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understanding novated car leases

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.

Understanding Novated Car Leases

by | Aug 1, 2020

Understanding novated car leases and how they work can give you light bulb moment on how you can save much-needed dollars. Have more money in your bank account rather than “someone else”.

Have you ever sat down and thought about how you can turn your family car into a tax-effective machine and in doing so saving you thousands of dollars a year?

Many employees and employers alike are unaware of the changes the Australian Taxation Office made to the fringe benefits tax back in 2014. A rule change which allows most employees the opportunity to enjoy some fabulous tax savings whilst using their private cars.

Benefits very similar in fact to those enjoyed by many business owners for years. What we are talking about of course is using a Fully Maintained Novated Car Lease for your next vehicle purchase. New or used car choices.

You have three clear choices when it comes to placing your car under a Fully Maintained Novated Lease. You can take delivery of a new car, a second-hand car or convert your existing car into a novated lease.

Did you know that the second biggest cost to the family budget is actually your family car including running costs? In many cases, you have more than one car parked in your garage! That’s right, while your home is hopefully going up in value, your car is definitely depreciating in value unless of course, you have a special vintage car.

Understanding Novated Car Leases Through Nick and Gertrude’s Story

A simple and common example to help your understanding novated car leases and how all this works to your advantage.

Nick is married to Gertrude. They have three children. Now Nick’s employer provides him with a company car (and his employer thinks of himself as a top bloke for doing so). So essentially a free car all expenses paid. Now we know you can’t do better than free right? Lucky Nick! However, with the family car, there is nothing free and Nick has just made the decision to upgrade Gertrude’s existing SUV to a new SUV.

Now after deciding on their new people mover, and after hearing from friends how they save thousands by leasing, Nick decided to see more information. Nick contacted us at Novated Car Leasing Options (NCLO) for a free quote.
The information that Nick supplied is as follows:
• His base salary is $95,000 PA
• The family chose a new seven-seater SUV with a dealership price tag of $48,000

After the school run, taking the kids to sport, doing the shopping and general out and about driving Nick estimated the kilometres travelled per year was 18,000. (we need the approx. kilometres travelled per year to estimate the car running costs, i.e. fuel, tyres etc)

Nick and his family live in country Victoria and wanted to opt-in for a 3-year lease term. When requesting a free quote from us, Nick placed those basic details in our Novated Car Lease Calculator to get an idea of his approx. savings of which he found over $,4000 dollars per year or over $12,000 dollars for the term of the lease in savings! Now that is money that he can direct into the family budget where the benefices could be his home mortgage, topping up his super fund or even upgrade the next family holiday. More money and more choices!

All this means is Nick and Gertrude now have a real choice on how to treat all the financing and running costs associated with their new family car. Option 1 take out a personal car loan and pay for all the vehicle expenses after tax has been taken from Nicks salary or Option 2 Nick salary packages his new SUV under a novated car lease via his employer and enjoys the tax savings amounting to around $12,000 dollars.

Now Nick and Gertrude have a genuine alternative to traditional vehicle financing and how to treat those pesky car running costs like fuel just for starters! Why pay a $1.65 per litre compared to Nick who is now paying around .92cents a litre thanks to his fully maintained novated car lease benefits.

Be Like Nick and Gertrude!

Remember just like a business a fully maintained novated car lease provides tax savings because now all your budgeted car expenses are paid for via a pre-tax deduction via your employer’s payroll, either weekly, fortnightly or monthly depending on how you are normally paid your salary.

Also, just to add Nick under a novated lease, didn’t have to pay GST on his new SUV which gave him an instant saving of over $4000 from day one. Plus, he doesn’t pay GST on all associated running costs to do with his new SUV. Even including insurance, registration, servicing etc. Which means you gain a fully budgeted cost centre around your family car.

It takes very little to put your lease in place aside from providing us with your relevant details and where you are choosing to purchase your new family car. Most important though, you must not sign any documents of any description at the dealership before talking to us in case you inadvertently become locked into a finance deal at the dealership. It has happened before! Plus, in most cases, we can source the exact car at fleet discount prices which means even further savings to be gained.

We also organize and setup with your employer all the paperwork and help the payroll dept set up our simple plug a play administration function.

Contact our team today for a free quote and get you on the road to saving a lot more money!

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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. Trademarks and Brands are the property of their respective owners.

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