Getting your dream car should not be challenging. At least that is what we all desire. However, the reality is that it can sometimes be challenging. And this is when it comes to making the relevant financial commitments. This is because the cost might run into thousands of dollars, and making a one-time payment financially inconvenient. Now, while this can appear challenging, do not let it be.
You can now obtain car finance. And one way to do this is through novated leasing. It represents both a smooth and tax-efficient way to get your dream car.
What Is Novated Leasing?
This represents a three-way arrangement between you, your employer, and a financier for the purchase of a car. In this arrangement, you agree to buy a car through a lease agreement with a financier. However, rather than make direct payments yourself, you do this through your salary package.
This involves a situation where you sacrifice part of your income, pre-taxable, to discharge your obligation under the lease agreement.
In turn, you enjoy payment advantages. This is because your employer claims the vehicle’s depreciation and GST cost price. Also, your employer claims the running cost, which allows you to enjoy some tax benefits.
This option works effectively where the vehicle purchased is predominantly for business purposes. Or in a case where you already get your employer to pay your car allowance. So, your employer makes the payment on your behalf. Even when you leave employment, you retain the vehicle. And, of course, you take responsibility for payment to your new employer.
Getting Novated Leasing
You must keep in mind that your employer might not offer novated leasing as a part of their salary packaging policies. As such, you would need to confirm with your employer if it does. If it does, then you can kick start the process and enter into the necessary agreement with all parties.
Frequently Asked Questions
Otherwise known as residual value payment, this is a core aspect of a novated lease arrangement. However, under this arrangement, you do not pay as much as you would otherwise pay under the regular finance arrangement.
However, what you need to pay depends on existing tax rules, the loan amount, and the loan term. It reflects the market value of the vehicle at the lease termination.
This refers to a novated lease arrangement where your employer should guarantee the payment of the residual value at lease end. On the other hand, with a full novated lease arrangement, an employer must guarantee the balloon payment and other payments.
Typically, it is quite difficult for anyone with bad credit to get approved for novated leasing. Although you might decide to give it a try, we advise against it. Your best would be to get a bad credit car loan. Alternatively, you can find a guarantor to stand in for you.