What is a Novated Lease?

A lot of Australian companies these days offer some form of novated car lease or financial package to their full time employees who seek out alternative salary sacrifice deals.

What is novated leasing and how does it work?

A novated lease explained simply is a process providing advantages to both employers and employees whereby a mutual financier is bought in to supply a vehicle through the employer and the employee pays for the vehicle out of a percentage of their regular wages.

A novated lease works among three parties- the vehicle financier, the employee and the employer as a way of financing cars and repayments through an agreed wage percentage.

Novated leasing is a very cost effective way to purchase cars, as when an employer agrees to pay for the finance of the vehicle from your wage while you’re employed with their company, the repayments are deducted from your wage ‘pre-tax’ which ultimately reduces your taxable income so you end up with a more cost efficient system. This system is commonly called salary sacrificing and is growing in popularity throughout Australia.

Through this novated lease agreement, the employee is able to lease a vehicle of choice from a reputable vehicle financier, who arranges the agreement with the employer. It then becomes the employer’s responsibility to make sure that the novated car lease charges are remunerated to the vehicle financier. In this arrangement, the employee can use the car for both business and personal use. The running costs of the car will also come out of the gross salary of the employee. Thus, a novated car lease provides benefits to both parties.

What is a novated lease and how suitable is it for you?

If part or all of your salary is situated in a higher tax bracket, then novated leases are definitely suitable for you. Or if your job entails you being on the road a lot, then you should do your best to acquire a novated car lease, since the more you drive, the lower your pre-tax income will be, and thus the less tax you pay.

There are many people out there who are unaware of the salary sacrifice, or ask what is a novated lease agreement, what it consists of and if they’re eligible. As soon as they learn of the benefits of novated leasing they quickly become excited and interested. If you too want to know more about novated car leasing, contact one of our dedicated lease providers and begin to claim its advantages.

If you would like to know more visit our About Automotive Lease Packaging page.

We serve a large variety of locations in Australian including the following major cities:

• Adelaide
• Brisbane
• Canberra
• Darwin
• Hobart
• Melbourne
• Perth
• Sydney

With many different car models available for lease including; Commodore, Falcon, Camry, Mazda 3, Corolla you will be sure to find something to meet your everyday needs.