Curious about how a novated lease could transform your car ownership experience? You’re in the right place! In this guide, we’re diving into what a novated lease is, plus the benefits of a novated lease with Clear Lease, shedding light on the perks that make this financial arrangement a smart choice for many.
How Does A Novated Lease Work?
Novated leasing involves three parties: your employer, a finance company, and you. It allows you to set up an agreement that takes your car finance payments directly from your employer, so it comes out of your pre-tax salary.
Whether it’s a new or used car, this allows you to bundle your car expenses along with your lease payments. This includes registration and insurance, as well as the cost of fuel, maintenance, tyres and car washing.
Without Novated Benefits
Gross Salary
Income Tax
Take Home Pay
Car Cost
Disposable Income
With Novated Benefits
Gross Salary
Car Cost
Income Tax
Disposable Income
What Are The Benefits Of A Novated Lease?
A novated lease isn’t just about having a car; it’s about having a car with financial perks. Let’s explore the key advantages:
1. Tax Savings:
One of the primary benefits of a novated lease is tax savings. By having your lease payments and running costs deducted from your pre-tax income (or gross salary), you potentially reduce your taxable income. It’s a legal and savvy way to keep more money in your pocket. This is referred to as salary packaging.
2. Convenience
With all your expenses pre-budgeted, when tyres, servicing or registration comes due; a novated lease has you covered without needing to come up with funds.
3. Flexible Car Choices:
With a novated lease, you have the freedom to choose the car you want. Whether it’s a brand-new model or a reliable used one, the decision is entirely yours.
You can take a look at the different tax savings and costs associated with the car you want using the Clear Lease Calculator. The calculator takes into account the state you live in, the type of car and its cost, your annual salary, plus your estimated kilometers driven and loan term. After inputting these details, you’ll see the weekly cost, annual savings, and savings over the entire life of the lease.
4. No Hidden Costs:
Clear Lease stands firm on transparency. There are no hidden fees or surprise costs. We believe in keeping things straightforward and clear for our clients. You’ll find all of this information directly on the quote provided by our team. And to provide you with even more confidence, you can chat with our team at any time to run through exactly what this means for you and your budget.
Why Opt for a Novated Lease with Clear Lease?
Financial Clarity
Clear Lease is committed to transparency. Our clients can trust that there are no hidden fees or confusing terms. We break down the costs within your quote so you can see exactly what you’re paying for. If you still have questions after the quote, you can chat to our friendly team over the phone to go in depth about all the financial aspects of your lease.
Expert Guidance
Novated leasing might be new territory for you, but it’s familiar ground for us. Our expert team is here to guide you through every step of the process. Have questions? Reach out – we’re ready to assist. Plus, we have a range of frequently asked questions answered across our website.
Nationwide Accessibility
Whether you’re in the bustling city or a serene suburb, Clear Lease has you covered. Our novated leases are available across Australia, ensuring accessibility no matter where life takes you, and our team are always on-call for maintenance or repair requests.
Enjoyable Driving Experience:
Novated leasing with Clear Lease is more than a financial transaction; it’s about the joy of driving. Picture yourself on the road, knowing you’ve made a smart financial choice – that’s the Clear Lease difference and the true benefits of a novated lease.
Community Connection:
Choosing Clear Lease means becoming part of a community. Access resources, tips, and insider knowledge that enhance your novated leasing journey. You can also follow along on our social media channels where we regularly address commonly asked questions.
Ready to explore more benefits? Get in touch with us.
The Bottom Line: Is a Novated Lease Worth It?
As a novated lease is all to do with finance, answering this question is going to be dependent on your personal circumstances. Considerations will include:
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- How much you make
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- Your tax liability
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- How much you can afford to reduce your tax home pay by
While there’s a huge range of benefits for novated leases that we’ve outlined above, like tax savings, flexible car choices and no hidden costs, we’ll always recommend you seek the advice of your accountant or financial planner.
FAQs
What is the downside of a novated lease?
If your employment situation changes, i.e. if you change jobs or your company restructures, you are still responsible for continuing to make lease repayments on your car. However, this has an easy fix.
If you leave your employer for any reason, your lease agreement (the deed of novation) will terminate immediately. The options available to you include:
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- Transferring your novated lease to a new employer
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- Continuing your monthly lease payments yourself (an un-novated lease)
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- Paying out the remaining amount of the lease (including the residual value) and keeping or selling the car
No matter which option you choose, the Clear Lease team can help guide you through the process.
The other downside of a novated lease is if you exceed the kilometer driven limits set out in your novation agreement, you may incur additional costs. It’s important to carefully consider your financial situation and future plans to make sure the budget in your agreement reflects your driving habits.
Does a novated lease actually save you money?
Yes, a novated lease can definitely save you money. This is because you’re using pre-tax income to pay for your lease repayments and vehicle running costs. This reduces your taxable income, lowering the amount of income tax you need to pay.
A novated lease can also help you save on GST on the car’s purchase price, plus on running costs which compounds over time.
It’s important to note that individual savings will vary. To get an indication of how much you can save, use your novated leasing calculator.
Who benefits from a novated lease?
You, as an employee, can benefit from a novated lease with tax savings, convenience, flexible car choices, no hidden costs, and more.
Your employer also benefits from a novated lease agreement, as it’s an attractive employee benefit to retain and engage staff. It also allows your employer to reduce their payroll tax.
Read more about the benefits of novated leasing for employers.
Does a novated lease reduce your taxable income?
Yes, a novated lease can reduce your taxable income. This is because your lease payments and car running costs are deducted from your pre-tax salary, lowering your taxable income and the amount of tax you have to pay to the ATO.
How much tax can I save on a novated lease?
The amount you will save on a novated lease will vary, based on your specific circumstances, such as your income and the vehicle’s cost. To get an indication of how much you can save, use your novated leasing calculator.
Due to the FBT exemptions available as of March 2024, you can save up to 45% on running costs for electric or plug-in hybrid vehicles. You can read more about the benefits for EV novated leasing here.
