A Novated Lease, is a three-way finance arrangement between you, your employer and the lease company, of which is usually at your employers choice. Part of the payment gets deducted form your pre taxable income, which can save on the tax you pay, the amount of which is depending on your tax bracket. You save the upfront cost of GST as its deducted and you get a fuel card, vehicle maintenance and comprehensive insurance all included! So convenient! You know when something sounds too good to be true. It usually is.
Things to consider about a novated lease:
- Will the deduction drop you in to a lower tax bracket?
- Will the post payment deduct prior to calculation of super contribution and employee contribution?
- What is the interest rate of the novated lease?
- If you leave your employer, you will be liable for the full payments with no tax deductions, unless your next employer is willing take the lease over.
- Is the GST benefit more than a normal discount you could get on the car? Breaking the arrangement may also mean you could lose the GST and package benefits; Plus early term charges;
- The residual will need to be paid in full, if you are intending to keep the car at the end regardless of the car’s value;
- What insurance provider is your novated lease company using? And will they use genuine manufactured parts if required?
- Check the price of car manufactures service package and whether they less than maintenance packages with the novated lease?
- FBT – Fringe benefit tax costs
- Are you using the car for work purposes and intend to claim this?
- How much are the fuel costs should you go over your estimated Kms? How much do they charge per Km, is this higher than the fuel costs per year if you were paying for your own fuel?
The quotes you receive will always highlight a yearly saving which can be enticing, although we would suggest that you check with your accountant to correctly calculate these costs for your personal situation over the entire period of your payments. Compare these with a quote from a dealer on the exact car with servicing packages and discounts.
Most manufacturers offer a guaranteed hand back on their own finance agreements at the end of an agreement, if the car is worth less than the balloon.
Add on insurances check
This is where it can get tricky –
The quotes you receive can be confusing, they may or may not have included other insurances in additional to your comprehensive insurance that you may not be aware of. These costs can add a significant amount on to you overall costs per year! If you unaware of these insurance add ons, then they are also worthless as you won’t know to use them, and may have been added incorrectly without checking if they were suitable for you to claim on if required.
These could be;
- Tyre and rim insurance
- Consumer credit insurance
- Gap insurance
- Warranty extension Insurance
- Risk protection insurance
How do I know if I have paid for junk insurance add ons?
All add on insurance policies are a consumer choice, under no circumstances should these policies be added on to your package without your prior knowledge.
Your finance agreement with the financier and the leasing package are separate, the insurances are added on to the costs of the package which you pay to the leasing company and not added on to your loan with the finance company. All of these details should have been explained to you in your initial proposal inclusive of any ‘Product Disclosure Statements’ about any optional general insurance. If purchased you should have received policy documents also.
Can Get My Refund help me claw back some of these costs?
YES! Thankfully this is where our industry expertise comes in!
Our team of specialists help you find exactly what was added for you and we can assist you with claiming back
- Easily and quickly apply online
- We request your information from the provider on your behalf and analyse these details for you.
- We submit your refund claim(s)
- You get paid!
We work on a No Refund No Fee policy – if there is nothing to claim there is nothing to pay!
Don’t delay cotact us today!