Understand & Optimise Novated Lease Residual Values

The residual value has great significance on the overall Novated Lease. It impacts the amount required for the monthly payments which in turn determines the amount to be salary sacrificed by the employee and the tax deduction for the employer.

Under ATO rulings, the term of the lease determines the residual. Buyers can look at varying the term to achieve an optimum outcome.

Interest is applied to the residual and factored into repayments. Securing the best interest rate when arranging a Novated Lease by using our services can lower repayments. Effectively reducing the overall acquisition cost of the vehicle. Lowering the repayments and salary sacrificed may enable employees to set aside funds to cover the residual when due at the end of the term. Speak with us at the initial stages of arranging your Novated Lease to find out what low rate we can secure for you.

GST is applied to the residual value. This can be claimed by the employer but would need to be covered by salary sacrificing and should be considered when making decisions on Novated Leasing.

The ATO sets the minimum amounts, but a larger residual value may be preferable, especially on higher-priced vehicles. A higher residual can significantly reduce the monthly payments, but it does mean a larger amount is due at the end of the term. When deciding what is the optimum residual, consideration should be given to how this amount is going to be covered when due.

Residual values are subject to lender approval. Our brokers negotiate with our lenders to secure the residual value that will best suit our customers. Contact us to discuss your options.

• Residual reduces monthly payments.
• Secure lower rates to reduce total vehicle acquisition cost.
• Expert services to negotiate optimum terms and residual value on Novated Lease.

Residual values apply to Vehicle Leasing, which is a commercial credit facility for businesses. Novated Lease is a facility which allows employees to acquire vehicles with a commercial credit product with salary sacrificing. The alternative vehicle financing for an employee would typically be a Secured Personal Car Loan.

There are benefits for employees with salary sacrificing including acquiring a vehicle at a lower commercial interest rate rather than a personal loan rate; realising lower income tax payable through salary sacrificing; and having a residual.

With a personal car loan, buyers would be required to make an upfront deposit to reduce the loan amount required and hence achieve lower repayments. With a residual value, that balloon payment with Novated Lease is payable at the end of the finance term. Allowing buyers more time to accumulate funds to make the payment.

The residual may allow for lower repayments compared with say a personal car loan. Resulting in less salary to be sacrificed. But a personal loan allows the buyer greater flexibility with their employment options. If they leave a job when a Novated Lease is in place, arrangements need to be made to finalise the ease in order to have ownership of the vehicle.

Our brokers can go through all options available to you to finance your motor vehicle and provide quotes at our low interest rates.

• Residual allows for lower monthly payments.
• Individuals finance vehicles at commercial rates.
• Personal Secured Car Loans may provide greater flexibility.