Novated leasing is one of the most cost-effective ways to buy a car. Smartleasing customers not only save thousands of dollars in purchase costs and running expenses, but they also tap into a raft of tax-free benefits. Sound too good to be true? It’s not. Here are the top four myths of novated leasing – busted!
Myth #1: I won’t own my car
Yes, you will. The term ‘leasing’ scares off many car buyers, who’ve lumped it in the same category as renting a house versus owning your home. In reality, novated leasing is just a form of finance that enables you to buy and run your car cheaper and with less impact on your personal finances, while also reducing your tax liability. Your car is registered in your name, and you don’t have to hand it back at the end of the lease. You can refinance and extend the lease period, pay out the amount owing or upgrade to a new car. The ownership arrangements are no different than if you took out a personal loan to purchase the car independently. Either way, the financier still has a title on the vehicle.
Myth #2: I can only lease new cars
Novated leasing is not reserved exclusively for those buying a shiny new set of wheels, fresh off the showroom floor. You can take out a novated lease on a used car bought from a dealership or private seller, and even enter a leasing arrangement with your current car under a ‘sale and lease back’ agreement. Let’s say you have a two-year-old car with $20,000 in finance owing. Smartleasing will pay you the market value of your car and take over the maintenance, running and financing costs on your behalf. If your car is worth $22,000, that’s a $2,000 windfall for you. If it’s worth slightly less, you pay down the difference but still reap the ongoing tax benefits and savings.
Myth #3: I don’t earn enough money to make leasing worthwhile
You will make big savings, regardless of how much money you earn. Novated leasing enables employees of any wage bracket to unlock tax-free savings and benefits. The savings kick in straightaway with the discounted purchase price of your car, thanks to the power of third-party volume buying. Let’s say this purchasing power saves you $3,000 on a $30,000 car, then you add in an additional $3,000 in GST – that’s $6,000 in savings before you even get behind the wheel. Next, factor in running and maintenance expenses, including registration, fuel, servicing and roadside assistance. All these costs are GST-free and taken out of your pre-tax salary as part of your monthly leasing fee. The net effect is that you pay less for your vehicle while at the same time reducing your taxable income. Win-win!
Myth #4: I don’t clock up enough kilometres to benefit
Until recently, the more kilometres you travelled, the greater the tax benefit you reaped from novated leasing. But not anymore. The tax rules have changed. Now you can tap into handsome tax savings on the purchase of a car, regardless of how many kilometres you drive per annum. Under salary packaging arrangements, 20% of the vehicle’s FBT base value (which is the car’s drive away price minus on-road costs) must be paid with post-tax dollars, while the balance of the annual lease package is tax-free. And because your leasing costs are calculated, in part, according to how much you drive, you only pay for what you use.