Novated lease benefits is a type of vehicular leasing agreement common in many parts of the western world that allows a business house to lease out a vehicle through executing a leasing deed. This leasing deed is executed by the business houses on behalf of its employees who cannot afford a car though a down payment. Many business houses are using novated lease benefits as an aspect to boost its employee’s morale. Under this scheme, the responsibility to pay the EMIs of leasing deed rests upon the employee and the amount of EMI will be deducted from the employee’s pre- tax income.
Under certain agreements, the employer takes on the responsibility of making the payment of lease agreement on behalf of the employee and then employer deducts the amount from the employee’s pre-tax income. The novated lease benefits is a mutually beneficiary scheme to both employer and employee as this will improve the employee morale(from the employer point of view) and also benefits the employee as this reduces the tax liability of the employee.
Moreover, a monthly payment is always desirable over a down payment as this will reduce the cost burden of both employer and employee. And the savings on tax liability is one more reason due to which both the corporate houses and the employees opt for novated lease benefit. Further, the flexibility attached to this benefit i.e., the employee can add few more features to the vehicle and can opt for a new or used car depending on his repayment ability and monthly surplus. All these features are collectively leading to novated leasing by many employers and employees.
Besides above benefits, there are certain value additions that make an employee go for a novated leasing over buying out a vehicle is its transferability from one employer to another. If in case you move from one company to another during the leasing period you can transfer your lease from old employer to new employer. The novated lease benefits also called as salary packaging/ salary sacrificing and are viewed as a part of employee’s earnings agreed to pay for the benefit of a vehicle. Under this agreement, the employee can include any of the benefits such as Vehicle finance, Comprehensive insurance (or you can arrange your own), Registration, Fuel, Maintenance such as servicing, tires, battery replacement and repairs, roadside assistance as elements of leasing without fail by employees.