To explain what a novated lease is, it would be helpful to describe the roles each of the three parties play in the transaction– the employee, employer and the service provider. Here’s a rundown of their roles in the novated lease process.
The employee gains many significant benefits: first is his taxes will be lower as he will be paying the car’s operational costs like fuel, insurance and car maintenance using pre-tax income. Secondly, he stands to gain a much lower price for the vehicle because of the service provider’s buying power.
Further down the road, there is the flexibility to change cars during the lease; it just depends on the structure of the contract. The employee can also opt to buy out the vehicle by paying the remainder at the end of the lease.
On the employer side, the benefits start with being able to provide a handsome salary or increase to the employee with minimal to zero cost to the company. Instead of owning company cars, novating car leases to the staff also takes care of the expenses involved with such a significant business expense as well as assumable risks in the event an accident happens. Since the employee owns the car, they are not part of the company’s accounting reports, specifically the balance sheet. Also, should the employee stop working, the employer does not get stuck with the vehicle.
The employer can opt to re-novate the lease back to the employee along with all the assumed obligations. It can as well get novated to the new employer, thus severing all responsibilities of the previous employer.
Service Provider or Fleet Company
The fleet company also stands to gain from the transaction by way of fees or commissions. However, bear in mind that car manufacturers give the service provider deep discounts since he buys a fleet at a time so that you can get your car at a very reasonable price via a novated lease. The same fleet provider also will handle the vehicle maintenance or servicing, which the lease payment includes as well.
Are you interested in a novated lease? Then you need not look further than Vehicle Solutions. At Vehicle Solutions, we service over 85 employers throughout Australia including state Governments. We provide a much cheaper lease to all SA Government employees through the “Self-Managed Lease” option.
By opting to go with Vehicle Solutions Australia as your service provider, you can buy with confidence knowing you will get the best novated lease options available