Need a car?
For many of us, having access to our own vehicle is more than a nice-to-have, it’s an essential part of our lives and the jobs we do.
However, there is more than just one way to get into a vehicle of your choice – aside from purchasing outright, getting a loan or entering a guaranteed future value (GFV) programme offered by a manufacturer, a novated lease may be just the ticket to getting you into the car you want, and benefiting from potential tax savings in the process.
So, what is a novated lease?
With a salary packaging provider, your vehicle costs are bundled into your pre-tax income. They work with your employer to deduct payments and make car repayments to a financier like Metro Finance on your behalf. This setup, known as novated leasing, can help reduce your tax liability and save you money.
Both car loans and novated leases can help you get into a new or used vehicle. However, with a novated lease, your employer makes payments directly to the leasing company, streamlining the process for you. Plus, unlike a standard car loan, a novated lease allows you to bundle running costs—like fuel, maintenance, and insurance—into one convenient, tax-effective package.
Sounds great, how do I get one?
First things first, you need to talk to your employer about novated leasing and what options they may have available for employees – in most instances, new employees would need to complete their probation period before being able to access novated leasing if its offered. It’s also a good idea to talk to your accountant about how the potential lease may affect your future tax payments.
From there, if your employer offers novated leasing as an employee benefit, the leasing provider takes care of the heavy lifting. They work with your employer to gather relevant details—such as your income, expenses, and living circumstances—and guide you through the process, including a credit check, to get you on the road faster.
Once approved, your lease agreement between you, your employer and the finance provider is set-up before you buy a car (or have one purchased for you by the financier). The agreement will include things like lease duration, how many kilometres you intend to drive each year and, of course, the type of car you’re keen on buying.
What are the benefits of novated leasing?
In short: saving you money. Because your novated lease would be paid from your salary before tax, it could potentially reduce the amount of tax you have to pay. Another financial benefit is you don’t pay GST on the car you purchase, or its running costs – once again, potentially putting more money in your pocket.
The other big benefit is the flexibility of not owning the car outright (which you can still do by paying any agreed amount owing at the end of the lease term), and knowing how much it will cost you month-to-month with set payments.
Anything else I should know?
It’s important to consider all your options when deciding on whether a novated lease is right for you. Start a conversation with your colleagues and find out more about the leasing company your employer uses.
