Novated Lease Finance:
Your Easy Fix To Getting A Car Loan
Car ownership is mainstream in Australia, with 92% of Australian families having at least one car. According to Australian Bureau of Statistics (ABS) data, more than two-thirds of Australians commute to work in a car, making it the most common mode of transportation for employees.
If you want a new car, you may be thinking about ways to pay for it, like getting a personal loan or taking money out of your mortgage.
However, have you given a novated lease any thought?
Before you answer that, take the time to read our proven-effective manual on novated lease to help you decide with a level head.
Outlined below are the key takeaways you’ll learn from this tip-off:
What Is Novated Lease?
A novated lease is a three-party contract between an employee, employer, and a novated lease provider. The employer assumes responsibility for lease repayments and deducts a proportional amount from the employee’s wage. The car is handled as though it were a business car, even though the employee owns it personally.
Do you want to go with novated leasing? Here is our comprehensive guide to help you decide.
At Askfunding, we’ll help you get your dream car through our novated lease solutions. We provide financing options that cover your car’s costs during your lease while your employer regularly deducts a predetermined sum from your paycheck. Novalease manages and pays for all of your car’s operating expenses using these recurring deductions, including:
- Carbon offset
- Roadside assistance
- Servicing and repairs
How Does A Novated Lease Work?
A novated lease is a contract between you, your employer, and Novalease. You Novalease engage in a financing lease, and part of your lease responsibilities are later transferred to your employer through a separate contract known as a novation agreement. Because of this arrangement, your company will deem the automobile leased.
Moreover, the Goods and Services Tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. A novated lease enables you to save money on income taxes and GST(Goods and Services Tax) by having your automobile recognised as a corporate car.
Your employer withholds a monthly payment from your pay, which is composed of pre- and post-tax payments, to sustain your novated lease. Novalease uses this money to cover the operating expenses of your car.
Check your employer’s salary packaging policy to discover whether you qualify for a novated lease.
How Does A Novated Lease Function Tax-Wise?
One significant advantage of a novated lease is that you do not have to pay GST(Goods and Services Tax). The lender, who purchases the car and subsequently leases it from you, is responsible for paying the GST on the vehicle, but they may transfer this GST to the tax authority.
The other tax possibilities are dependent on the method you choose. When signing a novated lease, you can choose between the Fringe Benefits Tax approach and the Employee Contribution Method.
Fringe Benefits Tax Approach
According to the Australian Taxation Office, you can use the Fringe Benefits Tax approach to avoid paying income tax on that part of your wage since the whole sum of your lease payments will be subtracted from your pre-tax income.
However, since this lease is being provided to you by your employer as a benefit, it is taxable to the Fringe Benefits Tax (FBT) that you are responsible for paying. The Statutory Formula technique is used to determine FBT, and it takes into account the expected distance you’ll travel throughout the “FBT year,”
Additionally, you can minimise your FBT on “days not available,” which applies when your car is not used for transportation. This may result from having your car in for maintenance, leaving it on the business site, or giving it on-the-spot permission to a trusted individual for an entire workday.
The Employee Contribution Method
This method involves both pre-tax and post-tax deductions from your income. There are benefits to this method, mainly if your salary is below $180,000. If you contribute part of your post-tax salary, you can reduce the rate of FBT from 46.5% to your marginal income tax rate, which might be as low as 30%, depending on your income. This can ultimately reduce the cost of salary packaging your vehicle. Moreover, this option is available to both fully-maintained and non-maintained novated leases.
What Are The Different Types Of Novated Lease?
There are several types of novated leases available. Choosing the best type depends on your needs, employer, and many other factors.
1. Novated Operating Lease
With this kind of lease, you may keep using the car as long as you still owe the money for it; after that, nothing more is required of you. Additionally, you can no longer use the car. In addition to regular wear and tear, the car will be examined upon return and should be in excellent shape.
2. Novated Finance Lease.
This lease requires a security deposit equal to the vehicle’s residual value. You are liable for any shortfall between the valuation and the agreed-upon residual value at the termination of the lease period. Remember that you will be responsible for paying for this, not your employer.
3. Fully-Maintained Operating Lease.
When a vehicle is leased on a fully-maintained premise, the total running expenses of the car are rolled into the monthly payment from the salary package.
4. Non-Maintained Operating Lease
Under this lease, you will be liable for the vehicle’s operational expenses, including fuel and maintenance charges. Your employer will deduct only leasing payments from your pre-tax income.
5. Budgeted Finance Leae
It’s a choice that some lenders provide, allowing you to budget for maintenance costs and establish spending limitations.
What Are The Benefits Of Getting A Novated Lease?
NALSPA (National Automotive Leasing and Salary Packaging Association) members currently administer over 180,000 novated leases for Australian employees, equating to a total asset value of around $6.7B, driving significant economic value through the Australian economy.
Given the popularity, novated leases can work out astonishingly well for full-time workers who have recourse to a salary sacrifice opportunity through their company and sole entrepreneurs. However, it would be best to consider your choices before committing to auto financing since it is often a long-term commitment.
To help you get started, here are the benefits of choosing a novated lease as your car financing option.
FOR THE EMPLOYEE
Costs And Tax Advantages.
You may pay part of the leasing charges out of your pre-tax income. You may also be able to take advantage of business fleet discount programs, which may lower the total cost of a car. Also, no GST on the purchase price of your vehicle means that you’re saving 10% on the price of your car.
Simple Loan Management
Since your wage covers the monthly repayments and the expenses of car ownership, you won’t be worried about keeping track of or managing your loan.
You Can Choose Whatever Car You Like
With a novated lease, you can lease various cars, including both new and used vehicles.
After-Lease Sale Advantages
Any profits made from the sale of your car, if you choose to do so after the lease term is up, will not be subject to taxes.
You can use the car whatever you choose, whether it’s for work or fun; there are no restrictions on how you may use it.
FOR THE EMPLOYER
A Means Of Giving Incentives
A novated lease is a cost-effective approach for your company to reward staff.
If your employee resigns before the term ends, you won’t be liable for the car.
Nothing To Do With The Business
Novated leases are neither an asset nor a liability for your business.
Setting Up A Corporate Fleet Is Not Necessary
Novated leases provide your staff access to affordable car leasing without placing the responsibility of fleet management on your company.
Are You Eligible For A Novated Car Lease?
Nonetheless, before you apply, you must first meet the following eligibility prerequisites:
you must be of legal age
you must be an Australian resident employed either full-time or part-time
your employer must have been in business for at least 24 months. and lastly,
Your employer must consent to the conditions for salary packaging.
In applying for a novated lease, it’s worth noting that you don’t have to earn a considerable salary or use a car for business. When you partner with us, your committed consultant will do a personalized benefit evaluation based on your unique circumstances and tailor your lease to your needs.
How To Apply For A Novated Lease?
Applying for a novated lease isn’t complicated, and with our help at Askfunding, you can agree to a contract that works for everyone and brings you a step closer to driving a new car.
Follow the fail-proof steps our successful clients use to surefire your novated lease loan application.
Step 1: Consult Your Employer
Without question, you need to talk to your boss before making a hasty decision about choosing the car you wish to drive.
Step 2: Shop For A Car
This is the exciting part. Look around for the car you love and examine the specifications, models, and pricing, then get a written quote from the seller or dealer for the best price. Additionally, our in-house car broker can help you negotiate a reasonable price for a car.
Step 3: Request For A Novated Lease Quotation
After securing a car price quote, the next step is to request a novated car lease quote from your trusted lender. Our professional novated car lease providers at Askfunding are big believers in total transparency. Thus, we provide novated car lease quotations that feature the best bargain and a summary of all the expenses and terms related to your novated lease.
Step 4: Get Things Started
If you’re satisfied with the quotation, all you have to do is accept it. We’ll handle all the documentation and administration between us, the car dealer or seller, and your employer. We make every effort to minimize your involvement and make the procedure as stress-free as possible.
Step 5: Drive Your Car
You will be able to pick up your car and start driving it immediately as soon as all the arrangements are settled, along with loan and procurement documentation, and the dealer or seller confirms that it is in stock.
In just five simple steps, you may arrange a novated lease and be behind the wheel of your new vehicle. When you work with the right novated lease provider, the wait between selecting a new car and receiving the keys should be as short as possible.
Frequently Asked Questions
Can I choose the type of car I can finance with a novated lease?
There are no limits on the type of car that you may finance. You could even be allowed to use a vehicle you currently pay off in certain circumstances. Also, we provide financing for both new and used cars.
What happens if I lose my job?
You may be entitled to carry your novated lease to your new workplace if your employment is discontinued. Additionally, you may be able to keep paying your lender directly, or you might be able to end the lease agreement early and pay the remaining balance.
How long is a novated lease application gets approved?
Generally speaking, depending on your chosen lender, it will take a week or a month. This is where Askfunding makes a difference. We are the industry leaders in providing fast and efficient services dedicated to our client’s satisfaction. Upon receiving your application, we only need at least 24 hours to get your novated lease approved.
Is a novated lease a good idea?
Depending on your job and financial circumstances, a novated lease could help you lower your taxable income and, subsequently, your tax obligation. A novated lease is worth it if you need the funds you save on taxes. However, as this will depend on whatever tax rate you fall under and how often you use the car, you need also talk to an accountant to find out your potential gains.
Can a secondhand car be leased under a novated lease?
Typically, yes. However, some suppliers could limit their novated leasing offerings to brand-new vehicles or stipulate that the used car must be under a specific age.
Is a novated lease right for you?
If your employer is willing to let you salary package your lease, novated leasing is a great choice to consider. Novated lease is best for employees seeking convenience and time savings.
Why Lease A Car With Askfunding?
We’ll Carry Out The Arduous Work
We can work together to find your new car by using our extensive nationwide network of approved dealers, arrange for delivery to your house or place of employment, handle all the paperwork, and even set up the financing and insurance, so you can enjoy driving it off!
You May Save Money On A New Car
A portion of your payments under a novated lease come from your pre-tax income. In other words, availing of a novated lease can boost your net take-home pay and reduce your taxable income.
We’ll create a thorough leasing plan that combines your monthly loan payments and operating expenses, such as gasoline, registration, insurance, and maintenance, into a single, convenient payment.
Getting A Car Has Never Been Easier With Askfunding!
Imagine having all the information you need about a car leasing in one place with Askfunding at your fingertips. You can easily see which cars have been pre-approved for novated leasing, which dealers have finance agreements that can save you thousands of dollars on each car, and more!
While our team of professional staff does all the paperwork, Askfunding saves you time by providing detailed information such as credit history and trade-in values. We also help you avoid common financial scams!
Askfunding puts our expertise to work to provide efficient car leasing solutions. Our broad car leasing choices include range rovers, big SUVs, hatchbacks, and more.
Find your dream car or vehicle today with Askfunding – It’s that simple!
Contact us to get approved for a no-cost loan with Askfunding and get your vehicle delivered to you at your destination.