Novated lease comparison offers an effective way of saving on car and running costs, but it’s crucial that quotes be assessed using total cost calculations; that means considering early termination charges, residual value costs and real interest rate charges when making comparisons.
Know the GST advantages of novated leasing as they include tax savings on fuel, servicing, tyres, and insurance costs.
Costs
Novated lease arrangements often involve multiple parties, which can result in confusion and higher costs. They involve your employer, a finance company and yourself; typically leasing companies charge finance commission and account keeping fees; some bundle add-on insurances like loan protection or tyre and rim coverage into these leases – these costs could easily outweigh fleet discounts and GST rebates that you are eligible to claim.
Before signing, be aware of all costs associated with a novated lease agreement. A calculator can help provide a breakdown of all associated costs. Check with the finance company to ensure there are no extra or hidden fees being assessed to you and know what happens if your job changes or your novated lease ends – in such instances you must negotiate new terms or negotiate another car loan agreement with your employer.
Tax
Novated lease comparison differs from traditional car loans in that they combine purchase costs and running expenses like fuel, servicing, and insurance into one payment that’s deducted directly from your pre-tax salary – making this arrangement known as salary packaging more tax efficient for employees.
Employees first experience savings by making payments from pre-tax dollars, which reduces their overall income tax payable. Employees may also claim running costs like gasoline and insurance premiums against tax, further lowering ownership costs (although Luxury Car Tax thresholds and general GST discount thresholds may impact this).
When evaluating novated lease quotes against car loan quotes, it’s essential that they are evaluated in terms of total costs. Novated leasing companies frequently charge large finance commissions that add substantially to the overall costs. Furthermore, when considering different options it is also crucial to compare early termination costs, residual values, and real interest rates when making your decision.
Insurance
Novated leasing provides both vehicle finance and running costs in one monthly payment; while car loans usually only include financing elements like on-road costs or insurance premiums.
Car loans may also restrict which provider you can use for vehicle running costs, while novated lease providers can bundle fuel, maintenance and repair into their novated leasing contract to help reduce the overall costs of owning and driving a car.
Compare Novated Lease Quotes On an actual Cost Basis It is essential that you compare Novated Lease quotes by factoring in all associated fees, taxes, or insurance costs in order to select the option which meets both your needs and budget requirements.
Options
Novated lease comparison enables employees to salary package a new car and pay for it with pre-tax income, while still enjoying GST-free vehicle running costs (since any Fringe Benefits Tax that would normally apply is claimed as an input tax credit by their finance provider).
Dependent upon your employer, novated lease offers may allow you to select from a wide variety of vehicles with fully maintained or non-maintained agreements and enjoy pricing discounts that would not normally be available through traditional finance leasing options.
Always compare novated lease quotes based on total costs, which includes lease term, residual value, real interest rate and GST disclosure. Furthermore, it’s crucial that you compare inclusions carefully; some providers may attempt to sell you extras like income protection, excess insurance and vehicle paint protection; this could significantly increase overall costs so it would be prudent to avoid them if possible.