Novated leases are a unique way to finance your next car. They allow you to bundle your vehicle expenses, such as registration, insurance and major services, into one monthly payment, taking money from your pre-tax salary.
It can reduce your taxable income and give you more disposable money each year. But how does it compare to buying a car outright? Here’s a rundown of EV novated lease vs buying outright:
Tax Savings
A novated lease brings a third party into the equation, with your employer joining you and the car seller in a kind of menage-a-car. The leasing company does all the paperwork and – crucially – gets discounts on cars due to its fleet size, which reduces your overall costs. Your employer then deducts your novated lease payments and running costs from your pre-tax salary, which reduces your taxable income each pay cycle. It could mean significant tax savings for you (cha-ching!).
A great benefit of a novated lease is that it’s easy to include other costs like insurance, servicing, roadside assistance and rego in your package for one smooth monthly fee. It can make budgeting easier and give you a better idea of exactly what your costs are.
Of course, you don’t own the car at the end of your novated lease and can’t sell it, but that may not be a big deal for you, depending on your circumstances. Some people enjoy having the freedom to change cars regularly or modify them. But others prefer the peace of mind that comes with owning a car outright, especially if they plan on keeping it for 10 or 20 years or more. The important thing is to understand the benefits of both options and decide what works best for you.
No Depreciation
Many people are still hesitant to jump on the novated lease bandwagon. They may be unsure whether they will save money or not, or they may believe that it is only a service for big earners with dodgy tax breaks and that you need to drive lots of kilometres to benefit. Those opinions are often based on a lack of understanding about how novated leasing works and the benefits that come from it. So, it makes perfect sense to learn about EV novated lease vs buying outright.
A novated lease is a three-way agreement between you, your employer and the finance provider. Your employer makes the lease repayments directly to the finance company from your pre-tax salary, which reduces your taxable income and doesn’t require you to finance GST (generally). The lease payments generally cover the purchase price of the vehicle as well as running costs such as fuel, services, insurance and registration.
No Extra Costs
The other big advantage of a novated lease is that it bundles in all the running costs, including rego, insurance and fuel. These are paid out of your before-tax salary and don’t need to be repaid at the end like you do with a car loan.
Another bonus is that if you want to upgrade at the end of the lease or move on to a different vehicle, you’ll be free to do so without the headache of trading in the old car and paying what’s known as the residual value or balloon payment. Your novated lease company can also help you access discounts and fleet pricing which could further save you money.
In the EV novated lease vs buying outright debate, a novated lease is very cost-effective for employees. It is because the finance costs and operating costs are bundled together and deducted from your before-tax salary. It leaves you with more of that lovely post-tax cash to spend. And if you’re looking for the best-novated lease deals, it pays to work with an experienced provider who can source the right finance from specialist lenders and manage all the administration on your behalf. A good novated lease provider will also have a nationwide preferred dealer network to help you find the best car at the best price.