What is a novated lease?

A three- way agreement between the employee, employer, and the lease company, that is what a Novated Lease all about. This is a situation wherein the employee decided to lease a car through a lease company and then their employer agreed to its terms and conditions. Part of that agreement is the responsibility of the employer to make sure the monthly lease payment in behalf of their employee.

There are some reasons why an employee wants to lease a car in terms of salary packaging agreement. One of this is the freedom in choosing the car that they want to use, unlike in the company car where in whatever type or model was assigned to they are required to use it with limitations. Limitations such as they are not allowed to use it for personal agenda. In any case of termination from work for any reason, the agreement will be void and all the obligations and responsibilities will revert back to the employee by their employer.  But if just in case after the termination, the employee find their new employer and they agree with the arrangement, they can transfer it to them and they will continue the monthly lease payments.

Another advantage of this novated lease is the benefits that each party can get from it. I’ve already mentioned some of the benefits of employee such as the right choose the car and the right to bring it even for their personal needs. It is considered to be portable as they can bring the car with them if they transfer to another work or has been terminated from their present job. The employee doesn’t need to pay big amount for the tax that they are going to pay as it is being paid out of their pre-tax wage.  For the employer, there are benefits as well, they can avoid the risk for residual value, they can minimize their expenses and time for the maintenance of the car and the tax that it will cover, they can use it also a great salary remuneration package, in this way if they are targeting employees that they want to work for them- for the company, they can easily use it as their weapon. Service fees and commissions these are the benefits that a lease company can get in processing and closing the deal with the employee and to their employer.