In the fast lane of financial freedom, novated leasing is emerging as the ultimate pit stop for savvy drivers looking to upgrade their ride.
Picture this: driving your dream car, with tax perks lighting up the horizon.
Novated leasing isn't just a financing option; it's a turbocharged game-changer. Let's break down the unique advantages that set this option apart from the rest.
What is a Novated Lease?
Novated leasing is a car financing option that involves an agreement between an employer, an employee, and a finance company (administered by Remunerator). It allows an employee to lease a vehicle using their pre-tax income, with the employer facilitating the arrangement by deducting lease payments from the employee's salary before tax is calculated.
Here are some key points to consider when comparing novated leasing with other car financing options:
Ownership & Residual Value
| Novated Lease | Other Finance Options |
| The employee does not have to pay the whole purchase price upfront. The employee leases the vehicle and at the end of the lease term can either refinance or payout the remain amount outstanding. Alternatively, you can buy a new car. It is essentially a pay as you go model! | The individual pays the whole purchase price upfront inclusive of GST. They own the vehicle from the start. |
Taxation Benefits
| Novated Lease | Other Finance Options |
| It offers potential tax benefits as lease payments are made from pre-tax income, potentially reducing taxable income. The driver also doesn't pay GST on the purchase price of the vehicle when financed through a novated lease; or pay GST on the running costs of the car. | Generally, there are fewer tax benefits associated with traditional car loans or personal purchases. The tax deductions available are limited to the actual business use on the car. |
Cash Flow & Budgeting
| Novated Lease | Other Finance Options |
| A benefit of novated leasing is the finance payment and all the cars associated running costs are bundled into one regular payment. Predictable monthly payments can assist in budgeting, and it may provide better cash flow management. | Though in general the loan repayments will be fixed for the term, all running costs will vary from month to month based on actual use. This makes it more difficult to budget. |
Flexibility & Choice
| Novated Lease | Other Finance Options |
| Novated leasing provides flexibility in choosing the make and model of the vehicle, as well as additional options like maintenance, insurance, and fuel. Remunerator have built an extensive Australia-wide dealership network after 30 years of operations. This guarantees you the best price on your new car. Alternatively, employees have the flexibility to source their own new, used, or electric vehicle. | The buyer has complete freedom to choose the vehicle and additional services but may need to arrange these separately. The buyer will be responsible for the vehicle search and unlikely to gain access to fleet network discounted pricing. |
Upfront Costs
| Novated Lease | Other Finance Options |
| Typically, there is no large upfront payment, and the employee may only need to pay for certain fees or taxes. | Depending on the financing method, there may be a significant down payment requirement. |
Running Costs & Maintenance
| Novated Lease | Other Finance Options |
| Remunerator novated lease arrangements include maintenance, insurance, and fuel costs, which can be convenient for the lessee. | The individual is responsible for all running costs. |
Credit Requirements
| Novated Lease | Other Finance Options |
| The employer's involvement can sometimes make it easier to secure a novated lease, even if the employee has less favorable credit. | Individual creditworthiness plays a more significant role in obtaining a loan. |
Exit & End of Term
| Novated Lease | Other Finance Options |
| At the end of the lease, the employee can choose to either extend the lease, purchase the vehicle, or use any equity to purchase a new car. | The individual owns the vehicle from the start and can choose to keep, sell, or trade it at any time. |
Potential Risks & Considerations
| Novated Lease | Other Finance Options |
| The employees' tax situation may change, affecting the benefits of the arrangement. Also, if the employee changes jobs or leaves employment, they are typically responsible for the lease payments. | The individual bears the full responsibility for the vehicle, including its resale value and any outstanding loan balances. |
Novated leasing offers unique advantages in terms of potential tax benefits, lower upfront costs, and bundled service, but it may not be suitable for everyone. It’s important to carefully consider individual circumstances, including tax implications, job stability, and personal preferences, when choosing the most appropriate car financing option.
Consulting with a financial advisor or a specialist in car finance can also provide valuable insights. Our Remunerator Novated Leasing specialists are available to discuss further on 1800 NOVATE.