Thursday, May 23, 2013

What is a Novated Lease?

By Guest Writer Phillip Owen  

Interested in starting a Novated Lease but are unsure what it actually entails?
To put it simply, a Novated Lease is a three-way agreement between the employer, employee and a salary packaging company (e.g., Boost Salary Packaging). This three-way agreement enables the employee to finance a vehicle and package it through their employer. The employer will make payments for the lease on behalf of the employee and will deduct the appropriate payments from the employee’s pre-tax salary. There are two options available when deciding to lease your vehicle, a fully-maintained Novated Lease or a non-maintained Novated Lease (finance only).
What is a fully maintained Novated Lease?
A fully maintained Novated Lease is an agreement where all of the operating costs associated with your motor vehicle are included in your salary package and is looked after by your chosen lease provider.  Operating costs that can be included in a fully maintained Novated Lease include items such as; finance, fuel and oil, services and maintenance, registration, tyres and insurance. By choosing the fully-maintained option an employee is eligible for the following:
  • 100% finance with a flexible choice of the term (1-5 years)
  • A fixed residual set by a lease provider (e.g., Boost Salary Packaging) and calculated using ATO depreciation guidelines
  • The option of which items to package. It is not compulsory to include all of the operating costs.
  • Flexible payment options.
What is a non- maintained Novated Lease?
A non-maintained Novated Lease is an agreement where the employee is responsible for all of the maintenance and other running costs of their motor vehicle. This type of Novated Lease can also be identified as a finance only Novated Lease. 
In regards to a non-maintained Novated Lease, the employee has full use of the vehicle for their chosen term in return for monthly repayments. At the end of their lease term the employee will be eligible for full ownership once payment of the residual value has been made. It is important to understand that although you are not including all of the running costs associated with a motor vehicle, this type of Novated Lease is still a tax effective way to lease a vehicle. Further benefits include; flexibility of the choice of vehicle, the option of 100% private use, access to fleet discounts with all new cars and substantial GST savings.
Regardless of which option the employee chooses, a fully maintained or non-maintained Novated Lease, a large variety of cars are available to be lease. Ultimately it is the employee’s decision on what car they feel is best suited to them. This could range from a fuel-efficient family car, such as a Hyundai i40, to a high-powered sports car, such as a BMW M3 Coupe.
It is possible to obtain a tailored Novated Lease options to suit your  specific needs.  The company you choose may be responsible for your Novated lease will usually take care of payment for all of the related operating services and running costs for the vehicle.  It is that you maximise on all of the financial benefits from the competitive prices in all these areas. In addition, a reputable Novated Lease service ensures that you receive regular reports that keep them fully informed of your actual expenditure against your budget. This can prove extremely valuable when arranging your finances to work smarter for you. People enjoy the freedom of a lease as it’s an easy way to always ensure that you have a vehicle that is reliable and trustworthy whilst being tax effective.

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Phillip is a senior manager at Boost Salary Packaging Pty Ltd and prides himself on his knowledge and expertise, offering employees a cost effective and pro-active solution to meet their vehicle and salary packaging requirements. With over 25 years of experience within the vehicle fleet leasing and financing services industry within Australia and UK, as well as an Executive MBA, Phil takes a strong interest in ensuring that employee’s needs are met through the effective financing and salary packaging solution tailored to meet their needs now and into the future.

2 comments:

  1. So, it’s definitely worth speaking with a reputable car leasing Broker if you’re looking for a competitive leasing quote and you value good Customer Service.

    ReplyDelete
  2. Good explanation with example about fully maintained Novated lease and Non-maintained Novated lease.

    ReplyDelete

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