Novated Motor Vehicle Leasing

What is a Novated Motor Vehicle Lease?

This is the purchase of a motor vehicle by the employee specifically leased by a financier. It is a three way agreement between the employer, employee and the financier whereby the employer agrees to deduct the lease payments from the  employee’s gross salary. The arrangement involves the following:

• The employee chooses the type of car, colour, options etc
• The employee leases the vehicle from Street Fleet
• The car is registered in the name of the employee
• If the employee ceases employment the novation also ceases. The employee will be responsible for the remaining lease payments on a monthly basis
• No lease liability finance is recorded on the balance sheet of the employer

A Novated lease term is generally between two to five years. Only new and late model cars will be entitled to be financed and accordingly the tax savings will only be available in these circumstances. Individuals should seek independent financial and taxation advice on the tax effectiveness of a novated lease.

What are the benefits of having a Motor Vehicle Novated Lease?

Benefits arises from the employee being able to package the costs of the leasing and running of the vehicle with PRE TAX dollars thus enabling the employee to save a considerable amount in taxation. Due to the fact that the employee is employed by a Public Benevolent Institution (PBI) there are substantial fleet discounts on the price of a motor vehicle which can be accessed directly by the employee.

There are also advantages to organisations that offer motor vehicle novated leases to its employees:

• Market competitive employee remuneration packages
• The improvement in retention and recruitment of valuable personnel
• Employer has no liabilities on its Balance Sheet
• Employer has no obligations for any of the motor vehicle payments if the employee ceases employment