Why are Novated Leases so popular?

“Tom from sales has one, Ann from accounts has one and I have one, why? Are you thinking of getting one?” Have you heard this before? Have you left the situation thinking “Why are these Novated Leases so popular and how come I haven’t had one before?” In truth tax savings products are not the most exciting topic of conversation however there is a growing trend towards them as a means to increased disposable income. Today we go into detail about why Novated Leases are increasing in popularity both in Australian business board rooms and at the lunch room table.
Saving your bottom line

Simply put Novated Leases save you tax. This tax saving comes as a double shot as the tax saving comes in both your pay pack and in your Goods and Service Tax (GST) liability. The Lease will save you in your pay pack as it’s an approved salary packaging service with the Australian Tax Office (ATO). This means that your vehicle expenses will be taken from your pre-tax salary. On the GST side you save on everything from the purchase price of the vehicle to regular servicing. While this is dependent on ATO rules it does mean that a Novated Lease will offer more GST savings than a standard lease.

Avoid large unexpected expenses

Big payments are painful but unexpected payments are even more painful. Think of the amount of times you were closing in on payday only to find out that your budgeting has been blown out by one big expense. These blowouts are frustrating and can be financially damaging especially where they put you in the red with your bank. With this in mind it’s important to note that the only way to overcome these problems is with good planning. A Novated Lease will offer you a real solution here as it will give you consistency with predictable payments which are approved upfront. This will help you navigate through your vehicle expenses without any harsh surprises.

Save on car expenses

Like with the tax and convenience benefits Novated Leases can also offer vehicle expense discounts. Some providers can offer these discounts as a result of big subscriber numbers. Some Novated Lease providers also operate as fleet management companies. As fleet management companies operate in a high volume business they can leverage the discounts they get for the benefit of their Novated Lease customers. This means discounts on purchase price, fuel, maintenance, roadside and servicing. Due to high numbers some providers can also benefit from discounts for services like insurance, finance and repairs.
Final thoughts

If you combine all the savings from GST and income tax with the convenience of predictable budgeting and fleet discounts you start to see why a novated lease is so popular. In short they work by finding the most effective way to buy a vehicle with the easiest way to keep up payments and the cheapest way to keep up maintenance.

Why not check out Fleetcare’s novated lease arrangements for yourself and see how much you can save just by paying for your car loan with your pre-tax salary!