What is ‘Novated Leasing’
Put simply, instead of using your post-tax income to pay for your car, you move the purchase upstream, and your lease is paid before tax. This saves you money by reducing your taxable income. Sounds simple, and it is but be aware of one thing. The typical new car purchase involves two parties, seller and buyer. The key to a novated lease is involving your employer.
By doing so, you have the opportunity to pay for your new vehicle via salary packaging. This means that your employer deducts your car repayments before you are taxed, so you are only taxed on the remaining amount. In effect, saving tax dollars.
How does Novated Leasing work?
Just like a standard car loan, the lease period lasts for an agreed term – two, three, four or five years – after which you have the option of either selling the car and buying a more recent model on a new lease meaning you’re not stuck with an old car. Or you can pay the pre-agreed buyout fee and keep the car.
How is better than a standard car loan?
As we’ve mentioned, by setting up a novated lease, you’re paying for the majority of your car before tax so whatever’s left over in your bank account is yours. You’ve effectively lowered the amount of tax you pay, making your salary go further.
Another difference to an average car loan is the agreement can cover more than the car repayment. Depending on how its set up, the lease can also cover running costs and some other extras which further increases savings. Depending on which fleet provider you go through, a novated lease can also secure a more substantial discount on your preferred make and model. Plus, a fleet company will usually manage all of your service costs for you – folding a significant upkeep cost into your lease payment.
Novated leasing is available for business owners as well and can be a via alternative to a chattel mortgage. Whether you are an employee or self-employed you are able to access the benefits of novated leasing.
Aspire Wealth Strategies can manage the process with your salary being altered through your company’s financial department, all you need to do is sign some paperwork, and we’ll do the rest.
If you’d like a detailed assessment of how a novated lease could work for you individually or just want to know more then get in touch for a chat or download our Novated Lease fact sheet by clicking on the link below.