Novated Leasing

A novated car lease is a salary packaging agreement that enables you to pay for a new or used car and its running costs, from your pre-tax salary. It’s a lease agreement between an employee, employer and a leasing provider like us, Fleet Network, car leasing Australia.

This agreement allows government and other employees to finance a car of their choice and all the running costs that come with it, using pre-tax income.

Sounds pretty good right? Take a closer look at the novated lease benefits here.

Yes! One of the many novated lease benefits, is that you can drive the car for 100% private use. The car is personally owned by you.

Take a look at the employee novated leasing benefits.

Take a look at the employer novated leasing benefits.

A novated lease covers not only the cost of your car, but all the associated expenses too. From the lease payments, insurance, registration, and running costs such as fuel, tyres and servicing too.

No more budgeting headaches – yay!

For novated car leasing Australia, there are no longer regulations on a minimum number of kilometres that need to be travelled and you don’t need to drive a great deal to save a great deal of money. Whether you drive 10,000kms, 100,000kms, less or more, a novated lease will help you save.

If you budget for a set number of kilometres and don’t drive then, this just means you’ll have surplus funds in your account and these can be paid back to you via your salary at any time you like – bonus! We can also increase your running cost allocations if you think you might do more kilometres than originally expected.

If you change employment during your novated lease agreement (these usually last 1-5 years), there are 3 things you can do:

• Continue with monthly payments – these will need to be out of your own pocket.
• Re-novate your lease – with your new employer (providing they offer the salary packaging benefit).
• Pay your lease out early – this means you’ll pay the remaining lease and residual value (GST inclusive). This option entails buying the car outright.

Under the impression that you can’t salary package a novated lease because you’re not an Australian government employee? This isn’t the case. Providing you’re given approval from your private employer; you can start looking for your new wheels and then speak to Fleet Network to see how much you can save

When choosing your car through a novated car lease, there are some exclusions to the type of car you can purchase.

Common novated car lease exclusions include:

• Cars in excess of 1 tonne
• Cars older than 12 years at the end of the lease period
• Car seating more than 8 passengers
• Cars without the proper compliance plates
• Motorcycles

Some employers may have their own exclusions, so it’s important to check before making your car choice.

Once your choice is made, we can help you get a quote with our car lease calculator.

Think a novated lease might be right for you?

Great! We think so too, but here’s what you should ask yourself first:

• Which car will I choose? Ensure it suits your needs.
• How long do I plan on keeping the car? Select a novated lease term to match.
• Do I want to stay on track? Check your account balance and kilometres regularly.
• Is a novated lease the right choice for me? Speak to a financial consultant first. It’s a big commitment, so appropriate financial advice is advised.

At the end of the lease, you can:

• Upgrade to a new car – trade your old car in and package a new one. Fleet Network can even handle your trade-in for you (all part of our outstanding service).
• Pay the full amount – paying the remaining amount gives you full ownership of the car. This also means you become responsible for all running costs including insurance, fuel, and maintenance – time to budget again.
• Sell the car – if you decide to sell your car, any remaining payments will still need to be paid.
• Extend your lease – keep your current car and refinance the residual value.

To offset the reduction in your taxable income when salary packaging, the ATO adds another tax (yes, another one) called FBT on the benefits provided.

How is FBT calculated? Calculations are based on the car purchase price.

Want to reduce your FBT? Using the Employee Contribution Method (ECM) employees can partially or fully reduce their car cost with post-tax payments. Contact our friendly team for more information.

Not familiar with the term residual value? Don’t worry, we’re here to explain.

A novated lease contains a residual value (balloon amount) which is paid at the end of the agreement. This is an ATO requirement for all novated leases.

The residual percentages are set in a scale based on the length of the term. In general, the longer the lease, the lesser the residual payment.

The ECM helps you reduce your FBT when salary packaging. How? By contributing to your running costs using post-tax income. That’s right. Every post-tax dollar you spend towards the running costs of your car reduces your FBT by the same amount.

ECM is one of the best tax maximising methods there is. Talk to us to find out more.