A Novated Lease is a Finance Lease between the Financier and the employee, which is then ‘novated’ to the employer. The employee chooses the vehicle and the employer pays the employees instalment obligations from the employee’s salary.
If the employee leaves their employer, the employee keeps the vehicle, including the instalment obligations, or arranges for their new employer to take over the instalment payment obligations.
Key points:
• A Novated Lease is a Finance Lease between the financier and an employee, which is then “novated” to the employer.
• After the employee chooses the vehicle, the employer pays the loan instalments from the employee’s salary.
• If the employee leaves their job, they keep the vehicle and subsequently take over the instalment obligations.
• Arrangements can be made for the customer’s new employer to take over instalments, if desired.
| DETAIL | |
| Purpose | Motor vehicle finance for employee which is then “Novated” to the employer. |
| Term | Minimum of 12 months to a maximum of five years. |
| Minimum amount financed | $7,500 |
| Age of asset | Motor vehicles – maximum age of 8 years at end of loan. |
| Instalments | The instalment amount is fixed for the duration of the agreement. |
| Payment frequency | Monthly. |
| Payment methods | The preferred method is direct debit. |
| Deposit | Cannot make a deposit on this type of contract. |
| Can insurance, fee and charges be financed? | No. All fees and charges must be paid for upfront. |
| Balloon/residual value | A residual value is compulsory. The minimum residual is set in accordance with the ATO guidelines. |
Benefits to Business (Employer):
• No risk of being left with unwanted company vehicles; if the employee leaves they take the vehicle and payment obligations with them.
• Tax benefits may apply for the employer’s business.
Benefits for Employees:
• Increases the effective value of a salary package – lease payments come from salary.
• Unlimited private use of the vehicle.
• Flexibility – complete choice of vehicle and where to purchase it.
• Never left without a vehicle—retain the vehicle even if changing jobs.
• Employee has effective control of the vehicle at all times.
• Employer will make repayments on behalf of the employee, removing the need to budget for payments.