A novated lease is an arrangement in car leasing where the pre-tax income of the employee can be used to acquire a new car of their choice. It may seem unbelievable but this is true, and it happens in Australia and other parts of the world. As explained by car leasing companies, this hassle-free agreement can help lower your taxable income. Apparently, this kind of leasing offers great benefits to the employers by making the employee’s remuneration package more attractive.
For most employees, car leasing is a great way to acquire a new vehicle without having to break their bank. While there are novated car lease calculators that can help you gauge possible savings, many leasing companies can also help you go through the details of the agreement so that you can know what you are getting into. They will help you better understand the terms from which you can make an informed decision.
So, how does this thing work? Before you get a new car, there has to be a financing company that is willing to purchase the vehicle of your choice. While they can get you your dream car, you will have to pay them back on the amount you both agreed on. With novated lease agreement, you do not simply pay them the amount of the vehicle on a monthly basis. What happens is that you pay the finance company monthly for the term of the lease which is within one to five years. The payment made each month is deducted from the outstanding balance on the contract. On the last repayment schedule, the employee has an option to procure the car for the residual value.
The employee has the option of either selling the car or pay the residual of the vehicle. Since your rental payment is to be taken from your gross salary, your income tax reduces while bringing home a huge pay. This sounds amazing, right? Well, this looks even better since all the running costs associated with the novated leasing are included in your monthly payment.
Imagine how much savings you will make with this type of lease agreement. To get an estimate of the savings as well as the cost of salary packaging, you can use the novated lease calculator. This calculator will help you answer any questions you have concerning the novated lease agreement. Also, if you still do not understand, you can approach a car dealer, and they will explain to you about the contract and ensure that everything is clear before signing the dotted line. Overall, it is a good deal and the best you will ever get when it comes to financing your dream car.