Salary packaging a car is a widely used practice which can be extremely cost and tax effective for many individuals. But as with all motor vehicle financing arrangements, optimising the benefits of Novated Lease can depend on securing the right deal. Our expert brokers work with employees and employers to source the best interest rates from across our vast lender base, and structure Novated Lease deals to specifically target individual requirements and objectives.
Novated Lease deals can be more complex than other types of personal and commercial loans. Our brokers are specialists in this form of commercial vehicle financing. We handle the entire process for customers to maximise vehicle lease benefits, optimise tax advantages and deliver a cost-effective, workable solution for employers and employees.
To discuss if salary packaging a car is a workable option for you, have a no-obligation conversation with one of our Novated Leasing experts.
Before entering into a salary sacrificing arrangement, it can be advisable for both employee and employer to have Novated Leasing explained to them by one of our Jade specialists.
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This type of vehicle financing is a commercial credit facility where an employer leases a vehicle for an employee and the employee sacrifices part of their salary to cover all the expenses associated with the purchase and maintenance of the vehicle.
The Lease is ‘Novated’ or transferred from employee to employer. At the end of the leasing term, the ownership of the vehicle is transferred from the employer to the employee.
The financing arrangement involves the employer, employee and the lender. All details of salary sacrificing a car lease must meet Australian Tax Office guidelines.
The employee sacrifices pre-tax salary and may benefit from paying less income tax while working towards car ownership.
Employees also have the opportunity to purchase a car with financing at commercial rather than the higher personal car loan interest rates.
The employer realises all the relevant tax benefits of vehicle leasing and may use the Novated Lease deal as a staff reward or incentive.
The involvement of the employee in a Novated Lease agreements differentiates this form of commercial finance from traditional operating leases. But many of the same features apply to Novated and other leases.
For a quote on a Novated Lease with salary sacrificing, contact us by phone or online.
While Novated Leases can be more complicated than other types of vehicle financing, we ensure the process is streamlined, with easy-to-follow steps for employee and employer. Our brokers handle all negotiations with our lenders to secure the cheapest rates and the term that delivers the most workable monthly payments. Request a quote by phone or online.
Basic steps to acquire Novated Lease deals:
Novated Lease agreements with salary sacrificing are extremely popular due to the vehicle lease benefits which may be realised. For employees, the opportunity to purchase a motor vehicle with financing at commercial rather than personal interest rates can represent significant savings over the loan term. Employees can find salary sacrificing an effective way to better manage their spending and budgets with all aspects of the vehicle upkeep and maintenance handled on their behalf. Plus, there is the potential to move into a lower personal tax bracket through salary sacrificing.
Where an individual has a poor personal credit history and an affordable car loan is difficult to obtain, salary sacrificing may provide affordable access to car ownership. Overall, salary sacrificing a car can be extremely advantageous for many employees.
For employers, the advantages can be both tangible and intangible. Businesses can realise the direct vehicle lease benefits with tax deductible leasing payments and vehicle expenses. With the employee sacrificing salary to cover all these costs, the employer is not out of pocket with Novated Lease agreements.
Intangible benefits can include offering this opportunity as an incentive or reward for key employees. Entering into a Novated Lease agreement may contribute to building greater employee loyalty and retaining staff. With the staff member entering an up to 7 year lease term on the vehicle of their choice, they may be more inclined to stay with the business for that period of time.
Using our specialist services, with our access to more than 80 lenders, can deliver advantages in lower interest rate leasing and individually structured vehicle financing. To maximise your advantages from a Novated Lease agreement, speak with Jade.
While the benefits of Novated Leasing can be significant for both parties, there are important factors to consider when opting for salary packaging a car. For an employee, that may include analysing the costs and benefits of salary packaging compared with a Secured Personal Car Loan. We handle all types of car finance and can provide quotes on both options for consideration.
From the employee perspective, the employer may put a limit on the price of a vehicle to meet their cash flow. This may limit the choice of vehicle that can be purchased.
Employees will need to cover all expenses and should allow for potentially higher business vehicle registration and insurance compared with private rates. Fringe Benefits Tax may also apply and that cost will need to be accounted for. A personal car loan may enable the employee to build their personal credit profile while salary packaging does not offer this opportunity.
Both parties need to consider the credit profile of the employer business as they are taking on the lease. If the business has credit issues the lease may not attract the best, lowest leasing rates available.
Salary packaging may entail more paperwork for employers, and they may not be keen to add this workload for the accounts department. While a vehicle under lease is not listed on the business balance sheet, the employer business may have other reasons not to take on finance at this time.
Finalising the residual at the end of the term should be considered at the outset. This amount cannot be paid out via salary sacrificing. Refinancing is an option, otherwise employees may need to fund the residual through savings.
Employees should also plan ahead to the end of the leasing term. In order for a smooth transition of ownership, employees will need to remain with the business until the end of the lease term which may be up to 7 years. They will want to ensure they do have employment stability and salary stability over that period before entering into an agreement.
When choosing the right Novated Lease deal, employees may want to give serious consideration to the term they would like our brokers to negotiate. If they only intend to stay with the business for say a further 4-5 years, requesting that term is an option. But a shorter term will mean higher monthly repayments, higher salary sacrificing and a greater residual.
Your Jade broker will be assisting all parties in choosing the right Novated Lease deals, securing the best rates and negotiating the term that meets individual objectives. Discuss your objectives with us and find out your options.
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THE COMPARISON RATE IS CALCULATED ON A SECURED LOAN OF $30,000 FIXED FOR A TERM OF 5 YEARS, NEW GOODS, EFFECTIVE 20/12/2024 AND SUBJECT TO CHANGE. WARNING: THE COMPARISON RATE IS TRUE ONLY FOR THE EXAMPLES GIVEN AND MAY NOT INCLUDE ALL FEES AND CHARGES. DIFFERENT TERMS, FEES OR OTHER LOAN AMOUNTS MAY RESULT IN A DIFFERENT COMPARISON RATE.
Essentially the employee selects the car with Novated Lease, subject to meeting the guidelines set by the ATO. The employer may set limits on the price based on their individual preference for leasing payments.
Employees will need to cover all the costs relating to the vehicle under lease. This includes the monthly payment, maintenance, rego, insurance and potentially any FBT which may apply.
Novated leases are priced at commercial not personal rates. Employees may save on income tax and it may be an effective way to better manage their budgeting.
The employer’s not the employee’s credit profile is assessed with Leasing applications.
Interest rates on leasing are individually offered based on the application assessment by the lender. Rates can vary across the lending market.
Where an employee resigns from their job while a salary packaging agreement is in place, they will need to negotiate with the employer to finalise the Novated Lease to take ownership of the car.
Considerations around the preferred term for a Novated Lease may include how long the employee intends to stay in the job and the repayments and residual associated with different lease terms.
A residual is a component of leasing agreements. It is a percentage of the car’s value which is due to be finalised at the end of the term. Minimum residual values are set by the ATO.
Leasing applications are in the name of the employer and rates assessed on the credit profile of the business.
Novated Lease deals must involve the employer and the employee. If the employer does not agree, the employee cannot proceed to apply on their own.
