Hi
What are the pitfalls of novated lease
A. shorter lease term vs longer lease terms
B. what providers you would go for to get lease
C. what happens if we change provider in between Lease terms
D. what is meant by the term "residual"
E. if I were to have a residual at end of term
Can I swap or change vehicle? how does it work
I did that thanks … After doing that I am with unanswered questions
you can't be serious, if you have rang or even google around, and you don't understand the term residual.
novated lease is not something save your money magically. it is a lease, that means you don't even own the car once the lease finishes.
use one of the online calculator to see if you save any money, but if your income is less than 80k a year, i would say don't bother with it.
Mate no disrespect but the term residual is different for each company …
Yes I am over that $ limit .
I was wanting to know the experience of people when they reach "residual" stage
when you reach residual stage, either pay the residual to keep the car, or hand back the car, and start again.
novated lease is only good if it can bring you taxable income down the the lower bracket, and if you like to drive a new car every 2-3 years.
if you want to keep a car, i don't think it is worth it.
the residual is the cost of the car once the lease ends (you have to pay, in some cases I think you can hand it back in assuming you get another car)…for a 5 year lease term, I think the residual is 28% of the original price of the car..the shorter the lease, the higher the residual… 3 of my office mates lease their cars through our employer…they are earning approx $58-63k
btw, there is a big post in whirlpool for this topic, you are welcome to have a read over there, lots of good suggestion inside.
Thanks mate , you can't pass the link can you for the whirlpool forum
https://www.google.com.au/webhp?sourceid=chrome-instant&ion=…
Don't think he had to provide a link - a google search would have found it regardless.
In response to C) changing lease providers, it would involve you getting a payout figure from your current provider and then working with your new lease provider to pick up on the balance of your novated lease.
However if your question is about changing employers, switching is easy too. Novated leases are typically offered as a staff benefit by an employer. The employer would receive an HR advice to deduct a certain amount from pre-tax and a certain amount of post-tax $ from your salary each pay period. The processing of your novated lease payments each pay period, is like if you asked your employer to pay $x into one bank account, and $x into another bank account.
If you decided to change employers, and you are mid way through your lease, it is not a big deal. The company through which you have your novated lease, would just approach your new employer to sign a novated lease deed (to set up the three way agreement between you, the employer and the finance company), and the payroll department would do the same and take deductions out each pay period to cover your lease.
A novated lease is not for everyone. You just need to consider your own risk preferences. Novated leasing is great if you are into budget smoothing the cost of acquiring and running a vehicle.
Novated leases are no longer as tax effective as they used to be. In the past the fringe benefits tax would vary based on the kms driven during the FBT reporting year. Now it is just a flat fee irrespective of kms - you could 2 or 200,000 and it would be the same FBT rate.
This said, to answer your questions broadly
A) shorter lease term vs longer lease terms
on the plus side, you can change cars sooner if that is important to you, particularly when you get to the point where you need to get mechanical checks etc.
B)what providers you would go for to get lease
subjective. Try Orix or Google.
C)what happens if we change provider in between Lease terms
you need to payout the old lease and refinance; same as if you changed provider for a mortgage or any other financing.
D)what is meant by the term "residual"
the amount owing at the end. How much do you think you can sell the car for at the end of the lease, or would you be happy paying in a lump sum to own it? Having a higher residual reduces your monthly payments but means you have a bigger balloon payment at the end. Can you afford that payment?
E)if I were to have a residual at end of term Can I swap or change vehicle ?how does it work
You can take up a new lease on a new vehicle definitely, but you would need to dispose of the previous vehicle and cover the residual payment.
Who do you work for? If it's a large company the fleet discount alone makes it worthwhile but if its small it is questionable. Lots of teacher leasetheir cars giving them buying power.
You employer may be link to a lease company and you will need to use yhat provider.
The more kms the better the taxe reduction.
Short lease may cost mote as fees and extras charged over a shorter period.
The tax office has a residual schedule that all novated leases work on.
At the end of the term my provider allows me to pay the residual or hand the car back.
If you chsnge providers you will have to pay the lease out and start again with the new company.
It's no longer true about the more kms giving a tax reduction. Legislation has changed so that FBT is now a flat fee irrespective of kms. It's not like it used to be.
Thats correct on the fbt david but your running costs are taken per tax so if you do more kms your pre tax deduction will be higher reducing your overall taxable amount.
Good point! My apologies, what you say is very true.
That said, I suppose it depends if the lease is an operating lease or just a finance lease. If people are going to lease their car I'd certainly recommend the full operating lease route.
Only if the travel is for work purpose………
@davidmwilliams:
I did assume it was an operating lease. If it is just a finance lease they would be better off getting a loan.
Google "novated lease", many fleet management companies. Call them if you have further question. An example
http://m.novatedlease.fleetcare.com.au