Find answers to your Novated Lease FAQ (Frequently Asked Questions)
Question
Why is it called a Novated Lease?
Answer
This is because of the special three way agreement between the employer, employee and leasing company. The document used to formalise this agreement is called a novation agreement.
A novation agreement is a common legal document used when assigning responsibilities (i.e. payment of your lease by your employer to the leasing company) to a third party.
Question
What’s the difference between Recommended Retail Price (RRP) and on-road cost?
Answer
RRP retail is the manufacturer’s listed price for the vehicle only. The on-road cost includes registration fees, purchase stamp duty and dealer delivery costs.
Question
Can I get a Novated Lease on a used or demonstrator vehicle?
Answer
Yes. Each leasing company has different restrictions on the age of used vehicles that can be financed so you need to check first. But if you’re buying a young, low kilometre car there should be no issues. You could also lease the vehicle currently parked in your driveway.
There are plenty of other questions to be answered and that’s where a specialist can help. Contact one of the advertisers in this guide, or your organisation’s preferred provider.
Question
Where do the annual savings come from?
Answer
The savings come from a reduction in the initial purchase price through buying power and from not paying GST. There are also savings in fuel, maintenance and tyres (once again not paying the GST). And the last component of the savings comes by using pre-tax salary.
Question
Why is there a difference between on-road cost and the amount financed?
Answer
The on-road cost is what you would pay when buying the vehicle yourself. The amount financed is the total on-road vehicle cost with a Novated Lease.
It’s lower because there is no GST and some vehicle manufacturers recognise Novated Lease buyers as a fleet buyer. So they provide extra discounts that may not be available to a retail buyer. The leasing companies also negotiate lower dealer delivery charges and extra discounts.
Question
Do you have to drive high kilometres to benefit from a Novated Lease?
Answer
No. Even employees driving less than 7,000 kilometres per annum can benefit.
Question
What happens if I change employers?
Answer
Here are some of the options if you leave your current employer but you should also check with your current provider. 1 Organise a new Novated Lease with your new employer through their preferred provider. 2 Continue to pay your lease payments and all running costs to the leasing company until the end of the lease. 3 Pay out the lease by selling or purchasing the vehicle.
