Novated Car Lease
A Novated lease is a type of financial agreement between three people, which are the employee, his employer and the company who is offering the finance. These agreements are ideal for any employee who is interested in making this type of agreement a part of his salary package.
The payments for the lease are paid by the employer from the employee’s pre tax salary amount. This kind of arrangement works out cost effective for the employer while offering an attractive salary package and helps the employee get a vehicle for a low cost since the payment is basically taken from the pre tax amount. Tax benefits can be expected from such financial agreements.
The main benefits of Novated agreements are that, the employee can enjoy the various tax benefits of leasing a vehicle without having an ABN, the employee can choose the vehicle he wants to use, the equity in the vehicle always remains with the employee and there is less paper work for the employer since leased vehicles are not on the company’s balance sheet.
Novated agreements can also ensure that the employer does not have to hire a fleet manager to take care of purchased or leased out vehicles. This in turn can help the employer save resourced and man power on managing purchased or hired vehicles. Employers can also benefit from this agreement due to a lack of residual risk for the employer.
If in case the employee who has taken a Novated agreement with an existing employer, decides to leave the existing employer then the lease will be reverted to the employee. This means that, if your employer has helped you get a lease and you decide to leave him then you will be responsible to pay the rental fees and any other charges that are due to the lender.
In some cases, lease agreements are transferable from the old employer to the new employer, there may be extra paperwork involved to do this. Employees can also enjoy all the regular benefits offered with car lease agreements. They can choose to insure the car and also opt for a range of value added services such as road side assistance in case of emergencies and break downs in the middle of the road.
Brokers that offer Novated agreements, usually offer calculators on their website. These calculators help buyers to understand how much they can save by opting for a Novated agreement. Brokers offer various types of Novated agreements such as fully maintained lease, non maintained lease, operating lease, fully maintained operating lease and non maintained operating lease.
The main difference fully maintained lease and non maintained lease is that in a fully maintained lease, the operating costs of the vehicle are taken care by the employer where as in a non maintained lease the employee has to pay for these expenses from his pocket. Lease, rental, fuel, oil, tyres, insurance, road side assistance and registration are some of the expenses that are managed by the employer under the fully maintained lease. The employer pays for these expenses from the pre-tax income of the employee.