Surprising Benefits of a Novated Lease
Novated leases are increasingly becoming popular in Australia these days because of the benefits they offer employers and employees. A novated lease is a way of financing vehicles. It is an agreement that involves the financing company, the employer, and employee, where the employer takes responsibility for the novated lease on behalf of the employee. Usually, an employer pays on behalf of his or her employee and makes deductions from the pre-tax income of the employee. Terms of a novated lease may differ slightly depending on the underlying circumstances. A typical novated lease contract requires a company to pay and guarantee the residual value of a car for the term of the agreement. A split novated lease requires the employee to guarantee the car’s value when the lease period expires. Australia is the leading country of the novated leases and a popular introducer includes Stratton Finance https://www.strattonfinance.com.au/ because this type of contract is popular there.
Advantages of a novated lease
A novated lease is an excellent way for employees to incorporate a car into their salary package. In other words, an employee secures the novated lease, but his or her employer makes the necessary monthly lease payments out of the employee’s salary through a novated contract. Also, the lease agreement enables employers to take up the car payments as well as maintenance costs from the pre-tax salary of the employee. That reduces the taxable salary of the employee, which in turn cuts the amount of tax income the employee will pay.
A novated lease also offers an employee more flexibility than any other form of car acquisition with the car selection. An employee has the chance to own the vehicle even after the expiry of the current novated lease, begin a new agreement, or pay out the current lease agreement. Besides, since you own the car and the lease contract is in your name, you control the kind of care and maintenance that will be offered to your vehicle as well as how you want to use it.
Employers too enjoy benefits from a novated lease https://www.strattonfinance.com.au/novated-lease . It offers them a simple and effective technique of adding value to the salary package of their employees. A novated lease also impacts positively on the recruitment and staff retention for employers. Employers don’t have to run a fleet of company vehicles because employees have the chance to own their cars. Also, employers don’t carry the obligation of paying payments for an employee who has left their organization. Consequently, employers are relieved the time consuming and costly burden of managing and getting rid of the fleet of cars left behind.
The beauty of a novated lease is that it doesn’t have risks like other car financing methods. Employees can choose their desired car model. If an employee leaves a company, the novated lease agreement is no longer a responsibility of the employer.