A novated lease case study

Now that you know all about novated leasing, chances are that you’re looking for a clear breakdown of the process. We’ve got you covered with our novated lease case study, which presents a clear, detailed example of the type of experience you can expect with us at Leaselab. Bear in mind that this scenario is an indication only – as the most powerful aspect of a novated lease is its flexibility. So your circumstances may vary from this one.

Meet Nita, a working professional in her twenties.

Nita is 27 and a web developer in a digital marketing team earning $80k per year. She’s looking to get a new car and has heard that novated leasing might be the most cost-effective way to do so.

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Research

Nita researches novated car lease providers and chats to a few to find out whether they're a fit for her. She learns that she’ll need to involve her employer, and after speaking with them finds out that they don't provide novated leasing yet.

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Calculating costs and savings

After trying a couple of novated lease calculators to get an idea of her savings and what her payments will be, she calls Leaselab and asks some questions.

Nita thinks she wants a Kia EV5 or something similar, and Leaselab is able to provide options and assist in making that decision. As Leaselab doesn’t affiliate with any brand or garage, they can keep selections as broad as possible and this flexibility is how they’re able to find the most savings for people.

To begin with, Leaselab explains that they’re able to save Nita the GST component on the vehicle purchase price, around $6,000 of the $65,000 total. They may also be able to access fleet pricing to make an additional saving via the Leaselab fleet pricing network.

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Getting a quote

After discussing Nita’s typical vehicle usage, Leaselab is able to forecast Nita’s average vehicle running costs, including things like electricity, servicing costs, tyres, insurance, rego, etc.

Nita wants to include all these costs in her novated lease to maximise her savings.

Leaselab explains that the estimate is usually quite accurate. However, if her regular payments are higher than needed, Nita will build up a budget surplus that she can use to pay for unexpected car fixes and expenses. If this budget isn’t used throughout the term of her lease, she can have it returned to her at the end of the lease.

Nita receives her quote via email immediately. Moving quickly and efficiently is something that we at Leaselab pride ourselves on.

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Thinking time

Leaselab encourages Nita to take time to review the quote and come back to them with any questions that may arise, ensuring that she is fully informed before making a final decision.

In the meantime, Leaselab is able to get her pre-approved for the lease. Leaselab explains that there’s no obligation to being pre-approved. Leaselab is also able to contact Nita’s employer and guide them through the process of establishing and paying for the lease.

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Going ahead

Having reviewed the numbers, Nita decides that a novated lease is the way to go due to the significant tax savings (over $42,000 in this scenario).

The thought of paying the full amount of $65,000 upfront seemed a poor use of money to Nita. If she was to enter the novated lease and put $65,000 into an interest bearing account at 3.75% p/a, she would make $12,187.

Conversely, if instead of a novated lease she were to take our a car loan for $65,000 at 7.99% p/a, she would pay $25,967 in interest over a 5-year period.

Nita’s employer was happy with the phone call and guidance received from Leaselab. In fact, they found the process to be a lot simpler than they had imagined and now wants to introduce novated leasing as a perk to their employees. Nita’s employer is reassured that they are not liable for the lease and it will cost them nothing out of pocket. They also love that there’s next to no time involved for their payroll office to set it up.

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The admin step

The Employee form: Leaselab emails Nita her final lease documentation, which is straight forward to complete and sign.

The Employer form: Leaselab also sends a short employer agreement to Nita’s employer. This only requires a signature to confirm that the company will make Nita’s car payments out of Nita’s salary on her behalf. There is also a document outlining the deductions they need to apply to Nita’s salary, which is a ‘set and forget’ function.

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Getting the new car

After the paperwork is finalised, Nita receives her welcome kit from Leaselab and picks up her car. The lease deduction payment is automated and commences after she collects the car. Nita’s welcome kit includes her Leaselab card, which allows her to pay for vehicle expenditure out of her pre-tax novated lease account in line with agreed budgets. She knows she can login to Leaselab's client portal at any time to view her account balance and submit any receipts to be quickly reimbursed if she pays for fuel or servicing out of pocket.

Nita has a 5-year lease and will be contacted by Leaselab six months before the end of her lease to discuss her options. Until then, she’ll enjoy her car, the hassle-free convenience of having to make no car payments herself, and of course the money she’s saved in tax, which she could decide to invest elsewhere.

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The end of the lease

Five years later, Nita’s lease is at an end. Across the term of her lease Nita has saved more than $42,000 in tax.

Nita’s already decided that she wants to start a new lease and upgrade to a newer car.

She’s earning more income now, so opts for a more expensive car. But given the tax-saving effect of the novation, she will pay around the same amount out of pocket. Leaselab is able to trade her existing car for almost $5,000 more than the residual value (the balance remaining) on her lease, so she pockets that $5,000 as tax-free profit. She then completes the paperwork on her new car and lease (which is faster this time), and she’s on her way again to five more years of incredible savings.

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