A novated lease is a three way agreement between you, your employer and a finance company.

In fact, look at it as another form of finance with a big difference - it comes with some very attractive benefits.

• Pay for lease payments and running costs with pre-tax dollars to increase your take home pay
• Enjoy unrestricted use of your vehicle, whether its for work or pleasure
• Don’t pay GST - that stays in your back pocket
• There’s no deposit - so you can be in the car you want today
• The terms are flexible – because you’re not locked in, you can upgrade to something new any time you like
• Lease more than one vehicle at a time (with your employer’s consent)
• Forget budget stress - a single fortnightly payment takes care of everything

How does it work?

The finance company will buy the vehicle on your behalf and you pay back an agreed amount each month for the term of the lease. This could be anywhere between 1-5 years. Each rental payment that is made effectively reduces the total balance outstanding on the lease, upon payment of the last rental you will be be given the option to purchase the vehicle for the residual value, which is GST inclusive.

Therefore, at the end of the lease period, you can pay out the residual value of the car, refinance or simply sell it. If you make a profit you get to keep it - tax free.

With a Smartleasing fully maintained novated lease, your monthly lease payment is deducted from your gross salary – so you’ll be lowering your income tax and increasing your take home pay. Plus all your running costs, including fuel, insurance, registration, servicing and tyres, are included in a single fortnightly payment - taken directly from your pre tax salary.

What is a residual value?

The residual value of your vehicle is a percentage of the amount you financed that must be paid at the end of the lease term.

The percentage is set by the Australian Taxation Office (ATO) and will vary depending on the length of the lease. Your residual value will always be specified in the Lease Agreement.

 

Next... Sourcing your Vehicle