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WHAT IS A NOVATED LEASE AND HOW CAN IT BENEFIT YOU?

Sounds complicated, but it’s not, really – and it could have some serious benefits for your bottom line. 
A novated lease, also called salary packaging a car, is an increasingly popular arrangement where an employee leases a vehicle from a finance company, and his or her employer takes over the financial obligations under the lease. Under most arrangements, the employer makes lease payments on the employee’s behalf, and then deducts the payments from the employee’s pre-tax income, leaving the employee with more take-home pay. 
In addition to increased disposable income, a novated lease can give the employee the benefits of choosing a car to suit his or her own needs and tastes; control over the use, care and maintenance of the car; and the ability to keep the car when changing employers (the lease can be transferred to the new employer or even to the employee, if necessary).

Employers find novated leases attractive because they allow businesses to increase benefits to their employees at very minimal expense, they are much more cost effective than purchasing company cars, and the employer does not assume any risk for the vehicles themselves. It's a form of Salary Packaging.
With all the benefits for business owners and employees alike, it’s no surprise that the novated lease has become such a popular arrangement.

TAKE ADVANTAGE OF THE BENEFITS
A novated lease, also known as salary packaging a car, is a three-way agreement between an employee, an employer, and a finance company under which the employee leases a car from the finance company and the employer agrees to make the payments on behalf of the employee. The employer then deducts the amount of the payments, pre-tax, from the employee’s salary.
This can be a fantastic benefit for you as an employee from both a financial and a personal perspective. You can save money by taking a novated lease.. This way, your taxable income is calculated on your salary minus your car payment, instead of just your salary as a whole, which amounts to less taxes and more money in your pocket. Also, you may be able to save on Goods and Services Tax (GST) when you enter into a novated lease.

From a personal standpoint, a novated lease gives you much greater flexibility than a company car, from beginning to end. Instead of choosing from a few pre-selected fleet vehicles, you’re able to find a car that fits your lifestyle and budget (subject to your employer’s policy, of course). And should you change jobs, your car goes with you – you can either transfer your lease to your new employer or arrange to make the payments on your own.
With so many advantages, salary packaging with a novated lease could be the choice for you.

THE NOVATED LEASE: BENEFICIAL TO EMPLOYERS AND EMPLOYEES
A growing trend in employee benefits is the novated lease. It is a win-win arrangement between employers, employees, and auto finance companies that allows employers to provide “company cars” to employees with very little cost to the company and with great flexibility to both parties.
Here’s how it works: the employee leases a car from the finance company. The employer agrees with the finance company to make the lease payments for the employee. Payments are deducted from your pay, before you get it..
Why is this such a good arrangement?
For the employee:
• More disposable income because the lease payment is made with pre-tax dollars.
• Compared to a company car, more flexibility in choosing a car to suit the employees needs.
• The car stays with the employee if the employee changes jobs – and arrangements can be made for the novated lease to be transferred to the new employer, if desired.
For the employer:
• Increases employee salary at minimal or no cost. Plus, payments made under the agreement are tax-deductible to the employer.
• The vehicle is neither an asset nor a liability – it’s off the balance sheet.
• When an employee leaves, the car goes, too. An employer is not stuck with unwanted vehicles to maintain.
Of course, there are many details to consider in entering into a novated lease. However, as evidenced by its growing popularity, such an arrangement can have enormous benefits for all involve

Tags: car finance, novated lease, salary packaging