The key points‍

As people seek increasingly creative ways to be frugal, one hot discussion topic is the most cost-effective way to purchase a new car. After all, it’s one of life’s biggest expenses.

If one of your friends or family members has a novated car lease, no doubt they’ve been chewing your ear off that it’s the best way to keep money in your pocket.

It’s true that a novated lease has a long list of benefits, including:

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1. Reducing your tax bill by using your pre-tax income

The first and most important thing you need to know is that a novated lease comes out of your pre-tax salary (which you can’t do with a standard car loan). And because of that, in the eyes of the tax department it reduces your total salary - and therefore how much tax you have to pay.

So you’re essentially using money that would’ve otherwise gone to the ATO to get yourself a new car! It’s the main game changer to really think about when weighing novated leases against other ways to get a new car.

We’ve got a handy novated lease calculator that helps you estimate how much tax it could save you.

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2. Save up to $6,334 in GST on the vehicle

Because of the way a novated lease is set up between you, your employer and a financier, you don’t have to pay the full GST on the vehicle. In fact, you can save up to $6,334 in GST - so depending on the price of your vehicle, you might get it GST-free!

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3. Your car expenses are GST-free

A novated lease lets you save on GST associated with fuel, servicing, car parts and labour, which is an immediate 10% saving on all of your car’s running costs. That alone could be thousands of dollars a year in savings.

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4. All of your car costs can be bundled into your novated lease

One of the great things about a novated lease package is the ability to put the car’s running costs – fuel, servicing, roadside assistance, insurance, registration, tyres – on your lease. By doing so, you pay for all of it using your pre-tax income (just like your car payments), which helps you save even more money on your yearly tax bill.

You can see how quickly all of these savings add up. And you’re probably starting to understand why a novated lease is the best way for you to get your next car.

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5. Customise your lease to suit your exact requirements

There’s no supplier list you need to choose from in order to access the benefits of a novated lease - pick and choose the suppliers that make you comfortable.

For example, say you’d like to stick with your current insurer - you can, no problems.

If you like the service garage you’ve always used, you can bring that over to your novated lease and include that too.

If you want to include fuel and roadside assistance but nothing else, no problem. We can accommodate that.

You can add and remove things from your lease to make any combination you want. As long as it works for you, that’s the most important thing.

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6. Smooth out your costs and avoid bill shock

By bundling all of your running costs into your lease, you can avoid that sinking feeling you get when all of your big payments arrive at once - the dreaded ‘bill shock’.

Instead, you make a predictable, affordable and simple monthly payment that covers all of your costs for the year.

You might be wondering how including your running costs will affect your monthly novated lease payment, given the ad hoc nature of fuelling up or getting a service – or even an unexpected cost, such as getting something fixed.

Well, to keep your monthly lease payments predictable, a forecast of your fuel usage and other costs is calculated upfront and balanced across your entire lease. This is pretty handy if you like to plan your budget for the year.

Not bad, eh?

If your usage is lower than your payments and you build up a surplus, it’s still your money and can be returned or used towards anything car expense-related.

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7. Fleet pricing for your car

Leaselab has access to fleet pricing on most cars, which means getting the best price on the car you want.

Because we work with so many different dealerships to source cars for our customers, we can negotiate a better price than a dealership would offer you directly.

So you can add this to your rapidly growing savings pile thanks to novated leasing.

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Novated lease considerations

At Leaselab, we pride ourselves on educating hard working Australians about novated car leases. We want to deal in facts and be as transparent as possible. And while there are plenty of benefits to get excited about, we want this to be a balanced guide.

So here are some considerations for you to ponder:

1. In the end, it’s still paying for your next car. So, the usual pre-budgeting needs to be done by you. Yes, there are plenty of savings and cost reductions, but you still have to be able to make these payments.
2. You need to be employed and paid via PAYG. And if you leave or lose your job, you need to be comfortable handling lease payments yourself until you find your next job.
3. You’ll need to ensure your new employer is set up for novated leasing, but if they’re not you can simply put us in touch with them directly and we can do all the heavy lifting for you. Getting setup is quick and easy.

If you’d prefer to chat through the pros and cons and any questions you have, feel free to give us a call on 1300 888 594 or get in touch. We’ve love to guide you through your journey!