NOVATED LEASE EXPLAINED
A novated lease is a three way agreement ("novation agreement") between an employer, employee and lease company, under which the employee leases a vehicle from the lease company, and employer agrees to take on the employee's obligations under the lease.
The employer then makes the lease payments on behalf of the employee, and deducts them out of the employee's pre-tax income (known as salary packaging a vehicle).
If the employee ceases to be employed by that employer, or the lease agreement ends, the employee retains the vehicle but all obligations assumed by the employer under the novation agreement revert back to the employee.
Commonly there are two main types of novated leases:
- A fully maintained novated lease, where the vehicle and its running costs are wrapped up into the lease,
- and a non-maintained novated lease, where finance is provided for the leased vehicle.
Benefits for the employee:
- potential for significant income tax savings
- End of lease profit
- savings on GST that would normally be incurred on vehicle expenses
- Access to volume discounts under this scheme
- more flexibility in the choice of a car compared to a company car arrangement
- vehicle stays with the employee and can be transferred to a new employer
Benefits for the employer:
- a way to provide an effective increase in employees' salaries with no or minimal cost to the business
- potentially a cost effective alternative to operating a fleet of company vehicles
- the business does not assume any risk for the vehicles
- the employee vehicles are "off balance sheet"
Fully maintained Novated LeaseView
A Fully Maintained Novated Lease is an arrangement where all of the operating costs of the motor vehicle are included as part of your salary package.
Operating costs that can be include
- Lease Rental
- Fuel & Oil
- Servicing and Maintenance
- Roadside Assistance
The Key Features of a fully Maintained Novated Lease are:
- Finance 100% of the vehicles value, flexible terms of 1-5 years.
- Fixed Residual. A residual is set by the lease provider and is calculated using the ATO depreciation guidelines.
- Package Options. Choose from a complete fully maintained or partly maintained option.
- Flexible Repayment Options. Repayments can be adjusted immediately if usage or running costs increase or decrease.
- Flexible Fuel Card. A fuel card that is valid anywhere a Visa Card is accepted.
- Own account Login. Get your own online account login from anywhere you can access the internet.
Non-Maintained Novated LeaseView
Under a Non-Maintained Novated Lease the lessee is responsible for all maintenance and other running costs of the motor vehicle.
Under a Novated Finance Lease arrangement the client has full use of the vehicle for a specified term in return for monthly repayments. At the conclusion of the term full ownership of the vehicle will pass from the Financier to the client after payment of the residual value.
There are four variables to consider as follows;
- Amount Financed
- The Finance Term
- Residual Value
The Key Features of a Non-Maintained Novated Lease are:
- No finance payout penalties
- It's a tax effective way to lease a vehicle
- You get total flexibility in choice of vehicle
- Your vehicle can be used 100% for private use
- Access to fleet discounts for all new cars
- Substantial GST savings
An Operating Lease is an off balance sheet car leasing option, it offers competitively priced passenger and light commercial vehicle leases which eliminates any residual risk or maintenance risk and is tailored to match the vehicle usage.
Make savings with an operating lease
We can offer you many ways to minimise the costs associated with your fleet of company cars. Like the services offered to larger fleets, we can take care of all maintenance and administration for you.
Forecasting is made easy with your monthly lease rental payments fixed for the full term of the Operating Lease. When the lease term expires, you simply return the vehicle to the finance provider for disposal and your company has no residual value exposure.
Fully Maintained Operating LeaseView
A fully maintained operating lease is a one payment a month solution which covers all the operating costs of the vehicle including a 'hand back the keys' at lease end.
The lease has flexible terms expressed in both term (number of months) and kilometres travelled. Expiry of the lease can be initiated by either the term or the stipulated kilometres which ever occurs first. There is also some flexibility in the items included in the lease eg; tyres and petrol may be optional.
The Key Features of a Fully Maintained Operating Lease are:
- Simple vehicle management. One monthly repayment.
- Reduced administration costs as employees time is free to focus on income producing core business rather than vehicle purchasing, maintenance and administration.
- Vehicles are kept off balance sheet, to improve debt-equity ratios for future lending. The monthly lease payments are treated as an operating expense for taxation deductions (refer your accountant for personal circumstances).
- No residual risk resulting in loss on resale of your car. The residual responsibility remains with the fleet provider, not you.
- Potential fleet savings. Buying power on the vehicle and the servicing costs keeps the monthly payment down.
- Comprehensive Reporting keeps you informed of vehicle usage, FBT expenses and replacement dates.
- Emergency break down service.
- Simple order process.
Non Maintained Operating LeaseView
Under a non-maintained operating lease the lessee is responsible for all maintenance and other running costs of the motor vehicle.
The Key Features of a Non Maintained Operating Lease are:
There are a number of benefits associated with operating leases, including:
- The rental payments are fixed over the term of the lease.
- The financier assumes the residual value risk on the vehicle.
- The motor vehicle does not appear on the balance sheet.
- Operating costs can be included in a single payment.