– By Marc Sibbald –
Do you ever read the terms and conditions or the fine print? If the answer is no you’re in the same boat as most people that sign up for a novated lease. The good thing is most novated lease agreement don’t have any nasty surprises. But there are a few things you look should at went you receive your novated lease quotation.
Most people will focus on the purchase price. The first thing they look at when they receive a quote is the price of the vehicle. Then after asking a few questions they realise they can get their own vehicle quote if they want.
For some people their competitive spirit kicks in and the game is – beat the dodgy car dealer at their own game. This stereotypical view of car dealers may still apply to some independent used car operators, but new car dealers generally play with a straight bat while trying to protect small margins in a competitive environment.
Though even if you save $1,000 upfront. Over a five year lease this is $17 a month before any tax benefits are factored into the calculation and it probably involved a lot of back and forwards between several dealers.
The key questions to ask when you receive your novated lease quote are:
1) What is the interest rate you are charging?
2) What is the monthly management fee I am paying?
These are the two things that often get hidden in the quote and can be used to increase the margin for the provider of the novated lease. They might show one but don’t show the other. So you need to ask and the be comfortable with the answer.
Interest rates won’t be as low as the cash rate, or the same as the rate on your mortgage. They shouldn’t be as high as a credit card either. In the current market 6-8% is considered acceptable.
An equitable management fee is a matter of opinion. If your employer has negotiated a low rate the leasing company will look to make money in other areas. But if its a fair rate then they are being paid for the service they are providing. The key is to know what rate you are being charged so you are comfortable paying it.
Other areas to look at are the fuel, maintenance and tyre budgets. Rates that are set too high or low will impact the monthly rental. The thing to remember is that they are a budgeted* amount so anything you don’t spend will be returned to you at the end of the lease. And it pays to be conservative with these expenses so you don’t need to add money during the lease.
Most companies only have one provider so you may not be able to negotiate anything with your lease, however if you have access to a panel of suppliers you can choose the best offer once you know what to look for in the quote.
* Some companies offer a fully maintained novated lease which is not a budget. It includes a fixed amount to cover the cost of expected, and some unexpected servicing and maintenance.
