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The Pros And Cons Of A Novated Lease

The Pros And Cons Of A Novated Lease

The Pros And Cons Of A Novated Lease

There has been a rise in the popularity of novated leases over the past few years. For those unfamiliar with the concept, a novated lease is a three way agreement, that is established between an employee, their employer and a leasing company. In order, to ensure that they get the best deal, many companies use an online novated lease calculator. There are many pros and cons to choosing a novated lease, here are a few key points.

The Novated Lease Process

The way this process usually starts is that an employee will approach a car leasing company. They sign a contract for the vehicle that they have chosen to lease. The employer, then fulfills the conditions of the lease, by deducting the monthly cost from the employee’s monthly salary. Some car novated lease agreements, are more comprehensive than others, including maintenance costs.

What are the Business Advantages?

One of the primary reasons for choosing this route as a business is that the employee can include the novated lease as a part of their salary package. This will mean that the employee can receive a lower taxable salary since the deductions for the novated lease will be made from their pre-tax salary. The best way to establish how useful this may be to your business is to use a good novated lease calculator. Check our calculator out at the Peel Subaru website for more information.

Freedom and Flexibility

As enticing as the financial aspect is, there is another advantage with flexibility and freedom. The employee has the freedom to choose the vehicle they want to lease. This is great for morale, and it gives the employee the flexibility to choose, what they want to do when the lease comes to an end. They may decide, to buy back the vehicle, or they may decide to select another vehicle using a new novated lease. They employee may also have the chance to make their own decisions regarding other factors, such as servicing, upgrades and maintenance options.

Some Disadvantages

While it is true, that there are financial benefits to choosing a novated lease, they may not always be the best solution. These kinds of arrangements are better for employees that are in a higher tax bracket. Tax benefits, increase significantly as the salary size increases, making a novated lease a good option. When using a novated lease calculator, make sure that the agreement terms maximise the employee’s financial standing.  Another disadvantage is that although the employee does have some negotiation power, they are still subject to the terms set down in the contract by the leasing company. As such, it is vitally important to read the contract carefully and ask plenty of questions before signing.

If you would like to know more about arranging a novated lease, contact us at Peel Subaru. We have a novated lease calculator available, and we will be happy to discuss your requirements. Get in touch with us today and we will be happy to answer any further questions you may have.