your own pocket.

Renovate your lease: If your new employer agrees, you can renovate your lease with them. You’ll have access to the same fantastic benefits as with your previous employer.

Payout your lease early: When you take on a novated lease, you agree to lease the vehicle for a set period of time. If you break the lease early, you’ll need to pay the remainder left on the lease, along with the residual value of the vehicle (GST included). Essentially, this option means you’re buying the vehicle outright.

If you’re made redundant, your novated lease becomes a normal finance lease and you’ll no longer have the tax benefits, salary deductions, fuel cards or maintenance program that come with a novated lease. In this situation, you can either sell the car and pay out the lease, or continue making payments to the finance provider until you get another job. Once you have another job, we’ll set up a new novation agreement with your employer, and the tax benefits will be all yours again.

If you took out redundancy insurance at the beginning of your lease, your lease will be covered for up to six months of payments, plus reasonable running costs while you look for another job.

When you purchase a vehicle under a novated lease, you do so using your pre-tax salary. This in turn reduces your taxable income. To ensure you don’t benefit above and beyond other taxpayers, the ATO offsets this reduction with a tax called Fringe Benefits Tax (FBT). This tax is calculated based on the purchase price of your vehicle and the annual kilometres driven. By paying for a portion of your annual running costs in a post-tax manner you can effectively offset any FBT liability accrued. Talk to us about your individual circumstances to learn more.

A novated lease has a residual value (or balloon) payable at the end of the lease or at the point in which you elect to payout and own the vehicle outright.  Generally, the longer the lease, the smaller the residual payment at the end of the lease. At the end of your lease term you have three options:

Pay the remainder: If you pay the full amount remaining on your lease, you then own the vehicle in full. You’re then responsible for all of your running costs including insurance, fuel and maintenance.

Sell the car: If you sell the car at the end of your lease, you must pay any difference between the sale price and the amount remaining on the lease. In the event you have sold your vehicle for more than what was owing on the lease, the sale profits are your to keep!

Refinance: If you don’t want to pay the remainder or sell the car, you can refinance the vehicle by taking on a new novated lease.

You can’t ‘swap’ cars within the one lease, so if you want to change cars during the novated lease period, you must terminate the existing lease and enter into a new one. However, everyone’s situation is different, so if you have questions, get in touch and we’ll talk through your options.

A novated lease is a great way to get a car you love at a price you can afford. However, to ensure you get the deal that best suits your circumstances, make sure you:

1. Choose the right vehicle for your needs

2. Pick the lease term that matches how long you plan to keep the car

3. Keep track of your account balance and via your driver report 

4. Speak with an independent financial consultant

Entering a novated lease is a serious financial commitment, so it’s important you understand the risks involved before deciding. We’ll walk you through the entire process, but recommend you seek independent financial advice to properly assess whether a novated lease is right for you.

Our experienced and dedicated team will work with you to ensure you get the best possible deal and are available to answer any questions you may have. Contact us to learn how a novated lease can work for you.