What’s A Novated Lease?

Novated Lease

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If you are an Australian who’s looking for ways to make vehicle ownership more convenient and affordable, you might want to consider some of the advantages of arranging for a novated lease. This type of lease is a special, three party agreement between a consumer, that consumer’s employer, and a lender who provides car finance to that consumer. In this type of arrangement, the consumer’s employer makes payments for the employee’s vehicle instead of the employee himself or herself. This setup also involves the employer making payments for other vehicle related expenses as well including for the vehicle insurance and for the fuel for the vehicle in question. While the novated lease setup is most commonly associated with situations where the employee is using the vehicle for job related responsibilities, this is not always necessarily the case.

TheĀ Stratton Finance novated lease agreement is popular in Australia not only because it tends to offer some distinct benefits. It’s also popular because it tends to offer some distinct benefits for both the employer and the lender as well. There following are some of the key benefits to keep in mind when evaluated the potentials of the novated lease:

  • Benefits provided to the employee- One key benefit of this type of arrangement for the employee is that the employee doesn’t have to remember to make a vehicle payment anymore. Also, the employee can in many cases take advantage of a lower tax liability. A novated lease payment from an employer can often mean that the employee has to pay only a fringe benefit tax, which can be lower than a general income tax.
  • Benefits provided to the employer- The employer often can benefit from the novated lease arrangement because the employer needs the employee to have the vehicle and use it for work related tasks. This way, the employer knows that the employee will have a vehicle available to fulfill company responsibilities. Also, the employer can enjoy some tax advantages as well.
  • Benefits provided to the lender- The lender might enjoy more peace of mind by knowing payments on the lease are going to come in more reliably. The employer needs to make sure that the payments are coming in in order to make sure the vehicle is available for work related tasks. The lender will have more of a guarantee of receiving novated lease payments.

Australian consumers who are employed should look into the possibility of saving money and enjoy greater convenience with a novated lease. They may want to explore their employer’s policy on this issue.

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