There are many ways to pay off a car. One popular way is through novated leasing. This payment option allows an employee to purchase a personal vehicle through salary packaging, determined by using a novated lease calculator. Doing so reduces the buying price of a new car by up to 10 percent. Given that it helps save workers thousands of dollars on car purchases, it is no wonder that it is a popular choice among employees.
Supporting Data on Its Popularity
According to a news report from SBS, novated Leasing accounted for at least 21 per cent of car sales in Australia in 2014. Additionally, at least 35 per cent of the cars purchased through a novated lease are locally manufactured cars.
Rich individuals are not the only ones taking up the offer. In fact, SBS found that at least 70 per cent of novated lease users earn less than $100,000: nurses, civil servants, teachers, police and charity workers are among the most common users. It is worth noting, however, that any employed person could use a salary package for their car.
Novated Lease Benefits for Individuals
Savings is perhaps the most crucial factor in a novated lease. When employees make monthly payments through pre-tax earnings, they are able to lower their taxable income. Thus, they pay lower taxes. They can even, on occasion, drop a tax bracket and pay even less.
The novated lease holder then becomes the proud owner of his or her car and can use it for whatever purpose he or she wants. Furthermore, all on-road costs and other expensive overheads — from fuel and breakdown repair to insurance — are included in the lease. This will allow the car owner to budget more efficiently.
Novated Lease Benefits for Companies
Given the popularity of novated leasing, employers are using the lease as a means to attract job candidates. When the best person for the job has a novated lease, the company will want to extend one to the candidate. Otherwise, the candidate will lose the benefits of salary packaging and switch leasing for a personal loan.
Being able to afford a personal car in Australia is possible with a novated lease. Before taking one out, though, it is vital to first contact the financial consultant of the company. This ensures that both employee and employer are happy with the estimated salary package they will create together.