When it comes to buying a new vehicle, there are so many options on how to do it that it may make your head spin. The novated lease, or salary packaging as some employers put it, is a way you can purchase a vehicle that can end up saving you a fortune in the long run. Now that we have your attention, let’s talk a little bit about what is involved in this type of lease and why you should definitely consider one.
What Is A Novated Lease?
Let’s start by saying that this type of lease is paid with pre-tax income from your salary. A novated lease is when your employer leases a new or used vehicle for their employer, which would be you. These leases can stretch between two and five years.
You enter into the novated lease agreement with your employer and the fleet service dealership. Your employer agrees to pay the monthly finances charges for the vehicle out of your pre-tax income. This takes the payment process out of your hands and lets your employer deal with paying your payment each month. Novated Lease Calculator at https://www.strattonfinance.com.au/novated-lease/online-quote.aspx
How Does The Lease End Work?
Just like any other lease, the novated lease has a termination date. At the end of your lease agreement, you have a few options. You can pay the residual value of the car and take over ownership. You can let the lease expire and return the vehicle. You could opt for an auto insurance loan and buy the car from the leasing company on your own accord.
Why Are Novated Leases More Financially Beneficial?
Novated leases are more financially beneficial because they decrease the after-tax income that you have to report on your annual taxes. Since your vehicle payment is taken out of your pre-tax income, there is less money left over to be reported in your after-tax income than if you were not to have a car payment. For most people, this will knock them down a tax bracket so they get charged less tax annually than they normally would.
Why Are Employers Offering This Type Of Lease?
As you can tell by now, there are many benefits for the employee with this type of vehicle lease. However, you may be wondering why employers would actually offer this type of leasing agreement and what they get out of doing so. That’s a good question. Let’s check out the reason why employers favor this type of agreement.
There are actually a few reasons employers are offering novated leases. This type of lease works to give benefits to employees without the employer having to pay out any additional money. Instead of giving an employee a raise, employers can instead offer salary packaging that benefits the employee at no cost to them self.
Hopefully, you are more knowledgeable about this type of vehicle lease at this point. We highly encourage you to see if your employer offers this type of benefit as it could help you drive a new vehicle you enjoy at a portion of the actual price.