Unique Original Articles » Benefits Of Novated Lease Agreements

The trend of buying a car under a novated lease arrangement is rapidly growing all over Australia. A novated lease is an agreement in between an employee, his or her employer and a car finance firm. This form of agreement is usually advantageous to all the related parties.

So, how does a novated lease work? Simply put, a novated lease permits a company to offer an employee with a vehicle which includes the lease repayments as part of the employee’s total remuneration package. In doing this, the business can meet their tool of trade fleet needs and also offering better flexibility and incentives for their employees.

This practice makes sure the cars that the business has are well-maintained. Additionally, these cars neither form a liability on the business nor do they become an asset.

This type of an agreement also offers considerable financial incentives in the event of an employee wanting to buy a car. If an employee leases the vehicle, they can ask their employer to make the monthly repayments instead of them from their pre-tax remuneration. The utilisation of pre-tax remuneration can legitimately cut down on an employee’s taxable remuneration leading to major income tax savings.
The ownership of the car stays with the employee always. If the employee changes employment, the car goes with them, and the novated lease gets shifted to the new employer.

Another benefit for the employer is that the vehicle is not deemed an asset or a liability thus doesn’t appear on the company’s balance sheet. To add to that, the company is not accountable for the on-going upkeep of the car and it goes when the employee leaves the company.

Finance companies usually regard novated lease arrangement favourably as the risks concerned in lease repayments by an individual are way better than with a corporate or other firm. The finance company, thus, has greater guarantee of payment if the employer makes payments instead of the employee.
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