Novated Lease versus Buying Outright
With so many financial options when purchasing a vehicle it can be common place for people to get confused over what may be best for them. Often we are asked by our clients if acquiring a car on a Novated Lease is really better off than buying the car outright. This month we thought we would lift the lid on this debate and examine where the benefits really lay.
Many Accountants would advise against investing cash into a depreciating asset, and may even suggest that the money would be better placed against a mortgage, deposit for a house or other asset. Whilst owning the vehicle outright may assist with monthly cash-flow, its important to remember that you would still need to pay for the running costs out of taxable income if this was the route you went down. So how can a Novated Lease be more beneficial?
1. Purchase Price Discounts
ProNovate purchases many vehicles every day for our clients, and as a result you can enjoy substantial fleet discounts on any vehicle through our bulk-buying power. No hassles or haggling from you, within 24 hours we have the pricing back to you. Here’s some recent ones that may look familiar!
- Nissan Patrol – over $11,600
- Kia Sorento – over $8,000
2. Pay the GST-Exclusive Purchase Price
On top of the discounts above, with a Novated Lease you only finance the GST-exclusive amount so you pay interest on 10% less than paying cash or a mortgage redraw. In the above examples, that equates to a further reduction of:
- Nissan Patrol – over $4,000
- Kia Sorento $4,600
3. Pay for the Finance & Running Costs from Pre-Tax Income
With a Novated Lease the finance and running costs are salary sacrificed, meaning that a large chunk of this expense would be recovered from your pre-tax income, meaning you could save up to 49% on these costs!
4. Claim Back the GST on the Running Costs
The Novated Lease will also allow you to get a further 10% off the portion of running costs that comes out pre-tax. This can include fuel, insurance, tyres, maintenance, car wshes and registration, saving you thousands more. Better still, this doesn’t matter if you use the car for business or 100% personal use.
5. Profit when you sell the vehicle is Tax Free
The ATO sets a minimum residual value or balloon payment at the end of the lease and it varies according to the length of the lease. We can help you pick the best Novated Lease package to help ensure that you make money when you sell the car at the end. Any profit is tax-free in your hands.
6. Convenience – All Running Costs are Pre-Paid
With all running costs included in the fixed monthly Novated Lease payment, you will have access to a fuel card and any other running expenses can simply be reimbursed to you overnight using our mobile app.
The information above should not be taken as definitive advice, and it is recommended that you obtain independent advice to discuss the tax and legal implications relevant to you individual circumstances.
For an obligation-free quote on how much you could benefit from a Novated Lease, simply fill out the form below: