Cancel/Payout Novated Lease after a Couple of Months

LtheMoebius on 28/08/2023 - 10:29

Complete noob when it comes to novated leasing and looking for guidance from those more familiar with it.

TL/DR: Wife took out a novated lease through her employer for a new car; unexpectedly changed jobs just after taking delivery of the car and can't directly transfer the lease under the new employer - what do we do?

I've had a look through various novated lease threads but can't find anything for our particular scenario:

  1. Ordered a new car on novated lease in Feb 2023 whilst working for 'Employer A' who offer salary packaging options via 'Provider A'.
  2. Car delivered in early Jul 2023 and commence salary deductions from 'Employer A' to 'Provider A' as planned - all good.
  3. Wife is referred for a new job by a friend; despite not planning to change, new job is too good to turn down from a career development and salary perspective, so successfully applies and starts in mid-Aug 2023 with 'Employer B'.
  4. Despite being told originally that 'Provider A' can usually continue the lease with new employers, 'Employer B' only works with their preferred 'Provider B' and so suggest requesting a payout from 'Provider A' and setting up a new lease with 'Provider B' - seems reasonable.
  5. Unfortunately, payout figure from 'Provider A' is apparently more than 15% above market rate for the car, hence 'Provider B' cannot setup a new lease on those terms.

My wife has been regularly trying to contact 'Provider A' and also their financier but it seems impossible to actually speak directly with someone, and replies to emails/messages via their app takes multiple business days to respond (and aren't particularly helpful).

I'm therefore trying to understand our available options here if anyone can help?

  1. We payout the lease with 'Provider A' and take ownership of the car at the inflated cost (including the fees/charges of the provider) and forego the salary sacrifice benefits, writing it off as an expensive lesson for the future?
  2. We payout the lease with 'Provider A' at the inflated cost, then setup a new lease with 'Provider B' based on market valuation (like a second-hand car, which seems to be an option from what I've read) - we would take a hit on the price difference but potentially still get some advantage from salary sacrificing moving forward?
  3. Return the car to 'Provider A' and find a new one (either outright purchase or via new lease with 'Provider B') - I'd imagine there will still be fees/charges involved but maybe less overall compared with keeping the car?
  4. Anything else?

Thanks in advance :-)

Financial Novated Lease

Comments

  • Settero on 28/08/2023 - 10:50
    +3

    This would be one of those , get professional advice situations, few hundred for someone to look at the specifics could save you thousands.

    • theMoebius on 28/08/2023 - 10:52

      We've definitely considered this but unsure what type of professional to go to in this scenario - any suggestions?

      • BewareOfThe Dog on 28/08/2023 - 12:35

        I would check with a financial advisor and see if they handle this sort of matter

        • RMBC on 29/08/2023 - 08:17
          +5

          A financial advisor is unlikely to; an accountant who understands salary packaging is a better place to start

  • djkelly69 on 28/08/2023 - 10:55

    I am also a NL noob, but am interested in responses.

    My understanding (based almost entirely on reading this thread on WP) is that you should be able to transfer the lease to Provider B.

    Some useful comments here and here.

    To quote from there:

    You would transfer it, in just about all cases it's not the "NL Provider" (who are actually just a salary packaging admin company) providing the lease, it's a finance company (e.g. Macquarie, Toyota Finance, CBA Asset Finance, CBFC etc.). The lease agreement is between you and the financier; the salary package admin takes care of getting your employer to sign the deed of novation and sets up the payroll deduction. The lease in your name is why if you lose your job the lease payments are taken from you directly.

    If you change employers, you take your existing lease to your new employer and get their salary packaging company to handle the deed of novation and payroll deductions (hopefully this would be handled between the salary packaging companies if not the same at both employers) – if the new employer's provider is happy to do this. It's the same lease.

    and

    the lease is a contract between you and the finance company, and the whole idea of novated leases is that you can move them from employer to employer. So you certainly don't need to (and shouldn't) "close" the lease and pay it out. But you'll need to redo the salary packaging arrangement with your new employer.

    • theMoebius on 28/08/2023 - 11:04

      Interesting, thanks.

      Noting that distinction between 'NL Provider' and 'Financier' I realise the new employer seems to have a slightly different arrangement:

      • Old employer > NL Provider A > Financier A
      • New employer > Financier B (i.e. they referred my wife straight to a finance company, rather than through an admin company)

      It was actually 'Financier B' in this scenario that said we'd have to request a payout and then setup a new lease.

      • djkelly69 on 28/08/2023 - 11:09
        +2

        So maybe new employer doesn't have a NL provider, and manages it in-house? In which case I think she needs to speak to those people and arrange for the existing NL to be novated to the new employer.

  • sumyungguy on 28/08/2023 - 11:21
    +1

    You have to go with whatever options Provider A advises. I assume FBT liability is being offset by the lease provider?

  • Muzeeb on 28/08/2023 - 11:40

    @mapax

    ADANLHS

    • theMoebius on 28/08/2023 - 12:02

      ?

      • mapax on 28/08/2023 - 15:59
        +1

        Another
        Day
        Another
        Novated
        Lease
        Horror
        Story

        • theMoebius on 28/08/2023 - 16:21

          Indeed - first experience of the process has been educational

  • jv on 28/08/2023 - 11:58
    +1
    1. Anything else?

    Skip the country and go in hiding.

    • theMoebius on 28/08/2023 - 12:02
      +2

      I was tempted to add bikies as an option but I guess this also works!

  • avoidfullprice on 28/08/2023 - 12:18
    +1

    I’ve done NL before, but fulfilled my lease so don’t have lessons learnt for your situation. I don’t have time atm to read the whole story, so couple of dot points

    • if new company doesn’t deal with old NL provider, you will likely need to pay out
    • paying out NL is almost like paying all the future interests in one go. It is almost like the break fee for a fixed term home loan. You already lose out when that happen.
    • refinancing with another NL provider doesn’t make much financial sense. I believe your vehicle FBT base value doesn’t change! You also don’t save on the GST on purchase.
  • BewareOfThe Dog on 28/08/2023 - 12:40

    Mine expires in a few weeks, however over the last few years I felt locked in with my employer as some potential employers I spoke to had no idea about NL?

    If the new job pays 15% more, it maybe worthwhile taking the hit in the short term. I know all my leasing company cared about was getting heire $280 per week regardless of the employer.

  • Typical16-bitEnjoyer on 28/08/2023 - 13:09

    unexpectedly changed jobs

    Yeah I hate when that just 'happens' out of the blue without warning

    expensive lesson for the future?

    RobertRedfordNodding.gif

    • theMoebius on 28/08/2023 - 14:01
      +2

      Yeah I hate when that just 'happens' out of the blue without warning

      Perhaps you missed the part where I explained she hadn't planned to change jobs until she was referred by a friend?

      We'd naively assumed that given the popularity of novated leases that they'd be transferable between employers without too much difficulty (as she was told by 'Provider A' before committing). Lesson learned…

      • Tommyaka on 29/08/2023 - 09:20
        +1

        I think the point old mate is getting at is that it seems like your partner has put herself in this situation.

        It doesn't sound like she was forced to change jobs, she saw an opportunity and she took it.

        Fair enough, but every action has an equal and opposite reaction.

        • theMoebius on 29/08/2023 - 09:39

          Agreed, totally accept that the choice to take the new job caused the current situation but frustrated that it's clearly not as straightforward to change employers as it potentially should be - others may end up in a similar situation if they're made redundant, etc.

          I just didn't find the original comment particularly constructive but hey, it's the internet and I should have let it go (for the record I wasn't the person that negged it either).

          • Typical16-bitEnjoyer on 30/08/2023 - 18:21

            @theMoebius:

            Despite being told originally that 'Provider A' can usually continue the lease with new employers

            I just didn't find the above particularly truthful, but hey, it's the internet.

  • geekcohen on 28/08/2023 - 13:58
    +1

    Can you not just take over the car yourself and pay the loan repayments or was your lease not like that?

    I set up a 5-year lease 12 months before changing jobs. I now pay the loan on the car plus the running costs myself. I don't get the salary sacrifice benefit anymore but have a better job, a higher paying job and a more enjoyable life. Plus don't have to go to the office anymore, so less fuel costs as well.

    Is taking it over yourself not an option through the lease provider? I had no exit fees or anything, just decoupled the loan as to who was paying for it.

    Otherwise, I could go with this option

    Return the car to 'Provider A' and find a new one (either outright purchase or via new lease with 'Provider B') - I'd imagine there will still be fees/charges involved but maybe less overall compared with keeping the car?

    • theMoebius on 28/08/2023 - 14:08
      +1

      Can you not just take over the car yourself and pay the loan repayments or was your lease not like that?

      That's one of the options we're hoping to discuss with the current financier but neither they nor 'Provider A' are being particularly responsive at the moment, which is adding to our frustration!

      Good to know that others have been able to do this though, thanks. As you say, her higher salary will offset the 'sacrifice benefits' so I think we'd prefer to keep making payments direct to the lease provider if we can.

      • geekcohen on 28/08/2023 - 14:22
        +1

        That's one of the options we're hoping to discuss with the current financier but neither they nor 'Provider A' are being particularly responsive at the moment, which is adding to our frustration!

        Probably just playing hardball, I didn't have an issue with my provider and if I was to do it again, I would go back to them. Very happy.

        As you say, her higher salary will offset the 'sacrifice benefits' so I think we'd prefer to keep making payments direct to the lease provider if we can.

        Exactly my scenario too.

        Good luck though!

  • pok on 28/08/2023 - 14:25

    Can you transfer to your employer?

    • theMoebius on 28/08/2023 - 14:26

      Not currently an option unfortunately but thanks for the suggestion

  • Not SkyNet on 29/08/2023 - 08:02
    +2

    Novated leases are commonly 3-5 years so you have a fair bit left and so the first provider know they have the upper hand.
    When you end your employment, the lease will just become a standard lease meaning you pay the monthly payments not your old employer, so what you may want to look at doing is just pay that monthly payment for a year or 2 and then look at breaking where the payout figure will not be as high and during that time you can still look at having the new provider take it over and as you are not rushed you have more time to make it happen as when they sense you are not rushed they more eager to accommodate you as they want your business.

  • dtn72 on 29/08/2023 - 08:05
    +3

    Couple of quick thoughts, having had a number Novated Leases over the last 10 years.

    As above, you should be able to convert the Novated Lease to a Financial Lease and just make the payments directly to the finance company. This is standard when the lessee ceases employment and the novation agreement ends.

    Another option that Provider B might not be forthcoming with, is they can re-package including the existing finance payment. They include the existing payment in the cost schedule and make the ex-GST payment on your behalf.

    Lease companies are shady, so they wont' make it easy for you!

  • tz001 on 29/08/2023 - 08:13
    +1

    I have transferred from one provider to another when changing jobs, the second provider supplied all paperwork etc. In the interim, I paid the first provider directly for a few months. From memory, I then took the second provider to a third employer.
    You could just take the hit now if there's no avenue with employer B/provider B, but if I were you I'd just push ahead with trying to transfer. Check that you're not getting junk insurance with provider B, and haggle on the interest rate. Good luck.

  • hdew47221 on 29/08/2023 - 08:48
    +1

    Haven't had this exact situation but I think dtn72 is correct. You usually would automatically convert the existing novated lease into a finance lease with Provider A (which means you don't get the pre-tax benefits anymore on the monthly lease payment - ie. it will go up). You can then potentially setup a new novated lease with the Provider B and have them buy the car from Provider A under the new lease arrangement. This would then reinstate the 'tax benefits'.

    The reason why it seems expensive is probably because the lease gets you a GST credit at the beginning and then charges GST incrementally in the monthly payment, whereas you will be hit with the GST on the whole amount plus all the finance charges that they won't get off you when you terminate early.

    It will take a bit of hustle to get them to do it because both parties make money by doing the opposite to what you need. Provider A has baked in the profit from your interest payments and Provider B wants to sell you a new car so they can get the commissions and rebates.

    IMO the novated lease product is a bit of a trap. It's pretty inflexible and overly complicated and I've found that over time although there are tax benefits a lot of the real benefit ends up being charged in fees and administration charges by the leasing company because everything is neatly and conveniently bundled. It's pretty good if you need a car but don't have the credit score to negotiate on a normal car loan.

    If you need advice, I would suggest you speak to a local lawyer. They should be able to interpret the lease and advise on any unfair contract terms or something that might give you an escape route.

    Good luck

  • theMoebius on 29/08/2023 - 09:41

    Thanks for the recent comments - I think we better understand the options now for when we can finally get hold of someone at the leasing company to progress

  • dp1 on 29/08/2023 - 11:42
    +1

    "We'd naively assumed that given the popularity of novated leases that they'd be transferable between employers without too much difficulty (as she was told by 'Provider A' before committing). Lesson learned…"

    If you have this in writing from Provider A you have a get-out. I thought the T+C always said something along the lines of " make sure you know what happens if you change jobs before signing up for this"

  • hiancc on 01/09/2023 - 15:10
    +1

    I think djkelly69 has got the technicalities right. The problem here is what legal may not be what is practical. Finance companies may not want to do what is legally possible. Also, you would be dealing with the regular CS people of both providers who don't understand the legalities and even if you can get to the guy 2 levels up, he/she may not want to go out their way to create a unique paperwork protocol for their staff to follow to facilitate your unique situation. Basically, your wife have signed a finance agreement that says that the monthly payment is X and balloon at the end is Y and early termination is calculated my formula Z.

    I don't believe there is a real option of "handing the car back". If you terminate the lease, the payout is calculated accordingly. If it's 15% above the market value, then that's what you are up for. If you don't want the car, then they will dispose of it for you and give you what they get for it less any costs involved. They probably sell it wholesale so not the best option.

    So, your best bet is to pay out whatever the amount. Then you go to the new employer finance company and novate the car (sell the car to the new finance company) at the secondhand "market value" of the car. The FBT is now whatever the finance company pay you for the car (should be lower than before). You can ask you tax agent if your wife can write off your loss from her taxable income. Probably not, as it's not strickly related to her earning salary (ie. salary sacrifice is optional, not required in her job); it's also a capital loss; it's also a personal asset which is CGT exempt.

    You did not mention if the 2 employers have different FBT status - i.e. is one of them FBT exempt like NFP, government, education, hospital etc.

    • theMoebius on 01/09/2023 - 15:55

      Thanks for the comprehensive response - I'll pass it on to my wife.

      Interesting point on the FBT status - previous employer was Dept of Education, new one is private-sector, so we'll check on the implications as things progress.

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