An easy way to buy the car you love
One of many benefits of taking out a novated lease is being able to purchase the car of your choice and save money.
With a novated lease, your employer deducts a portion of your finance payments and vehicle running costs from your pre-tax salary, so you pay less tax and have more money to spend on payday. You also pay a portion of your payment from your post tax salary so there’ll be no FBT to pay.
Here’s an example of how it works for John – an office worker who earns an annual gross salary of $85,000.
With a car loan, John purchases his car for the advertised cost, makes his car loan payments and pays his running costs from his post-tax salary.
However, with a novated lease, he pays no GST on the purchase price, instantly saving 10%. He makes one payment to cover his car loan and all his running costs before he receives his salary. Part of this payment is deducted from his post-tax salary so that he doesn’t have to pay any Fringe Benefits Tax. The remaining amount comes from his pre-tax salary. John’s employer passes on the GST savings on the finance payments and the running costs of his car, so John goes on saving throughout his lease.
John chooses a Mazda CX-5 which costs $41,421 drive away.
|With a Car Loan||With a Novated Lease|
|John’s salary||85,000||John’s salary||85,000|
|Pre-tax payment||Pre-tax payment||6,612|
|John’s taxable salary||85,000||John’s taxable salary||78,388|
|Tax and Medicare||20,872||Tax and Medicare||18,591|
|Salary after tax||64,128||Salary after tax||59,797|
|Johns car loan payment*||8,242||Johns after-tax payment||$7,818|
|John’s running costs||5,856|
|Money available after car costs||50,030||Money available after car costs||51,979|
|Extra money with novated leasing per year||1,949|
John will receive almost $2,000 extra a year by purchasing his car with a novated lease!
*Car loan rate 10% (effective rate) pa, 5 year lease, NL rate 9.85% (effective rate) pa