A novated lease allows an employee to use a vehicle for work and private driving and have the repayments deducted from their pre-tax salary.
The vehicle and any running costs are included in your employment contract, which means you get access to corporate discounts and tax savings.
When you enter into a novated lease, the vehicle and any running costs are included in your employment contract. This means that you can use the car for both private and business purposes. Your employer will take care of the monthly repayments, which are deducted from your pre-tax salary. You will be responsible for the running costs of the car, which can be calculated using an app that tracks your kilometres travelled.
The employer leases the car on behalf of an employee, who is then responsible for the payments.
If you and your employer agree to a novated lease, you will need to sign a car lease with the dealer and then your employer will also need to sign a novation agreement. This is the most common type of novated lease.
The vehicle enters into your employment contract, meaning your employer pays for the car using part of your salary as well as running costs such as maintenance, fuel and registration costs.
An employee can choose to trade in their existing car or buy a brand new one, and they can also choose whether it’s petrol, diesel or electric.
It’s up to you to decide what car is right for you, just as it would be if you paid for the car yourself. An employee can choose to trade in their existing car or buy a brand new one, and they can also choose whether it’s petrol, diesel or electric. They can have a manual or automatic gearbox and two-wheel or four-wheel drive. They can even have a hybrid engine if they wish.
The maintenance costs of the car, including registration and insurance, can be included as part of the leasing package.
You can include just about everything in your leasing package. The maintenance costs of the car, including registration and insurance, can be included as part of the leasing package. You can also choose to include fuel in your lease package – which is called a full maintenance novated lease – and a generous fuel card will be provided so you don't need to worry about buying petrol or diesel.
The level of car insurance cover you choose will depend on whether you want comprehensive (covers you for damage to other vehicles and property), third party property damage, or third party property damage plus fire and theft.
Most people choose to have their cars serviced at a dealer but this is not necessary – you can use any licensed mechanic or repairer for routine services.
A novated lease is a three-way agreement between an employer, an employee and a financier.
A novated lease is a three-way agreement between an employer, an employee and a financier. It is usually used to finance the purchase of a car for private use by you, the employee. Your employer agrees to buy the vehicle and include it in your benefits package. The financier provides the loan for the vehicle and gives your employer the option to lease back the vehicle from them (the financier), which effectively removes it from your employer's books.
The advantages of this arrangement are that while you benefit from having use of a car, neither you nor your employer actually has title to it (and therefore doesn't have any residual risk). This can also result in tax benefits which would not be available if you or your employer owned or leased the vehicle in their own right.
A novated lease is a way of buying a car with pre-tax money.
Novated leasing is a way for employees to buy and run a car using pre-tax money. It comes with many benefits, from reducing the tax you pay on your salary to allowing you to claim things like fuel and maintenance as legitimate business expenses. So it's no surprise that more companies are offering their employees the opportunity to enter into a novated lease.
Of course, not every employee will be eligible for novated leasing. The agreement is between an employee, their employer, and a finance company. An employee needs to have signed off on the arrangement with their employer before entering into a novation contract with a finance company which details what exactly is being leased.
Before you get started, it's important to remember that you should always consult your accountant before purchasing anything through your business. This will ensure that you're choosing the most cost-effective option for your situation.
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