Novated Lease Queries

sauce2k on 13/08/2021 - 11:46
Last edited 13/08/2021 - 12:20

Hi all,

I will have to give up my work car soon (part of salary sacrifice package) and have been offered to do novated lease instead.

Hoping to see what’s everyone’s thoughts and experience with novated lease?

I currently have my owned car (fully paid) and barely driven since I bought it (09 model, 80k kms so far).

I’m tossing either to sell my own car and get on a novated lease so I will have a new car or just keep driving my own car which I will probably upgrade within the next 3-4 years.

My issue with novated lease is that I heard someone said if you leave the current employer and go to a new one but the new employer doesn’t offer novated lease then things could get messy. In addition to this, I’m a bit confused that say if I do a 2 year novated lease and at the end of the 2 year lease I will need to pay a ballon payment for whatever is left to be paid. Is this correct?

Also would like to add my work requires driving to see clients but obviously right now that’s impossible and I don’t see the situation getting better any time soon. My other option could be keep my own car for now and just do novated lease when lockdown ends.

Thanks in advance.

Edit: thanks so much for the responses so far and it looks like I will go down the path of handing back the work car and drive my own car instead.

Totally agree the supply/demand market is not in my favour at the moment. I was thinking if I were to sell my car now, I would get a pretty decent price vs selling it after this pandemic.

Automotive

Comments

  • Soluble on 13/08/2021 - 11:57
    +2

    I'd be handing back the car if that's the option and no out of pocket. The lease payments remain consistent while the car declines in value. Look at how much the remaining would cost you on the novated lease + buyout vs buying that same car outright.

    • sauce2k on 13/08/2021 - 13:12

      Thank you!

  • Pelicannn on 13/08/2021 - 11:59
    +5

    Generally these days novated leases are crap due to the fees. I looked at Stratton and SmartSalary and both of them had effective interest rates of 15-16% when you took into account the management fees they charged.

    It pretty much removes most of the tax benefits so it becomes more of a convenience thing.

    • sauce2k on 13/08/2021 - 13:13

      I read that post Julia Gillard the FBT has gone downhill! Thank you!

  • pennypincha on 13/08/2021 - 12:04
    +2

    I'd say you should use your own car. Don't bother buying a new one now - supply vs demand is not in your favour. No point anyway if you're in lockdown.
    Hand back the company car, use your own. Sell once lockdown ends (you'll get a good price given the supply vs demand issues at the low KMs) and then think about either buying outright or novated lease on a new car.

    • sauce2k on 13/08/2021 - 13:17

      yep thank you for this!

  • thatonethere on 13/08/2021 - 12:06
    +1

    I'd keep driving the existing car to be honest. Or sell now and just take other transport for next couple years. Then do the novated lease/new car. Save some money.

    • sauce2k on 13/08/2021 - 13:17

      Yeh I would normally drive quite a bit including regional trips, so I definitely need a car :) thank you!

  • apsilon on 13/08/2021 - 12:24
    +4

    Given the current situation it's a no brainer to just use the car you have for now, especially if you're not actually driving anywhere. Leases are just a way to finance a vehicle. They can be beneficial in some circumstances (work through your specific case with your accountant) but for most people they at best break even or are worse off. You also have the pain of dealing with leasing companies which IME just isn't worth it. I'm yet to see any that are actually competent at doing their job after the paperwork is signed.

    • sauce2k on 13/08/2021 - 13:18

      True I hate financing things in general haha luckily the only thing I have is a mortgage at the moment.

      I will wait until this is all over and reassess the situation!

  • Gronk on 13/08/2021 - 12:54
    +2

    Totally agree the supply/demand market is not in my favour at the moment. I was thinking if I were to sell my car now, I would get a pretty decent price vs selling it after this pandemic.

    Yes, but you're selling and buying in the same market so you'll pay a premium for whatever new vehicle you buy.

    • sauce2k on 13/08/2021 - 13:18

      ah true haha didn't really think about this! Cheers Darren!

  • abovethelimit on 13/08/2021 - 14:00
    +1

    My 2c: I had leased my car with Smart Salary for 4 years pre-covid and will never down that rabbit hole unless you earn north of 200k. Fully novated lease is made up of pre-tax and post-tax component, keep in mind that your take home pay reduces once the pre-tax amount is deducted and then on top of that you will have to pay x amount post tax. As @toshjammi pointed out, novated lease comes as a bundled package with high interest rates and super high insurance premiums and you either opt in or opt out of optional packages only but never replace the bundle with something better that you found. Insurance premiums go up as soon as they see fleet or lease as they assume that you're on the road 24 x 7 and hence pose a significant risk for them via claims.

    Excess baggage when you're looking for work elsewhere as now your employment terms comes with conditions apply. I had a balloon for which I had to take out a loan once the lease ended. In the end, the only perks I had was I didnt cheap out on anything when it came to the car maintenance. The korean car lived a luxurious european life that it never asked for. If you can score a good deal on a new car and car loan in covid normal world, negotiate to throw in free service packages if you can, you're better off than novated lease cost wise. Tax savings was very minimal for what I was trying to achieve.

    • Trump2020 on 07/09/2021 - 14:51

      if you go with the Novated lease included insurance you really messed up. they quote around $1800 a year

      sort out your own insurance

  • Euphemistic on 13/08/2021 - 15:26

    Hang onto the current car and reconsider a lease in 3-4 years when you consider an upgrade.

    Personally I’m not keen on the novated lease thing. It locks you in, then you need to find a large sum of dosh at the end of the lease. It’s designed to get you to roll over to a new lease.

    If circumstances change, new job, want to change vehicles for other reasons etc it makes it more difficult.

  • [Deactivated] on 13/08/2021 - 16:56
    +1

    I've had a few novated leases which have worked well for me, from the original purchase, to cheaper expenses & tax savings, even with the higher interest rate. The things I learnt were to negotiate the buy price, sort out your own insurance, and all expenses do as chargebacks to the lease company. Also if you plan to take out a lease make it short term 1 or 2 years max as that is where you get the best tax benefits, as the depreciation is highest in the early years.

    • Trump2020 on 07/09/2021 - 14:57

      can you explain the chargebacks part

      • [Deactivated] on 07/09/2021 - 18:42
        +1

        You just submit the receipts to the lease company for reimbursement

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