Novated Leasing FAQ

Novated leasing makes owning a car easier and more cost effective but what does the process entail and how can it benefit you? The following are the most frequently asked questions about novated lease.

1. What is novated leasing?

Novated leasing is a special type of leasing that allows employees to forgo part of their pre-tax income to finance the vehicle. This process requires a three way agreement between the employer, employee, and leasing company. The employer is responsible for making the lease repayments while the employee agrees to commit a portion of their salary to cover the vehicle payments and running costs. This is also known as salary sacrificing.

2. Is the car strictly for business use only?

A common misconception about novated leasing is that the vehicle needs to be strictly used for business purposes only but this is not true. The vehicle can also be used for private use and employees can even choose any motor vehicle as long as it is not a commercial vehicle. Employees can even finance used cars although certain conditions apply.

3. How do employees benefit with novated leasing?

One of the most significant benefits for employees that choose to novate their vehicles is the significant income tax savings on GST that would normally be incurred on vehicles. Once the process is finalised, a card is provided to pay for fuel and maintenance, which means there are no inconvenient lump sum payments should any large repairs be required. Employees can also save on insurance and other costs with a novated lease.

4. How do employers benefit with novated leasing?

Employers also benefit by assisting their employers with financing a vehicle through novated leasing. One example is that it helps employers better manage company vehicles with minimal cost to the business. It also helps employers provide a cost effective transportation solution for employees.

5. What does novated leasing cover?

During the application process, a budget is put in place which covers lease payments, insurance plan, and registration fees. A card is then provided to pay for running costs such as fuel and regular vehicle maintenance. This option allows employees to stay on top of all costs related to their vehicle.

6. Do I need to drive a certain number of kilometres to save money?

Another common misconception is the notion that employees need to drive a lot of kilometers each year or drive an expensive vehicle but this is also not true. The amount you save depends on various variables including the number of kilometres driven, purchase price of the vehicle, and your gross salary. Whether you drive less than 10,000 kilometres or much more, novated leasing can still save you a significant amount of money on your next vehicle.

7. What happens if I change my job?

A novated lease agreement typically lasts between one to five years depending on the terms and conditions. The vehicle payment and fuel cards are linked to the employer which means the leasing company and the employer will need to be notified immediately if you change jobs. You have three different options:

  • Continue with the monthly payments: With this option, you will be expected to pay all of the monthly payments in addition to the maintenance cost for your vehicle out of your own pocket.
  • Re-novate your lease: You also have the option to re-novate your lease with your employer. This option is beneficial for those who want to continue enjoying the benefits of a novated lease.
  • Pay out the lease early: When you enter into a lease, you agree to lease the vehicle for a period of time. Breaking the lease means that you will need to pay the remaining lease and residual value (GST inclusive). This option entails buying the vehicle right.

8. What is Fringe Benefits Tax (FBT?)

Employees that decide to salary package a vehicle do so using pre-tax dollars which reduce their taxable income. To offset this reduction, the Australian Tax Office (ATO) adds another tax called FBT on the benefits provided. This amount is calculated based on the purchase price of the vehicle and the annual kilometres. Employees are able to take advantage of the Employee Contribution Method (ECM) to partly or completely a vehicle’s costs with post-tax amounts. This helps to effectively reduce the FBT amount.

9. What happens at the end of a lease?

A novated lease must have a Residual Value to avoid any liability for FBT. This is the remaining amount at the end of the lease which must be made by the employee. The percentages are set in a scale depending on the length of the term. In general, the longer the lease the lesser the residual payment. At the end of the lease, you can:

  • Pay the full amount: Paying the remaining amount gives you full ownership of the vehicle. This also means that you become responsible for all running costs including insurance, fuel, and maintenance.
  • Sell the car: Any remaining difference will need to be paid off if you decide to sell your vehicle.
  • Refinance: Another option is to refinance the vehicle and take on a new novated lease.

10. What else do I need to consider?

Novated leasing is a cost effective way to finance a vehicle by taking out funds directly from your salary. Be sure to keep the following in mind when deciding to go with this option:

  • Choose a vehicle that fits your needs
  • Select an appropriate lease term that reflects how long you plan to keep the car
  • Check your account balance and FBT kilometer amount regularly
  • Speak to a financial consultant

Novated leasing is a significant financial commitment that requires an understanding of the risks involved before entering into an agreement. You are strongly encouraged to seek financial advice to assess whether a novated lease is right for your situation.

At Fleet Network, our financial experts work with you every step of the way to help you finance your own vehicle and achieve maximum financial benefits through tax savings. We offer comprehensive novated car leasing, available to employees across Australia.

Contact us today for more details about our services.

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“I’d like to thank you and the Fleet Network team for the professional and friendly assistance I received throughout the process and renewing my car. The whole team ensured I knew everything that was happening and a special thanks to the lady who I signed the final paper work with on the hand over day, she was so nice. I have since mentioned you guys and the service you provide to a few of my friends and hope that if they choose to go down this path then they will certainly be looked after. Once again thank you all so much, I will see you all again at the end of my lease for a new one, apparently my son will have his licence by then and has already claimed my car.”

Shirley , WA Education

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Garry , Department of Indigenous Affairs, Western Australia

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“I first started dealing with Fleet Network in 2002 when I got in touch and spoke to Matt. I was a bit wary as I had never financed a car this way before but Matt talked me through everything and put me at ease. I told him the things I was looking for in a car and before I knew it he had arrived with a Toyota Corolla for me to test drive. I tested it, he went through the costs, which were almost negligible, and the car has been going beautifully ever since. It’s been passed through the family but Matt was right, it was exactly what I was looking for and has been a great car. Since then I have bought 3 more cars through Fleet Network. I can’t recommend them highly enough – they are really good people, so friendly and they always follow through on their promises. Everyone I know who has dealt with them has commented that Fleet Network really do care.”

Antonio , Department of Education, Western Australia

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Phil , Corrective Services

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“Everything great with my new car. Customer service was excellent was a pleasure doing business with your company.”  

Theresa , NT Dept of Health

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“Thanks Jodie, I would just like to say that you have been fantastic with your help through this whole car process and I really appreciate everything that you have done.”

Donna , WA DOCS

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Colleen , WA Health, Western Australia

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“We have a big family and when we first started dealing with Greg from Fleet Network earlier this year he pushed and pushed to get us into a car big enough for us all and one that would work within our budget. He just wouldn’t give up! We now drive a Hyundai iMax, which is perfect for us. We rang him up so many times with questions but nothing was ever a hassle for him. When Greg went on holiday and Jodie took over it was exactly the same – they were phenomenal. They really did go above and beyond what they had to do in order to help us. Would we recommend Fleet Network? We already do recommend them, to everyone. They have been just so friendly and helpful and worked so hard for us. We can’t thank them enough.”

Troy and Karen , State Government Employee, New South Wales

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“Everything is going well with my vehicle, I love it. I am more than happy with the assistance that I received during the process and would happily recommend Fleet Network to others.”

Jo-Anne , QLD Dept of Communities

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“Your customer service during the leasing process was outstanding, as it was last time. We would not hesitate to lease through Fleet Network again when our lease is up.”

Jason , WA Education

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“Everything is going very well. The whole process was excellent and I am very happy. Thank you.”

Mark , Army

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De , WA Dept of Human Services

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“Everything is fantastic with my car and the service I have received was great, can’t thank you enough. Thanks Carole, I do appreciate your follow up. Well, so far everything is ok, if I have any queries I will definitely contact you. The customer service was quite good, I was impressed by consistent and up to date communication throughout the process.”

Memory , NT Dept Children and Families

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“I would like to say a big thank you to Sasha who provided me a very valuable service, she has been very patient, friendly and always providing me up dates on my current vehicle on order. I currently work for defence and as you probably do not know our movements can be stressful at times and have requested to have my vehicle delivered to me before the delivery date of December 12. Even though Sasha has been informed by Holden that the said due date will still occur on December 12, she is trying really hard to have this vehicle delivered to me at the earliest opportunity due to my transfer taking place on December 16. Once again thank you and I am looking forward to doing business with you during the course of my lease through Fleet Network and I will highly recommend your company to Defence and to family members.”

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