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How Does Novated Car Leasing Work?

How Does Novated Car Leasing Work?

For those people who aren’t familiar with the term ‘Novated Leasing,’ it may seem like a confusing and unnecessary way to purchase a new car, but novated leasing is a term that’s well worth getting your head, and back pocket, around.

The traditional way to purchase a new car would involve you either buying it outright through the dealership or purchasing through various finance options. However, there is a way that can see you drive the car you love, while also saving your bank account a fortune. Let us introduce you to the world of novated leases.

So, What Is a Novated Lease?

While it may seem like some scam to pay for something you don’t own, leasing as opposed to buying your next new car has the potential to save you thousands every year!

In Australia, it’s referred to as a novated lease. In short, it translates to adding in a new party (your employer) to the traditional purchasing agreement. Meaning that your novated lease is a way for you to pay for your vehicle and on-road costs through the means of salary packaging. It means that your employer will pay for your car payments for you from your pre-tax income.

How Does It Work?

Average novated leases range from between two and five years. When your leasing contract is up, you have the option of upgrading your car with a new leasing agreement, or by paying a predetermined buy-out fee, which will allow you to keep the car.

Compared to taking out a car loan, the payments for novated lease is pre-tax – meaning that not only your salary goes further, but you’re also lowering your overall taxable income at the same time!

It’s important to keep in mind that you’re not just renting out a car. That’s something you do at an airport. Novated leasing is between yourself, your fleet provider and your employer. While the payments are your responsibility, your company takes the loan your behalf.

The difference here is that your monthly payment includes all of your cars running expenses, as well as benefiting you no matter what scale of tax you pay. Never worry about fuel prices or expensive services ever again!

Benefits Of Novated Car Leasing

If a novated lease appears to be the right fit for you and your employer, it comes with a host of benefits. The first being that it is such a tax-effective car ownership solution – you’re just paying for the running costs of your car using your pre-tax income!

Secondly, you are given increased buying power through that of a fleet company. A fleet provider will provide you with significantly more discount than going through a regular dealership.

And lastly, you have the opportunity to update your car whenever your lease expires. It gives you the flexibility of structuring your novated lease to suit you, meaning that you can plan out when you can update or purchase your car! A bonus is that all of your on-road costs are taken care of as part of your novated lease payment.

If you’re looking to enter into the world of novated leasing, why not check out the Vehicle Solutions novated lease calculator to see if you are eligible, and realise your potential leasing power.

Head over to the Vehicle Solutions website to find out more today!