Novated Leasing comes in several forms, however, a vast majority are termed “fully maintained”. Fully maintained novated leasing does not just refer to the vehicle being maintained or serviced it actually refers to the fact that the Novated Leasing company will maintain a register on every running cost that is included with the lease hence the term “fully”. Running costs typically include finance (lease), fuel (on a fuel card), tyres, scheduled servicing, registration and insurance renewals.
How does the fully maintained lease work?
To maintain this register of running costs the Novated leasing company establish an account or in simple terms a bucket which they can draw money from to pay and report on your vehicle running costs. Money is deducted from your salary (Salary Sacrifice/Packaging), this money goes directly from your employer into this account or bucket. When the running costs expenses come due the Lease company simply draw funds from this bucket and pay the account. Every transaction is logged and reported on for payment, GST and FBT requirements. This payment and reporting process is what you pay your annual Salary Packaging administration fee for. To understand what and how these payments are managed we will look at each payment that makes-up a typical fully maintained Lease.
- Lease (Finance) – The lease in 99% of cases is established 2 months is arrears. This means the first two payments required by the leasing company are $0.00. Therefore is you have a 4 year lease you will have 2 payments of $0.00 and 46 payments of $x. This payment structure allows the Novated Lease company and your employer to establish you package and payment structure and begin deducting money from your salary to have enough in your “bucket” to begin making the finance payments in the 3rd month.
- Fuel – You will receive within a few weeks of signing the Novated Lease documents a fuel card. This fuel card in most cases will allow you to pay for fuel, tyres, batteries, windscreens and in some cases even schedule servicing. The monthly bill is sent directly from the fuel card company to the Leasing company who deduct money from your bucket to pay the account.
- Schedule Services – Most Novated Leasing companies will allow you to have complete choice of where you service your vehicle. Simply arrange with the Lease company to pay the account before collecting your car or if available use the fuel card to pay the service. Again money is deducted from your bucket to pay this account.
- Tyres – Are the same as schedule servicing, you have a choice of provider and the Novated leasing company will pay this account directly or you may have the option to pay the account on your fuel card.
- Registration and Insurance renewals – When you receive your renewals simply forward them to your Novated Lease provider for payment on the due date. Please ensure you allow enough time for your provider to pay these accounts, don’t send them in on the due dates, as the Novated Lease provider needs to complete an administrative process before payment and processing.
Every good Novated Lease provider will have established an online portal for their customers to view their Novated Lease bucket/account. This online portal will provide a detailed view of every transaction into and out of your bucket and a running balance. It is a good idea to check in on this account from time to time to see how your bucket is tracking. You may be building up too large a surplus and you always have the option, in this case, to reduce your running costs and make your package even more affordable.
The Novated Lease company can only use the money in your bucket to pay for items you have budgeted for, the balance of the funds are always yours. Any surplus funds can be returned to you via your payroll system.
If you have any questions please don’t hesitate to call us on 1300 990 880 during office hours.
The first step in any fully maintained novated lease is getting the best deal on the price of the car. Try our unique car buying site called Motorbuys. Simple go to www.motorbuys.com.au. This service is free AND will save you thousands off the price of a new car. This means you will save even more on your lease payments.
While you are waiting for the pricing get a pre-approval on the finance by clicking here. The pre-approval take a few minutes over the phone and provided confidence when buying the car.
Vehicle Solutions is South Australian owned and operated. We have been assisting SA Government employees with this choice for over 8 years. Please make sure you get a competitive quote from our accurate online calculator, call us anytime on 1300 990 880 or drop into our office at 288 Glen Osmond Rd Fullarton to discuss this in more detail.