Novated Lease – An Advantageous Agreement

Novated lease agreement is specifically an Australian concept. In other countries it refers to the condition where a car lease is reassigned from one party to another.

Novated Lease Explained

A novated lease is a contract (called a novation contract) between 3 parties. These are:

• You (the member of staff)
• The car finance party (or lease company) and
• Your company

In short, the way it works is along these lines. You (the employee) take part in a contract to rent a car from a lease company. Your boss then is in agreement to capture the accountability for making payments. These payments are usually made out of the workers pre-tax wages (thus, the term salary sacrifice).

Upon termination of service, the accountability for the lease falls back on the worker (i.e. you).

There are 2 different types of novated leases:

• Novated finance lease
• Novated operating lease

Novated Car Lease Elements

• The lease is taken out in your name; your manager signs a novation contract taking on reimbursement duties.
• Buying a car through a novated lease means you won’t have to make use of your cash flow to fund the car
• In the affair, if you change companies the vehicle still remains yours.
• Your boss compensates the car leasing payments directly to the car finance company.
• Offering the workers a car lease is easy and company’s balance sheet is also not affected by it
• You have a complete choice on what you want to buy and where from

Novated Car Lease Advantages

• You have the use of the vehicle without planning for the reimbursements.
• You can buy the vehicle, devoid of giving any deposit or the botheration related to the process, too
• The novated lease contract is arranged in such a way that in the process if the employee leaves the company; the company is not left with the trouble of a car which is of no use or is old.
• There are many tax benefits headed for the company with the Finance lease.
• The employee can make all the choices they want to customize their car lease agreement. They can select the color, accessories etc.