Novated Lease

Novated Lease Pros and Cons

Taking out car financing is a long-term commitment. This is why you want to take the time to consider all your options before making a decision. Just like how some sole traders find chattel mortgage vehicle financing most ideal for their needs and car loans work best for the majority of vehicle owners, novated lease may prove to be the most suitable option for certain people. This is especially true for full-time employees who can get salary sacrifice set up through their respective employers. 

There are a number of factors that can affect whether the same arrangement could work for you. Examining these factors is essential to help you make an informed decision. Novated leasing offers the chance for borrowers to get huge tax benefits in certain circumstances. Read on as we review novated lease pros and cons to help you decide.  

Choosing MoneyScout for your Novated leasing needs

One of the most important points to consider when reviewing novated lease pros and cons is how the whole thing works. The financing is established with the agreement between the employer, the borrower and the financing company. It is a type of salary sacrificing which makes it possible for you, the borrower, to get a car from your pre-tax earnings. As a result, you get the benefit of a more affordable income tax. 

It is common for employers to not rely on a single provider for salary packaging. Most would let you look for one on your own. This is a good idea as this would give you the option to compare potential choices to get the best possible deals at the end of the day. This is where MoneyScout is most helpful. As a lender finder, you can expect to take advantage of offers coming from some of the top trusted lenders across the country offering you no less than the most competitive rates.

Competitive options

Among the things you will uncover when determining Novated lease pros and cons by applying with MoneyScout is that the lease options are going to be very competitive. We have taken the time to partner with only the most trusted lenders in the country to ensure that you will only be offered with the best rates possible. The best thing about it is that you don’t need to apply for each of these lenders as we will take care of pairing you with the best financing providers out there. 

Wide choice of providers

When reviewing novated lease pros and cons, you want to make sure that you get access to some of the most trustworthy lenders out there. With MoneyScout, you get to enjoy access to some of the top names in the financing scene in Australia, so you know you are not missing out on anything.

We do the hard work for you

We know how much time it takes to shop around. This is why we make it a point to do the work for you. All you need to do is send us an application and our competent financing experts will see to it that you get paired with the best providers of novated lease around. 

A closer look at novated lease pros and cons

Pros

You get taxed less

Depending on the value of the car, one of the most notable benefits of novated lease is that you’ll pay less in income tax. To illustrate, if your yearly income is $1000 and you decide to pay $1000 for your novated car lease, $12000 will be taken off your yearly income. Taking the current tax rate into account which is at 32.5%, you’re saving quite a substantial amount as a result. 

Fixed running costs

You cannot look at novated lease pros and cons without taking into consideration the costs involved with running a novated lease car. Most novated lease companies will have everything bundled into one single and set monthly payment. You will know exactly how much you need to pay every month. This makes it easier to stick to a budget. 

Access to novated lease vehicles that are GST-free

Three parties are involved in a novated leasing arrangement. All of these different parties will be getting different benefits as a result. However, you also get to share in the benefits that the leasing company gets. This is especially true where GST is concerned. Novated lease companies 

Claim GST back when they buy the cars. This means that what you are charged with is the actual price of the vehicle before GST. This is probably the only setup where you can enjoy non-GST pricing for a car financing that is not business in nature. As a result, this could mean substantial savings for you. 

Get better prices

When a novated lease company will buy the car, they bring to the negotiating table considerable buying power. This is why it is common for providers to purchase vehicles in the thousands every year. As a result, they can get significant discounts on these purchases from manufacturers.

Cheaper servicing costs

Cars under novated lease will require servicing on the regular and this is one area where customers can enjoy even more discounts. Providers of novated lease vehicles have to manage several vehicles every year. Each of these cars has its own servicing schedule to keep them in tiptop shape. Thanks to the volume of servicing required, lease companies also get better rates for servicing compared to what private individuals usually get charged with. 

Pay some of the costs with your net earnings

A good way of tweaking the novated lease agreement to your favor is by using the ECM or Employee Contribution Method. This helps offset the Fringe Benefits Tax or FBT which has been known to reduce savings one can get out of a novated lease. No set guidelines have been established when it comes to how much of the running costs of a novated lease can be paid before tax. This makes it possible to change the deal to make the most out of the ECM tax savings. As a result, any FBT liability will get canceled out.

Cons

FBT or Fringe benefits tax

One cannot discuss novated lease pros and cons without talking about FBT. While it is paid by the employer, most would likely pass on the costs onto the novated lease. So if the employment package is offered as a perk, it is common for the ATO to charge more taxes in the form of the FBT.

The novated lease car isn’t yours

A lot of people will consider this a deal-breaker on why they will prefer not to sign up for a novated lease agreement. To some people, however, this does not alter the convenience and enjoyment they