Welcome, Jake! If you’re in the market for a new car, you may have heard about novated leases. This type of lease is becoming increasingly popular in Australia, allowing employees to lease a car through their salary with tax savings. In this article, we’ll give you all the information you need to know about novated lease cars for sale, including their advantages and disadvantages.
Introduction
What is a Novated Lease Car?
A novated lease car is a type of lease agreement in which an employer pays for an employee’s car lease payments from their pre-tax income. Essentially, the employer agrees to pay for the lease payments on behalf of the employee, and the employee agrees to have their pre-tax income reduced by the lease payments. This means that the employee can save on tax, as they are paying for the car with pre-tax income.
How Does a Novated Lease Work?
A novated lease works by having an agreement between the employee, the employer, and the finance company. The finance company leases the car to the employee, and the employer agrees to pay for the lease payments from the employee’s pre-tax income. The employee is responsible for the car’s running costs, such as fuel and maintenance.
What Are the Benefits of a Novated Lease Car?
There are several benefits to a novated lease car, including:
- Tax savings
- Lower monthly payments
- Flexible lease terms
- No residual risk at the end of the lease term
- The ability to choose the car you want
What Are the Different Types of Novated Leases?
There are two main types of novated leases – fully maintained and non-maintained. A fully maintained lease includes all of the car’s running costs, such as fuel and maintenance, while a non-maintained lease only includes the lease payments.
What Are the Eligibility Requirements for a Novated Lease?
In order to be eligible for a novated lease, you must be an employee who receives a salary package from your employer. Your employer must also offer the option for novated leasing and be willing to enter into an agreement with the finance company.
What Happens at the End of the Lease Term?
At the end of the lease term, the employee has the option to purchase the car or return it to the finance company. If the employee chooses to purchase the car, they will need to pay the agreed-upon residual value.
What Happens if You Change Employers?
If you change employers during the lease term, the novated lease agreement will need to be transferred to your new employer. If your new employer does not offer novated leasing, you will need to pay out the remaining lease payments and residual value.
Specification
The Process of Getting a Novated Lease Car
The process of getting a novated lease car involves several steps:
- Check your eligibility
- Choose the car you want to lease
- Get a quote from a finance company
- Enter into a novated lease agreement with your employer and the finance company
- Make lease payments from your pre-tax income
- Pay for the car’s running costs
- Decide whether to purchase or return the car at the end of the lease term
The Advantages of a Novated Lease Car
There are several advantages to a novated lease car, including:
- Tax savings – as mentioned earlier, novated lease cars allow employees to pay for their car lease payments with pre-tax income, reducing the amount of tax they pay
- Lower monthly payments – because the lease payments come out of pre-tax income, the monthly payments are often lower than if you were to lease the car yourself
- Flexible lease terms – novated leases can have lease terms of up to five years, giving you more flexibility with your payments
- No residual risk at the end of the lease term – because the residual value is agreed upon at the beginning of the lease, there is no risk of having to pay more at the end of the lease term
- The ability to choose the car you want – with a novated lease, you can choose the car you want, rather than being limited to the cars offered by a dealership
The Disadvantages of a Novated Lease Car
There are also some disadvantages to a novated lease car, including:
- You are responsible for the car’s running costs – while the lease payments are taken care of by your employer, you are responsible for the car’s running costs, such as fuel, maintenance, and repairs
- If you change employers, you may need to pay out the lease – if your new employer does not offer novated leasing, you may need to pay out the remaining lease payments and residual value
- You may be locked into a lease – if your circumstances change and you need to get out of the lease, you may be locked in and unable to terminate the lease early
- You may need to pay for insurance separately – some novated lease agreements require you to pay for insurance separately
Complete Table of Novated Lease Cars for Sale
| Make | Model | Year | Price | Lease Term |
|---|---|---|---|---|
| Toyota | Corolla | 2021 | $25,000 | 3 years |
| Mazda | CX-5 | 2021 | $40,000 | 4 years |
| Hyundai | Tucson | 2021 | $35,000 | 5 years |
| Subaru | Outback | 2021 | $45,000 | 3 years |
| Nissan | Qashqai | 2021 | $30,000 | 4 years |
FAQs
What is the difference between a novated lease and a car loan?
A novated lease involves an agreement between the employee, employer, and finance company, while a car loan is an agreement between the borrower and the lender. With a novated lease, the lease payments are taken from the employee’s pre-tax income, while with a car loan, the payments are made from after-tax income.
Do I own the car during the lease term?
No, the finance company owns the car during the lease term. At the end of the lease term, you have the option to purchase the car or return it to the finance company.
Can I choose any car I want for a novated lease?
Yes, as long as the car is eligible for novated leasing and within your budget.
What happens if I change jobs during the lease term?
If you change jobs during the lease term, the novated lease agreement will need to be transferred to your new employer. If your new employer does not offer novated leasing, you will need to pay out the remaining lease payments and residual value.
What happens if I want to terminate the lease early?
If you want to terminate the lease early, you may be required to pay out the remaining lease payments and residual value. This will depend on the terms of your lease agreement.
Do I need to have a good credit rating to get a novated lease?
Yes, you will need to have a good credit rating to be approved for a novated lease.
Can I add additional items to my novated lease?
Yes, you can add additional items such as insurance and maintenance to your novated lease agreement.
Do I need to pay GST on a novated lease?
No, GST is not included in novated lease payments.
What happens if I have an accident in my novated lease car?
If you have an accident in your novated lease car, you will need to follow the usual procedures for car accidents, including notifying your insurer and the finance company.
Can I use my novated lease car for personal use?
Yes, you can use your novated lease car for personal use.
How do I know if a novated lease is right for me?
You should speak to a financial advisor to determine if a novated lease is right for your financial situation and needs.
What is residual value?
Residual value is the estimated value of the car at the end of the lease term.
What is a balloon payment?
A balloon payment is a large payment that is due at the end of the lease term. Novated leases do not typically have balloon payments.
Conclusion
If you’re in the market for a new car, a novated lease may be a good option for you. With tax savings, lower monthly payments, and the ability to choose the car you want, a novated lease can be a great way to get behind the wheel. However, there are also some disadvantages to consider, such as being responsible for the car’s running costs and the potential for being locked into a lease. If you’re considering a novated lease, be sure to speak to a financial advisor to determine if it’s the right option for you.
Thank you for reading this article on novated lease cars for sale. We hope this information has been useful to you. Remember, when it comes to car buying, knowledge is power.
Disclaimer
The information provided in this article is for educational purposes only and should not be considered financial advice. Novated leases have risks and may not be suitable for everyone. Before entering into any financial agreement, you should speak to a financial advisor to determine if it’s the right option for your individual needs and circumstances. We do not accept responsibility for any loss or damage caused by the use of this information.
