subject: The Advantages Of Novated Lease Agreements [print this page] The trend of buying a car under a novated lease arrangement is rapidly increasing across Australia. A novated lease is an agreement between an employee, his or her employer and a car finance company. This form of agreement is generally helpful to all the associated parties.
So, how does a novated lease work? Simply put, a novated lease permits a company to provide an employee with a vehicle which includes the lease repayments as part of the employees overall remuneration package. In doing this, the company will be able to satisfy their tool of trade fleet demands as well as providing better flexibility and perks for their employees.
This practice makes sure the cars that the business has are well-maintained. Moreover, these cars neither form a liability on the firm nor do they turn into an asset.
This kind of an agreement also provides vital financial benefits in the case of an employee willing to purchase a car. If an employee leases the vehicle, they will be able to ask their employer to make the monthly repayments instead of them from their pre-tax remuneration. The use of pre-tax salary could legitimately reduce an employees taxable remuneration leading to significant income tax savings.
The ownership of the vehicle stays with the employee always. If the employee changes job, the car goes with them, and the novated lease gets transferred to the new employer.
Another benefit for the employer is that the vehicle is not considered an asset or a liability therefore doesnt appear on the firm's balance sheet. To add to that, the business is not liable for the on-going maintenance of the car and it goes when the employee leaves the company.
Finance companies normally regard novated lease arrangement favourably as the risks concerned in lease repayments by a person are way better than with a corporate or other company. The finance company, hence, has better assurance of payment if the employer makes payments instead of the employee.
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