Novated Leasing Myths

Wed 08 Feb

The novated leasing industry has made using complexity, technical jargon and marketing fluff an art form.

At stratton, we have made it our mission to separate fact from fiction and shed light onto one of the most tax-effective ways to finance a new car.

7 Myths of Novated Leasing

Myth #1: Novated leases are for business use only

There is a lingering perception that novated leases can only be arranged for cars used in business, as a tool of the trade.

It doesn't matter if you are using the vehicle for 1% or 100% for personal use, in fact you can get a novated lease for your kid's or spouse's car too.

Myth #2: It's an administration nightmare for employers

We want employers to be able to offer novated leases to their staff, so we make it as simple as possible for them.

At stratton, a dedicated consultant will help you with the initial paperwork to set up the novated lease process but after that, everything is covered in one monthly invoice regardless of the number of leases under management.

Myth #3: It is only available for new cars

Untrue. We all know we can unlock the equity in our homes, but did you know you can do this with your car?

Using a novated lease to unlock equity in your current car is called a sale and leaseback and is available for cars less than 15 years old.

You can also purchase a second-hand car and use a novated lease to finance it as well.

In short – it doesn't matter if the car is new or used.

Myth #4: You have to drive a lot of kilometres to make it worth it

This myth is left over from the early days of novated leasing, since changes made in the 2011/2012 budget, the number of kilometres no longer has any effect on an employee's FBT liability so now just about anyone who runs a vehicle will benefit from a novated lease.

The easiest way to solve this myth is to get a personalised transparent quote from one of our consultants based on your income and annual kilometres and see for yourself.

Myth #5: Only people on large salaries can benefit from a novated lease

This is probably the most common myth associated with salary packaged vehicles.

In reality, most people with a novated lease are moderately paid teachers, nurses, government workers and middle management who use a novated lease to help stretch their pay and provide a reliable safe vehicle to their families.

Myth #6: Your employer is the guarantor

Novated lease cars are not "company" cars. If the employee leaves the business, the employee remains responsible for making the payments.

The only involvement the employer has is to facilitate the pre-tax payments through their payroll system.

Myth #7: There must be a catch

This one is true but there is a solution!

Industry operators are under no legal obligation to disclose items such as interest rates and the true cost of vehicles.

The current industry norm is to use complex quotes that are difficult to understand, contracts that do not offer full disclosure of vehicle prices or interest rates, and all too often, poor customer service that sometimes doesn't communicate how much customers are borrowing.

Unfortunately, this lack of transparency in the novated leasing industry has resulted in employers and employees alike viewing the product with suspicion. Which is why we launched our transparent novated leasing product where we offer full disclosure of all components such as vehicle price and interest rates.

Read more about our transparent novated leasing or speak to a consultant today on 1300 131 050.

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