faq 1: can i get a novated lease on a car I already own?
- yes, it’s possible to obtain a novated lease on a car you already own, known as a sale and leaseback arrangement. this process involves selling your vehicle to the leasing company and then leasing it back through a novated lease agreement. It can free up cash tied in your car and provide you with the benefits of a novated lease, including potential tax advantages. however, there may be specific criteria your car needs to meet, such as age and condition, which vary by provider.
faq 2: what happens at the end of a novated lease?
at the end of a novated lease, you typically have several options:
- return the vehicle to the lease company.
- extend the lease term for an additional period.
- pay the residual value (a lump sum agreed upon at the start of the lease) to purchase the car outright.
- the best option depends on your circumstances, the car’s condition, and whether you want to keep the vehicle or upgrade to a new one.
faq 3: how does a novated lease affect my taxes?
- a novated lease can offer tax benefits, as the lease payments are deducted from your pre-tax salary, potentially lowering your taxable income. this arrangement can result in tax savings, but the exact impact depends on your income, the cost of the vehicle, and the terms of your lease. consulting with a tax professional or financial advisor can provide personalised advice based on your situation.
faq 4: can i choose any car with a novated lease?
- generally, you can choose almost any new or used car for a novated lease, subject to the leasing company’s approval. the vehicle should meet certain criteria, such as being roadworthy and insurable. according to government legislation, a car is defined as “a motor vehicle (except a motorcycle or similar vehicle) designed to carry a load of less than one tonne and fewer than nine passengers.” while this definition excludes trucks and some vans and utes, it still provides clients with a broad spectrum of choices.
faq 6: what is included in a novated lease package?
- a novated lease package can include the lease of the vehicle along with other vehicle-related expenses, such as insurance, registration, maintenance, and fuel. these inclusions make budgeting for vehicle costs more straightforward, as they’re covered in one regular payment. the specific inclusions can vary, so reviewing the lease agreement carefully is essential.
faq 7: can i end a novated lease early?
- yes, you can end a novated lease early, but this usually incurs termination fees or penalties. the costs associated with early termination can vary depending on how much of the lease term remains and the lease agreement’s terms. it’s important to understand these potential costs before entering into a novated lease.
faq 8: how is the residual value of a car determined in a novated lease?
- the residual value, or balloon payment, of a car in a novated lease is determined based on the Australian Taxation Office (ATO) guidelines. it’s a percentage of the car’s initial value and accounts for the car’s depreciation over the lease term. this value is agreed upon at the start of the lease and is payable if you decide to purchase the vehicle at the end of the lease term.
faq 9: can I use a novated lease for a used car?
- yes, a novated lease can be used for both new and used cars. however, there may be restrictions on the age and condition of the used car, which can vary between leasing companies. it’s essential to check with the leasing company about their specific requirements for used vehicles.
faq 10: what happens if I leave my job during the novated lease term?
- if you leave your job during the term of a novated lease, the lease doesn’t automatically end. the novation agreement with your employer ceases, and you become responsible for the lease payments. you have the option to transfer the novated lease to a new employer, or you may need to arrange an alternative payment method directly with the leasing company.
faq 11: how does insurance work with a novated lease?
- with a novated lease, comprehensive car insurance is required, and the cost can be included in the lease payments. this ensures that the vehicle is adequately protected throughout the lease term. some novated lease providers offer insurance products tailored to leased vehicles, or you can choose your insurer, provided the coverage meets the lease agreement’s requirements.
faq 12: what are the upfront costs of a novated lease?
- the upfront costs of a novated lease can vary depending on the provider and the vehicle you choose. Generally, there might be an initial setup fee or establishment fee charged by the leasing company. Additionally, the first month’s lease payment may be required upfront. It’s important to discuss all potential upfront costs with the leasing company before finalising the agreement to ensure there are no surprises.
faq 13: can I include aftermarket accessories in my novated lease?
- yes, it’s often possible to include the cost of aftermarket accessories in your novated lease. this can cover items such as window tinting, car mats, or tow bars. Including accessories in your lease can be a convenient way to customise your new vehicle to your preferences while spreading the cost over the lease term. however, it’s important to confirm with the leasing company which accessories can be included and ensure they are approved and installed according to the vehicle manufacturer’s specifications.
1. what is a novated lease?
a novated lease is a vehicle financing arrangement where an employee leases a car, and the lease payments and associated expenses are deducted from their pre-tax salary, typically with the involvement of their employer.
2. How does a novated lease work?
an employee and their employer enter into a novation agreement, and the employee leases a vehicle. the employer deducts lease payments, as well as other vehicle-related costs, from the employee’s pre-tax salary.
3. what are the benefits of a novated lease?
benefits include potential tax savings, reduced taxable income, access to corporate fleet discounts, and the convenience of a single bundled payment for vehicle-related expenses.
4. can anyone get a novated lease?
generally, employees who meet specific criteria, such as being permanently employed, paying taxes, and having completed a probation period, can be eligible for a novated lease.
5. is a novated lease only for new cars?
no, novated leases can be used for both new and used vehicles, depending on the policies of the finance provider and employer.
6. what types of vehicles can be novated leased?
typically, cars, SUVs, and light commercial vehicles are eligible for novated leases. motorcycles and heavy commercial vehicles are often excluded.
7. can I choose any car for a novated lease?
in most cases, you can choose the vehicle you want, subject to the ATO guidelines, finance provider’s approval and employer’s policies.
8. can I use the leased car for personal and work purposes?
yes, novated lease vehicles can be used for both personal and work-related travel.
9. what expenses can be included in a novated lease?
lease payments, fuel, maintenance, insurance, registration, and other vehicle-related costs can typically be included.
10. how do tax savings work with a novated lease?
expenses paid from pre-tax salary can reduce your taxable income, potentially leading to lower income tax and higher take-home pay.
11. can I terminate a novated lease early?
terminating a novated lease early may incur costs, so it’s important to check the lease agreement for details. you may also need to cover any outstanding lease payments.
12. what happens to the lease if I change jobs?
if you change jobs, you can usually take the novated lease with you to your new employer, transfer it to a personal lease, or terminate the lease.
13. can i modify the leased vehicle?
most novated lease agreements have restrictions on modifying the vehicle. You should check with your finance provider for specific guidelines.
14. what is a residual value in a novated lease?
a residual value is the estimated value of the vehicle at the end of the lease term. it can affect lease payments and options at the end of the lease.
15. how do I choose between a novated lease and traditional car financing?
the choice depends on your financial goals, tax situation, and personal preferences. It’s advisable to consult a financial advisor for guidance.
16. are novated leases available to self-employed individuals?
novated leases are primarily designed for employees, so self-employed individuals may not be eligible. however, it’s essential to check with finance providers for any exceptions.
17. can i terminate a novated lease early if I no longer need the vehicle?
terminating a novated lease early may incur additional costs and penalties. you should review your lease agreement and consult with your finance provider for details.
18. what happens at the end of a novated lease term?
at the end of the term, you can often choose to purchase the vehicle, refinance the residual value, or return the vehicle to the finance provider.
19. are novated leases subject to GST (Goods and Services Tax)?
GST may apply to novated lease payments and certain expenses. you should consult with a tax professional to understand the specific GST implications.
20. how do I calculate potential tax savings with a novated lease?
tax savings depend on your income, expenses, and tax bracket. it’s advisable to use online calculators or consult with a tax advisor for personalized estimates.
21. can i choose any make and model of vehicle for a novated lease, or are there restrictions?
while you typically have the freedom to choose the make and model of the vehicle you want to lease, some finance providers and employers may have specific guidelines or restrictions on eligible vehicles.
22. what are the responsibilities of the employer in a novated lease arrangement?
the employer’s role includes facilitating the salary packaging process, deducting lease payments and related expenses from the employee’s pre-tax salary, and remitting those funds to the finance provider or lease administrator.
23. is insurance included in a novated lease, and what types of insurance are required?
novated leases often include comprehensive car insurance as part of the package. you may also need to arrange insurance for additional coverage, such as gap insurance or extended warranties, depending on your preferences and the terms of your lease.
24. can i transfer a novated lease to another person, such as a family member?
transferring a novated lease to another person may be possible, but it’s subject to approval by the finance provider and may involve certain costs and conditions.
25. what happens if the leased vehicle is involved in an accident or damaged during the lease term?
if the leased vehicle is damaged, you should contact your insurance provider to initiate a claim. the insurance coverage should help with repair or replacement costs. however, you should review the terms of your insurance policy for details.
26. are there mileage restrictions or penalties for exceeding mileage limits in a novated lease?
novated leases may have mileage limits or excess mileage penalties. it’s important to discuss these details with the finance provider and consider your anticipated usage when entering into the lease agreement.
27. how does novated leasing impact my credit rating?
novated leasing can affect your credit rating if you fail to make lease payments or other financial obligations related to the lease. ensure that you meet all payment obligations to maintain a positive credit history.
28. can i include more than one vehicle in a novated lease agreement?
typically, a novated lease covers a single vehicle. if you wish to lease multiple vehicles, separate novated lease agreements may be required for each vehicle.
29. how do i calculate my potential tax savings with a novated lease?
tax savings depend on various factors, including your income, lease expenses, and applicable tax rates. you can use online calculators or consult with a tax advisor to estimate your potential tax savings.
30. can i change the terms of my novated lease during the lease period?
some lease terms may be negotiable, but any changes to the lease agreement typically require approval from both the finance provider and the employer. it’s important to check the terms and conditions of your specific lease.