Are you planning on buying a new or used car?
Have you ever wondered how novated leasing compares to other types of car finance?
Novated leasing can look daunting at first, but once you get your head around the process and the different benefits, you can see why thousands of people choose a novated lease to finance their car, over a traditional car loan.
Novated leasing could put more dollars in your back pocket as it uses salary packaging, ie. it makes repayments and pays for running costs using your pre-tax salary. To take advantage of this ATO-approved way of reducing your tax, you need to work for a company that offers salary packaging as an employee benefit. All government employees are lucky as they are automatically approved, and private companies can also choose to offer this service as an added employee benefit.
What are the benefits of a novated lease compared to a car loan?
1. The first thing is the running costs are paid from your salary before the tax is taken out. This reduces your gross income which also reduces the tax you pay.
What do we mean by running costs? Well the obvious one is fuel; you are given a fuel card and this cost is automatically covered in your lease repayment. You also have servicing, finance costs, registration, insurance and tyres which are covered.
2. With a novated lease all the expenses are combined into a regular lease repayment (in-line with your salary payments) which makes budgeting easier.
3. You don’t pay GST on the car purchase price or the running costs, so in essence you are saving 10% upfront.
4. Your lease is generally set-up over a 5-year term, so you will pay less interest compared to adding the cost of a car to your mortgage repayments over 20 years, for example.
Sure, it’ll take some time to get your head around the benefits. But do the research. Take the time and you’ll thank us.
There’s plenty of information on our website that explains the ins and outs of novated leasing. And we have a developed a Comparison Table that shows an example of how a Novated Lease compares to a Car Loan, Cash and borrowing against your Mortgage.
Contact our helpful team if you have any questions. We are here to help.