Finance your novated lease

Understanding Novated Leasing and Its Functionality

A novated lease is a financing arrangement allowing you to use pre-tax earnings for vehicle repayments. Your employer's consent is required for participation in this scheme.

Although the vehicle and financing agreement are under your name, your employer commits to handling the repayments directly to the lender as part of your salary package. This setup might involve Fringe Benefits Tax (FBT) implications if the car is partially used for personal purposes.

Novated leases can cover only the lease payments or extend to include some or all vehicle-related expenses, such as registration, insurance, servicing, tyres, and fuel, under a salary packaging arrangement.

This type of lease serves as a secured financing option, applicable to both new and pre-owned vehicles, whether acquired from a dealership or a private seller.

Advantages of Novated Leasing for Employers

Employers in Australia can benefit from offering novated leasing in multiple ways:

• Enhance Employee Attraction and Retention:

Incorporating a novated lease into salary packages can serve as an appealing benefit, helping businesses attract and retain top talent.

• Cost Savings:

Employers are not responsible for vehicle expenses. Since lease payments come from employees' pre-tax salaries, payroll costs may be reduced.

• Simplified Vehicle Management:

Companies avoid the burden of fleet administration, as employees and leasing providers handle vehicle management.

• Customizable Arrangements:

Leases can be structured to suit both employer and employee needs, offering flexibility in terms of vehicle selection and lease duration.

• Tax Efficiency:

Employers may experience reduced payroll tax liabilities and minimized FBT obligations due to the pre-tax deduction structure.

• Improved Employee Satisfaction:

Employees appreciate the ability to choose their own vehicle while enjoying potential tax advantages.

• Reduced Administrative Workload:

The leasing provider typically manages all aspects of the lease, including vehicle procurement, financing, and upkeep, alleviating administrative strain on employers.