What Are the Benefits of Novated Leasing?

Novated leasing is becoming an increasingly convenient, cost-effective and common way to run a vehicle. For many people, owning a car isn’t always the best or most affordable option. A car is a depreciating asset and will soon start to lose its value. So, a useful alternative is novated leasing which comes with a variety of practical benefits.

Here are a few of the benefits of novated leasing:

1 – This type of leasing system is designed to let the employer take payments for the car and upkeep from the employee’s pre-taxable salary. This is useful for cutting the taxable salary and also to lower the income tax that will be due throughout the year.

Also, the lease can include added expenses on top of the main lease repayment, such as running costs like servicing, registration and fuel. So it is possible to rely on the pre-tax salary to pay for these day-to-day costs and perhaps help lower the taxable income further. In the event that any funds set aside for running costs aren’t used up, there is the option to have this money returned to the employee.

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2 – For many employers, the option to offer novated leasing can provide a cost-effective and simple method to add significant value to an employment package. This is certain to make a company more appealing when it comes to staff retention or recruitment.

3 – It is a practical alternative to a company running a fleet of their own vehicles. In the event the employee leaves the company, the lease and future payments or obligations will leave with them. This helps to remove a lot of the burden a company has to manage and maintain a large number of vehicles.

So, this helps to remove a lot of the risk placed on the company. The lease agreement instantly transfers to a two-party arrangement between the past employee and the finance company.

Disadvantages

Beyond the wide-ranging benefits of novated leasing, there are also a few disadvantages of this particular type of car financing. For instance, the tax benefits can vary with the different individuals. It is typically more favorable for the employees on the higher tax bands. There are lease companies that will which say which dealership can be used for purchasing the car. This can limit the general choice of vehicle and also the ability to negotiate the price. Also, the lease agreements contain a variety of clauses that should be read and fully understood before taking things further.

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