Why Going With A Novated Lease Presents A Win-Win Situation

Novated lease- the term does not sound like something you’d want to get familiar with, but it is to your own detriment not to look deeper into its meaning. If you’re an employer who wants to win over the best people as well as offer extra perks to your current staff, you’ll do well to find out how novated leases can help you inspire loyalty from your staff as well as boost your bottom line.

What exactly is this kind of lease and how does it work? Despite the unfamiliar term, it’s actually quite common in Australia. Basically, it allows the employer to make lease payments for a motor vehicle on behalf of an employee. The usual practice is for the employer to make payments from the employee’s pre-tax income. This effectively equates to the employee paying less taxes and receiving a pay increase. Since the lease is under the employee’s name, he or she is responsible for all other obligations such as service and maintenance, but in the event that the employee leaves the company, all financial obligations go back to him or her.

Most novated leases are worked into companies’ salary packaging solutions. A salary package involves an agreement between an employer and an employee stipulating that the employee is forgoing part of his or her salary in exchange for the employer providing non-cash benefits, hence its other name “salary sacrifice.” Car leases number among the common benefits that figure into these packages.

Novated leases benefit employees in such a way that they have a wider range of options when choosing cars to lease. Company cars are usually limited to certain makes and models, so the flexibility that novated leases provide is understandably more appealing to people who want to use cars that suit their lifestyle. Also, changing employers does not require them to give up that lease.

As for employers, novated leases mean that they are able to provide more employee benefits at little to zero cost. They also do not have to cope with the bother of providing, insuring, and maintaining company cars. Besides these, allowing employees more freedom when it comes to their vehicle choice presents employers in a better light, making them more endearing to their staff.

Clearly benefiting all the parties involved, novated leases are understandably a common provision in salary packages offered by Australian companies. It is but expected for an option that allows everybody to win to be very popular. If you want to be able to hit many proverbial birds with a single shot, novated leases are definitely something you should look deeper into.

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