There are quite a few novated lease companies in Australia who will help you salary package your car through your employer.
Unfortunately, some employees are locked into working with their employer's preferred novated lease provider. But if you have the flexibility to shop around for your novated lease, it’s important to pick the right company to work with.
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This will show you how much your novated lease will cost based on information about you (e.g. your salary and how many kms you drive per year), the car you want to lease and the lease duration.
The novated lease company's quote should outline:
If you decide to go ahead, the novated lease company can help you source a new or used car to novate through their connections with dealers. This is optional, and you are free to source the car yourself if you’d prefer.
The benefit of getting help from the novated lease company is that they can sometimes negotiate discounts or find a car that will be delivered sooner.
They will also be able to advise you on the cars that will save you the most money, e.g the electric cars that are eligible for the novated lease fringe benefits tax exemption.
Novated leasing companies do not provide the finance. Instead they will work with a lender to get your finance approved. This can involve everything from advising on which lender will offer the best deal, to submitting the finance application for you.
Your novated lease company will establish the lease agreement that you and your employer will need to sign to finalise the arrangement.
They will then provide your employer with everything they need to ensure your salary sacrifice car paymemts are deducted correctly.
For example, they will ensure the pre- and post-tax salary deductions means there is no fringe benefits tax for you or your employer to pay. That’s assuming you are not eligible for the FBT exemption on an electric car novated lease.
The novated lease provider will also take care of any ongoing admin. That could include sending you a fuel card to pay for fuel, or reimbursing you for any car running costs you have paid for yourself.
If you need to increase or decrease your running cost budget, the novated lease provider will also take care of that.
When your novated lease term ends, the provider will advise you on your options and help you with the next steps (e.g. renewing the lease or setting up a new one with a different car).
Unfortunately, not everyone is able to shop around for the best novated lease provider to work with. This is because some employers have ‘exclusive contracts’ with a particular provider. If that’s the case you will need to use that company, no matter how good or bad (and expensive) they are.
If that’s the situation you’re in, ask your employer why you don’t have the option to shop around for the best company for your novated lease. Remember, the ability to salary sacrifice your car through a novated lease is an employee perk. Employers looking to give the best experience and financial savings to their employees should be offering choice.
Shaun McGowan, Founder of Money.com.au
In other cases, some employers will use a certain company for the lease admin, but employees can choose their own novated lease company to take care of the finance and the other aspects of the lease.
This is usually referred to as a ‘self-managed lease’. But in reality you are simply using your choice of novated lease company to manage the process for you, source the finance and establish the lease. Your employer’s provider then takes over the ongoing lease admin.
If you’re able to shop around, ideally get a few quotes to see who’s offering you the best novated lease deal. Depending on what car you’re buying, the manufacturer may also offer a novated leasing service.
Here’s what to consider when deciding between novated lease companies:
Novated lease companies help you source the finance for your lease from a specialist lender. They will also deal with the lender on your behalf – for example, by preparing and submitting the finance application.
Most novated lease companies work with several lenders and will submit your application to the one offering the best deal. But ultimately it’s up to you if you want to progress with an application with that lender.
Be wary of novated lease companies that are not transparent about the finance providers you will have access to. Some providers funnel all their clients’ applications to a single finance company (or a very small number of providers) charging high rates and fees.
Just as with a car loan, it’s important to understand how your novated lease is financed, which lender is providing the finance and what you’re being charged in interest and fees.
Novated lease guides and resources
Find out more about the possible savings, benefits and things to watch out for, plus your range of options with a novated lease in Australia.