In the market for a new car? Novated leases can save you thousands a year, as well as a lot of hassle. Photo: Tramino.
If it sounds too good to be true, it generally is – unless you’re talking novated leases.
According to Alliance Leasing general manager Guy Ewin, novated leases are “one of the legitimately good schemes out there”.
“A lot of people think there’s a catch, but there really isn’t,” he says. “Even with the interest rates being what they are, if you do the research you’ll find you’re better off with a novated lease.”
A novated lease is a finance arrangement used with salary packaging, where your employer pays for your car lease and car running costs out of your salary package through a combination of pre- and post-tax salary deductions.
The main benefit is the tax savings because the pre-tax deductions reduce your taxable income. The savings aren’t minor, either.
“The average is about $4000 for most combustion engine cars, and $8000 to $10,000 for electric vehicles (EVs) due to government incentives, such as exemption from FBT (Fringe Benefit Tax),” Guy says.
“That’s not taking into consideration the 10 per cent saving on the purchase price, or the discounts that providers like Alliance Leasing get through manufacturers on our fleet network, which are typically better than anything you’ll negotiate off the floor.”
Novated leases allow you to bundle all your car running costs into one regular, ongoing, tax-effective payment. They can be for 100 per cent private use – even for Australian Public Service (APS) members. And there’s no logbook requirements or restrictions on the amount of travel.
For these reasons, Guy says many people opt into novated leases for the convenience of having an employer pay for the running costs.
“I can’t budget to save my life,” he says. “When a bill comes up, if I need new tyres or something fixed, I send in receipts and it gets paid for me. I don’t need to worry about putting cash aside for those running costs,” he says.
Alliance Leasing general manager Guy Ewin says novated leases are a no-brainer. Photo: Alliance Leasing.
If you’re interested in a novated lease, Guy recommends starting a conversation with your payroll or human resources (HR) team to find out your options.
This applies particularly to those in the APS because many government departments have exclusive arrangements with certain providers.
“Most APS employees have a novated lease option, but depending on their department, some will only be able to use specific providers,” Guy says.
“Alliance Leasing is veteran owned so we of course service anyone in the Australian Defence Force. We also cover the ACT Government, QLD Government, Services Australia and much more,” he says.
If you’re not bound to certain providers, most start with an internet search. But if this is too broad, there’s the Alliance Leasing calculator. It pulls together data such as running costs including fuel, lease terms and current interest rates then runs it against your parameters – vehicle type, salary and roughly how many kilometres you travel – to provide a live quote.
“Our calculator is a popular starting point because it’s pretty accurate, and there are no strings attached. It’s free, you don’t need to input any personal details or enquire to get a quote,” Guy says.
“If you like what you see, you can then request a formal quote.”
Whichever provider you choose, Guy advises asking a series of questions to ensure there are no “gotcha moments”.
Interest rates is the obvious one, but it helps to check if the provider has set-up, management or exit fees that aren’t presented upfront.
“We operate under a ‘fee-free structure,’ which signifies that we do not impose additional hidden fees; our only charge is a management fee that is transparently communicated from the outset,” Guy says.
“While such fees are prevalent in the industry and can often take clients by surprise, our commitment to transparency remains paramount. Furthermore, as a veteran-owned enterprise, we are pleased to waive the management fee for all veterans and Defence Australian public servants.
“If the base rate seems cheaper than other quotes, it might have been calculated before these fees, and in reality the finance repayments are dearer. So it’s worth asking the question.”
For additional information, a complimentary novated lease calculator, or free online quote, please visit Alliance Leasing.
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