Addtional Car loan and Car finance information
The articles below are included to help you find out more about car loan and car finance options. If you have any questions, please contact us.
FAQs – Novated lease
What is a novated lease?
- A novated lease is three way agreement between an employee, employer and finance company. The novated lease is paid off using the employee’s pre-tax salary (salary sacrifice) but the employer is ultimately liable for the repayments for the term of employment.
What are the benefits of a novated lease to me as an employee?
- The employee does not pay GST on the vehicle purchase price and maintenance costs of a novated vehicle.
- The employee can pay out the balloon payment at the end of the novated lease in order to own the car outright.
- The novated lease offers income tax savings as it is paid for with pre-tax salary.
A car used for 100% private use can be financed through a novated lease.
- Maintenance costs including fuel, oil, servicing and tyres can be included in the salary sacrifice.
- A fleet discount can often be accessed when taking out a novated lease.
What are the benefits of a novated lease to me as an employer?
- Offering a novated lease allows you to add value to staff remuneration without a pay rise.
- The employee is responsible for the leased vehicle when they leave or at the end of the novated lease, so you have no disposal risk and no excess fleet.
- A novated lease offers tax benefits on deductible expenses.
- Novated leasing can result in lower costs such as Payroll Tax and WorkCover premiums .
How does a novated lease affect tax?
Under a novated lease agreement, the employer can claim Input Tax Credit on the purchase price and lease repayments. This benefit is passed on to the employee, so effectively the employee is not liable for GST during the lease. FBT generally applies to any benefit (such as a car provided through a novated lease agreement) as a result of being an employee. This expense is payable by the employer but is generally passed on to the employee. The FBT can be offset through employee contributions to the car’s running costs.
Is a novated lease right for me?
A novated lease may suit you if:
- you are an employee and you want to purchase a car as part of your salary package. A novated lease can be used to finance a personal or business vehicle.
- you are a business wanting to offer a benefit to your employees.
Do I pay interest on a novated lease?
Yes, the interest rate on a novated lease is fixed, so you know exactly what your repayments will be for the life of the novated lease.
What is residual value?
Residual Value is the amount of money you owe at the end of the novated lease. It is set at the start of the lease. GST is payable on the residual value.
Can a novated lease have a small or no balloon payment?
There is some flexibility in the size of the balloon payment at the end of the novated lease.
Can I use a novated lease for something other than a new car?
Yes, a novated lease can be used for financing a used car. A sale and lease-back arrangement even means you can take a novated lease on the car you own now.
What happens if I miss a repayment on my novated lease?
The novated lease is guaranteed by your employer, so if you are having difficulties making novated lease repayments, you should contact your employer as soon as possible.
How do I apply for a novated lease?
Contact 360 Financial Services or apply online for a novated lease.
Using a novated lease calculator
A novated lease calculator can work out weekly, fortnightly or monthly repayments on a novated lease.
What you can calculate with a novated lease calculator
If you are an employee use the novated lease calculator to work out how much pre-tax salary will be deducted to cover the novated lease. Employers can use the novated lease calculator to work out the novated lease payment you are ultimately responsible for.
You can also use the novated lease calculator to do “what-if” analysis to work out how much you can afford on a car purchased through a novated lease
Case Study: Budgetting with a novated lease calculator
John wanted a second-hand, medium-sized car for his wife. He knows it might cost $15,000 - $20,000. John figured he could afford a deposit of $4000 from savings, so he needs to take the deposit from the purchase price before using the novated lease calculator. Now his hypothetical finance range is $11,000 - $16,000.
John now simply types S16,000 into the novated lease calculator, setting the novated lease calculator to fortnightly payments because he is paid fortnightly. He doesn’t want to get landed with a large balloon payment at the lease end, so he puts $0 into the balloon payment field in the novated lease calculator. At 15.5% interest over 3 years, the novated lease calculator calculates his repayment as $231.38 (plus GST of $23.14).
John wants to keep his payments below $175 so he knows he needs to change the loan amount payment in the novated lease calculator. He simply revises the purchase price in the novated lease calculator until the payment comfortably fits his budget. When he types $12,000 into the novated lease calculator, the calculator returns a repayment of $173.53 (plus GST of $17.35). The novated lease calculator has helped John realise that he can afford a cars around $16,000 ($12,000 on the lease + $4,000 deposit).
John could also have varied the balloon payment or the lease term in the novated lease calculator to fit the repayment to his budget.
Get the best interest rate
A novated lease calculator requires you to input the interest rate. 360 Financial Services can shop around for the best interest rate and lease that suits your needs.
More about novated lease calculators
For background information when using a novated lease calculator, see our FAQs on novated leases.
Once you’ve used the novated lease calculator, contact 360 Financial Services to find the right novated lease.