Novated leasing for Royal Australasian College of Physicians members

But what does all this mean?

When looking at any novated lease calculator it is important to understand what is included and importantly what is not included. On a novated lease calculator the provider can change the way fuel, tyres and scheduled services are calculated, which will reduce the amount allocated to the running costs to make their quotes look cheaper—but in the end you could be paying a lot more. It is very important to understand what is in each of the running cost budgets and how they are calculated. At the end of this explanation you will be able to do a quick check of your current budgets and see what’s right and what’s missing!

The calculations

Residual value

There is always a lot of talk about the balloon payment that falls due at the end of your lease. This is called the residual value or the final value (for tax purposes). The ATO allows you to pay for your car through your employer. This arrangement saves you tax and is very convenient to run. However for tax purposes only, because your employer is paying for the car from money deducted from your salary, you can’t get any equity in this vehicle. That means it needs to be paid back to a realistic market value at the end of the lease.

Good news – Because there is a residual value at the end, your repayments are cheaper during the lease term. Most people use these cheap finance payments to get into a more expensive car.

The residual value is an ATO-set percentage based on the lease term, but has a buffer of approximately 5% either side of required rates. Read more detail and view the ATO-set percentages in our residual value guide.

Loan or lease

For most people buying a car means they need some form of finance. One of the most common questions is: wouldn’t I be better off putting the car on a normal car loan? To get a true comparison of the difference between a loan and a lease, read our loan or lease article.

Finance approval conditions

After you have finished using our novated lease calculator and are happy that you can afford the deduction from your salary, the next step is getting the finance or lease approved. In general, getting a novated lease approved is a little easier than normal finance. The reason for this is simply because the financier is getting the repayments directly from your employer before you even get taxed. This gives the financier more confidence that their loan is going to be repaid.

To get a pre-approval started, visit our pre-approval page. The pre-approval will provide you with an approval in principle on the vehicle you choose. This approval is not binding and we never put any pressure on you to use this approval. The approval will provide you with a better negotiating position in the vehicle purchase. People who are ready to buy and have the funds in place can request a cash price for immediate delivery.