Are you searching for car leasing or car financing options that will suit your needs? Have you being searching for articles that will guide you, then this article is for you.
What is car allowance?
When we talk about a car allowance, we mean renting a car for 2 to 5 years and returning them to the buyer after the specified period. There are various types of car leasing options.
What is novated leasing?
Novated leasing is a car lease option that enables your employer to do lease payments for you- this will take place till you finish paying the money or as long as you are employed. Some people will benefit are happy engaging with novated lease, because it reduces their taxable income.
Normally a lease will include the following:
- Fringe benefits tax (FBT)
- Operating costs and many more.
Towards the end of the lease term, there is a residual value that would be paid to the financier. Keep in mind that there might be a lacuna between the worth of the car and the residual. This is what you will have to bear either as a loss or a gain.
This depends on a number of factors such as:
- The loan term
- Value of the car lease
- Interest charges, and
- The money deferred to the residual among others.
You select a car you want, and then organize a lease through the seller. Your employer may have a company they are already working with. Your employer will make the payment on your behalf, and then they will be deducting a certain amount of money from your monthly payments before they pay you.
Some employees are happy with this system because it will go a long way in reducing their taxable income.
When the lease term has ended, you can decide to own the car, or pay the residual or even enter into another loan or lease.
Although your employer is the one making the payment, but keep in mind that the lease is made in your name, and you have the sole responsibility of the lease. If you got hired elsewhere, your new employer has the right to keep making the payment until the lease term is over.
Benefits of novated lease
It is essentially necessary that you talk to your car leasing firm or accountant about your particular condition. Employees or those who engage themselves with novated leasing enjoy some benefits including:
- Reduced tax, this depends on your taxable income
- You are free to be using the car as you wish; no restrictions at all
- You can take the car while switching to another employer
- You can also control the maintenance
- At the end of the lease term, the car will belong to you, and you can resell it.