comparing loans to leasing

Novated Leasing isn’t just for employees of big business or Government as most people think. Any employee can benefit with a Novated Lease and there are huge savings to be gained from taking advantage of the tax benefits that this product offers.

Comparing Loans to Leasing

by | Jul 24, 2020

Understanding the difference when comparing loans to leasing will give you an insight into how they both work when trying to squeeze more out of your salary.

Quick question for you. What is the last remaining and genuine tax deduction available for the aussie wage earner that is not super?

Answer: A novated lease for the family car.

Our objective here is to highlight to you the difference when comparing a personal car loan versus a novated lease for when you next need to replace your family motor vehicle.

For the personal car loan example, you are paid your salary, your personal income tax is taken out and you receive your net pay. You then need to pay for all your running costs of your family car, including the car loan repayment, fuel, tires, registration, serving. Essentially anything associated with running your family car.

A fully maintained novated car lease, however, offers you a brand new and very tax-effective approach.

You are paid your salary, then your budgeted car expenses including your car lease finance payment, fuel, rego, tires, etc are all deducted before your income tax is calculated. You are then only taxed on the income left after your car expenses are paid with pre-tax dollars and you then receive your net salary.

Under a novated car lease there is literally thousands of dollars to be saved every year compared to purchasing your car via a personal loan.

Comparing Loans to Leasing – GST Savings

Let’s dive more into it all with an example. When you take out a fully maintained novated car lease, you don’t actually pay the 10% GST on anything associated with your car. So, let’s say you want to purchase a new or second-hand car from a dealer. You will not pay the GST on the purchase price, which turns into a fantastic saving right of the bat. It gets better than that though!

You don’t pay GST on your fuel, or on the tires, you will need over the life of your lease, or on service and maintenance that needs to be done. Nor will you pay GST on insurance, registration, etc.

Think about just the fuel cost for a moment. If you weren’t paying GST and you were able to pay for your fuel pre-tax then instead of paying, for example, $1.65 per litre you are effectively only paying around .92 cents per litre. Now that’s one incredible saving because that is ongoing week in week out. No waiting for a discount war at the bowsers for you anymore after you have paid a premium for your groceries!

Crunching the Numbers

You can check out our cost-saving novated car lease calculator where you can key in some details for your next family car. Whether it be a second-hand car, brand new, or even your existing car. Select the size of the car, add your gross yearly salary and how many kilometers you travel approximately per year. This simply allows us to estimate vehicle running costs. Then add the state in which you reside in (because stamp duty is different in each state) and of course your preferred lease term, which can be between 1 – 5 years.

Now calculate out the estimated savings as this gives you a guide on the dollars you can save via a fully maintained novated car lease with all running costs included compared to a personal loan and funding all of your running costs from your after-tax dollars.

Better having those tax savings in your pocket than someone else’s.

Now that you have had the opportunity of comparing loans to leasing can you see how you can now gain more from your salary and effectively gaining an instant pay rise?

Please note: the novated lease calculator only gives an estimate. So, when you request a free quote from us, we can show you in detail where your savings will lay and just how much you personally can gain per year on your private use motor car. We can assure you that you will be very surprised as there are many “light bulb” moments while the quote is explained to you by one of our experienced account managers.



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Novated Car Leasing Options does not purport to offer legal, financial or taxation advice. Employers and employees should seek independent advice as to the implications of a Novated Lease transaction. The salary packaging amounts and take-home pay calculations set out are estimates only. While due care is exercised by us to ensure the integrity of the estimates it does not make any warranties, express or implied as to its accuracy or completeness. Powered by Paywise & EasiFleet. Trademarks and Brands are the property of their respective owners.

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