Aside from a property, a vehicle is the second-largest investment that you can make in your entire lifetime. The last thing you’d want is to be in debt for it, which is why the idea of a novated lease is so attractive. It’s a popular car leasing programme here in the country. In this article, we’re going to discuss everything you need to know about it and why you will need a novated lease calculator to get the most from your investment.
What’s a Novated Lease?
If you’re working in a corporate workplace or is running a business, you may have heard your financial advisor mention it once or twice. A novated lease is a car leasing agreement that brings a “third party” into the mix. So, it involves three sides: you, your employer, and a third-party financier. While it can save you money in the long run, you’ll have second thoughts about it at first since you’ll be paying for something that you won’t even own, hence why it’s called a ‘lease.’
The Tax Benefits
On the bright side, we turn to the word, ‘novated.’ It has something to do with your tax and accounts, which is good news. The reason is that a novated lease can help you access some money that might otherwise turn into tax deductions.
So, by putting everything into the puzzle, a novated lease means that your employer plays a vital role in your leasing agreement. Through them, you can pay for your vehicle as part of your salary package. This option saves them money as well, so it’s a win-win for both you and your employer. The catch is that your car loan will be paid using your pre-tax earnings.
You can calculate your income tax using a novated lease calculator and determine your now reduced salary. That means you now have more disposable income. The final tax bonus is not having to pay for GST on the purchase price of your car when you’re not buying it. Doing so will reduce the overall cost by ten per cent.
How Does It Work?
When you commit to a novated lease, you’ll be leasing a car for a set duration, usually around two to five years. At the end of the contract, you can either trade up to a new vehicle model and renew your leasing contract, or you can pay a predetermined fee to buy the remainder of the contract and keep your car for good. These two options give you maximum flexibility. Are you looking to exchange your old model with a new one? Have you fallen in love with your vehicle and don’t want to replace it ever again? Check and check! You can make anything happen with a novated lease.