Ever heard of novated leasing?
Essentially, when you acquire a car through a novated lease, your employer leases the vehicle on your behalf, and the payments remain your responsibility.
While this might sound tricky, it can be an effective way to reduce the cost of car ownership (although it is likely will never actually own the car).
The great thing about a novated lease is that your repayments – which include all your running costs – will be automatically taken from your pre-tax earnings. This means your income tax will be calculated on your salary less the car repayments, so you’ll pay less tax, and be left with more disposable income than if you were making the purchase out of your post-tax income. In addition, you won’t pay GST on the purchase, saving you an extra 10% off the price.
Novated leases usually last two, three or five years and at the end of the agreed period, you can either trade up into a new model or pay a pre-determined fee – known as a balloon payment – to buy the car outright.
What’s the downside?
Of course, for every upside, there must be a compromise. In the case of novated leasing, you will find extra administrative fees that add to the cost of the finance arrangement and you’re likely to be lumped with a higher interest rate than those available for general loans. Also, if you decide to move on from your job and your new employer is not prepared to take over the novated lease, you might have to terminate it and payout what’s owing.
All that said many people find the tax benefits and access to cash flow, way exceed the downside.
Ultimately, when it comes to purchasing a new car, the right decision will depend on your circumstances. At the Ayers Group, we work alongside reputable novated leasing consultants who can advise you on the best way forward and help you to arrange finance.
Talk to the Ayers Group today about novated leasing and let us introduce you to an expert. We can also help you manage your administrative requirements and grow your wealth.
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