A novated lease allows an employee to get the vehicle of his or her choice as part of the salary package. It is an agreement which is made three ways. It is between the employee, the finance company as well as the employer. In this, the employer is responsible for the obligations towards the lease as long as the individual is in their employment.
This benefits the employee, as in addition to getting the vehicle which he or she wants, they can also get fleet discounts on the purchase of the vehicle as well as the running costs. They can also choose if they would prefer a used vehicle or a new one. The employee also gets to retain the vehicle when he or she changes jobs.
There are different kinds of Novated Leases which are available:
- Novated Operating Lease: In this the risk of the residual value is with the financing company. At the end of the lease term, the employee needs to hand the vehicle back to the financing company. The vehicle, in this case, needs not only to be handed over in a fair condition but also, the employee needs to adhere to the maximum number of kilometers driven as agreed upon at the time of signing the lease.
- Novated Finance Lease: In this, at the end of the lease term, the benefits of the ownership, as well as the risks involved, remain with the employee. The residual payments, as well as the GST at the end of the lease, need to be paid for by the employee. The ATO minimum guidelines are used as a base to calculate the residual values.
Non Maintained Novated Lease: This type of lease has the benefit of the purchase price being discounted. This also has benefits like tax saving including for fuel. The only downside to this is that the running costs and maintenance of the vehicle are not budgeted for and need to be paid out of pocket as and when the need arises. If you would like to learn more about bad credit loans, visit this page.However, this has a number of benefits and based on the type of the lease terms and agreements, all or some of the benefits which could apply are:
Novated lease can also be classified based on:
- Fully Maintained Novated Lease: This is the most popular type as in this, there is just one monthly repayment which needs to be done. This is inclusive of everything from the running costs of the maintenance and insurance as well as the repayment. In fact, all that is included is:
- FBT reports
- Vehicle lease
- 24/7 accident assistance
- 24/7 breakdown assistance
- A dedicated relationship team for the driver
- Expertise of automotive
- Payment structure which is regular
- Potential to save – this can even go up to thousands of dollars
- Purchase price of vehicles which are discounted
- Fuel discounted price
- Cost of Maintenance is discounted
- Availability of sale as well as lease back
- Breakdown as well as accident assistance available around the clock
- Zero GST of purchase price of the vehicle needs to be paid
Thus, novated lease are popular not only in Melbourne but all over Australia. For more information on vehicle financing, visit the Car Finance 4 You website.