Many people still believe that at the end of a novated lease they either drop the car back to the dealership or someone from the finance company comes to pick it up. With a Novated lease, this is not the case. At the end of a Novated Lease you always have a number of options to either own or dispose of the vehicle;
- Payout the residual value and own the vehicle outright. The residual value is the final lease, or a balloon payment that was set at the start of the novated lease based on the vehicles drive away cost and term of the lease. For more information on residual values click HERE. Your residual value will be shown on both the lease contract and on the original Salary Packaging quote. Once the payment is made, the title of the vehicle is transferred from the leasing company to yourself.
- Re-lease the residual amount over a further term.
Many people love the convenience of a leased vehicle, as all of the running costs including fuel, tyres, insurance, registration and annual servicing are paid from your pre-tax salary. They also love using a fuel card rather than finding cash or using a credit card. If you are still happy with the vehicle when the residual comes due simply re-lease the vehicle over a further term that suits your needs and continues to enjoy the tax savings and convenience.
- Sell/Trade-in the vehicle and payout the residual.
Only in a very few cases will the residual be higher than a sale price. In most of these cases, the owner has mistreated the vehicle or has chosen a vehicle that has not held its value over the lease term. However, in most cases, the owner who sells the vehicle will pocket the difference between the residual and the sale price. The secret to ensuring you make some money at the end of your lease is simple.
- Pick a vehicle that holds it’s value. These are typically vehicle of quality build (Japanese – Toyota, Honda, Lexus, Subaru…), and make sure it’s not a vehicle that is commonly purchased by large fleets or government departments. These buyers get great discounts and therefore can sell the vehicle at a discounted price which will push everyone’s price down.
Most leasing companies will send you an advice letter at least 3 to 6 months before the end of a lease to give you enough time to make a decision. If you have any questions about the options at the end of your Novated Lease feel free to send us an enquiry or call on 1300 990 880.
A great place to find out how Novated leasing works and see how much you can save try our online calculator. It’s free to use, and we never ask for personal details, so you can do as many quotes as you need without being pressured.