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In the vast landscape of car financing, a Novated Lease stands out as a unique and highly advantageous option, particularly beneficial for both employees and employers. Braid Finance, as a leader in innovative car financing solutions, delves deep into the world of Novated Leases, elucidating their workings, advantages, and how to select the ideal option for your needs.
Understanding Novated Leases
Roles in a Novated Lease Agreement
- Employer: Commits to deducting a specified amount from the employee’s salary for the lease.
- Employee: Agrees to salary deductions in exchange for the vehicle’s use, which can be for both personal and business purposes.
- Lease Providers: Manage vehicle procurement, lease initiation, and administrative tasks.
Types of Novated Leases
- Fully Maintained Novated Lease: Covers all vehicle costs, including maintenance and running costs.
- Non-Maintained Novated Lease: Only the lease payments are deducted from pre-tax salary; other expenses are borne by the employee.
- Novated Operating Lease: Offers use of the vehicle with no obligations at the lease's end.
Advantages of a Novated Lease
- Tax Efficiency: Payments made through pre-tax salary can reduce taxable income.
- No GST: On the car or running expenses, plus employers can reclaim GST as a tax credit.
- Cost-Friendly Vehicle Access: A more affordable way to access a vehicle with maintenance-covered options.
- Personal Use Freedom: 100% personal use without restrictions.
- Transferability: Easy transfer of the lease when changing employers.
- Accessorizing: Option to add accessories such as floor mats, window tints, and more.
Comparing Novated Lease and Other Financing Options
- Versus Car Loan: Both options offer full ownership, but differ in financing details and responsibility for running costs.
- New and Used Cars: Leases can cover both new and used cars, with GST savings on used cars bought from dealers.
End of Lease Options
At the end of your lease, choose to pay any residual amount and own the vehicle, sell the car, refinance, or return it to the leasing company.
Qualifying for a Novated Lease
To be eligible in Australia, you need to be employed full-time or permanently part-time, have employer support for leasing, meet the repayment criteria, be over 21 years old, and choose a passenger vehicle with a payload not exceeding 1,000 kg.
A Novated Lease with Braid Finance offers a flexible, tax-effective way to finance your car. Understanding its nuances can empower you to make an informed decision that aligns with your financial and personal needs. Ready to explore this option? Apply now with Braid Finance.
A Novated Lease is a car finance arrangement involving three parties: the employee, the employer, and the finance company. It allows employees to lease a vehicle using their pre-tax salary, potentially offering tax benefits and the flexibility of including vehicle running costs in the package.
The primary benefits include tax savings (since payments are made from pre-tax salary), no GST on the purchase price of the vehicle, and the convenience of having all vehicle costs bundled into one payment. It can also offer budget-friendly vehicle access and the flexibility to change cars at the end of the lease.
Yes, one of the significant advantages of a Novated Lease is that you can use the vehicle for both personal and business purposes without any restrictions.
If you change jobs, the Novated Lease can be transferred to your new employer, provided they agree to take on the lease under the same terms. Alternatively, you can continue the lease payments directly.
In a Novated Lease, the employer deducts lease payments from the employee’s pre-tax salary. These deductions are used to lease a car of the employee’s choice. The lease includes an agreement that the employer will make lease payments on behalf of the employee to the finance company.
- Fully Maintained Novated Lease: Covers all costs including the vehicle’s purchase price and running costs like maintenance, fuel, and insurance.
- Non-Maintained Novated Lease: Only the lease payments are covered, and the employee handles the running costs separately.
- Novated Operating Lease: Similar to renting, it allows using the vehicle for the lease period with no commitment to purchase at the end.
At the end of a Novated Lease, you typically have several options:
- Pay the residual amount (balloon payment) and take ownership of the vehicle.
- Trade in or sell the vehicle.
- Refinance the residual and continue to lease.
- Return the vehicle if it’s a Novated Operating Lease.
Eligibility typically includes being employed full-time or permanent part-time, having employer support for such a leasing arrangement, being able to meet the lease repayments, and being over 21 years old. The vehicle should typically be a passenger vehicle with a payload not exceeding 1,000 kg.