Pros of a Novated Lease
1. Tax savings: One of the main advantages of a novated lease is that employees can save on income tax. The lease payments are deducted from your pre-tax salary, which can reduce your taxable income and can result in less tax paid.
2. No GST: Unlike buying a car outright, you don’t pay have to pay GST on the purchase price of the car . On a $55,000 car that’s a $5,000 saving straight off the bat. In addition, with a novated lease, you also won’t pay GST on fuel, servicing, insurance, tyres, registration and any other running costs.
3. Available on a new, used or even your existing car: A lot of people still believe that novated leasing needs to be on a new car which isn’t true. Which means you can purchase a second hand car at a lower purchase price that fits within your budget and if you don’t want to change car you can still get a tax saving by putting your existing car under a novated lease.
4. Easy budgeting: With a novated lease, you can include your running costs of the car, making it easier for employees to budget their finances. This can be particularly beneficial for those who have a tight budget.
5. Save on purchase price: Novated lease companies get access to fleet pricing that regular retail customers don’t get access to. This means you can lean on their purchasing power to buy your next new car. In addition, most leasing providers get access to fleet pricing on parts and labour when it comes to servicing your car which can save you even more.
Cons of a Novated Lease
1. Need to involve your employer: As a novated lease is deducted from your pre-tax salary, you need to be comfortable with involving your employer. Whilst this isn’t usually an issue as most employers see this a benefit they can offer staff at no cost to the employer, its worth noting.
2. Purchasing a vehicle outside of your budget: Sometimes employees can be tempted to purchase car that they wouldn’t normally purchase because of the tax savings that arise through a novated lease. However, if you lose your job and no longer get the tax savings you might find that you can no longer afford the cost of the lease payments. That being said, financiers and good leasing providers will usually help in accessing whether a vehicle is within your budget.
3. Unnecessary insurance products: Depending on the leasing provider, it’s important that you assess the additional insurance products offered like Gap Cover, Guaranteed Buy Back Insurance and Lease Protection Insurance. These insurance products can drastically increase the cost of the lease so its important to understand what’s included and if it’s suitable for you.
The Bottom Line
With a novated lease there a few things to consider like what you want to include. The important thing to remember is that everyone is going to be different and finding the right provider that is going to supply the right information to help you assess whether a novated lease is for you. A good novated leasing company will be able to issue quotes and help tailor a package that is suitable to you.
To find out if a novated lease is right for you, contact us to get a quote.
1300 959 528
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