As an employer, you’re likely looking for ways to reward and motivate your employees without breaking the budget.
Novated leasing could be the answer.
A novated car lease is a win-win. Employees get a new car and access to potential tax savings, you benefit from a happier, more engaged workforce, and your business attracts and retains top talent.
However, in our experience, many employees are unclear about the process of novated leaseing – not to mention the perks.
This blog will explain how novated leasing works in Australia, how it benefits employees, and clear up any misconceptions they might have.
By the end, you’ll be ready to show your team how they can drive away in a new car and benefit from serious savings.
What is a novated lease?
Here’s an elevator pitch you can use if your employees ask, “What is a novated lease?”:
A novated vehicle lease is a three-way agreement between an employer, an employee and a leasing partner. In this arrangement, the employee leases a car of their choice, and the employer deducts lease payments from the employee’s salary.
One bundled payment covers everything, including vehicle purchase costs, registration, insurance, servicing, fuel, roadside assistance and even new tyres.
This salary packaging option can bring significant financial benefits and simplified vehicle ownership.
The key is finding a leasing partner with the experience, network and range to go the extra mile to tailor a novated lease agreement that works for all parties.
How employees benefit from a novated lease
Tax savings
A novated lease reduces your employee’s taxable income by bundling lease payments and related expenses in a fortnightly or monthly pre-tax payment.
That means they pay less tax and often have more in their pocket each month.
Lower running costs
Another perk of novated leasing, is that employees gain access to GST savings on applicable vehicles and running costs. That’s a 10% saving right there!
Then there are perks like half-price car washes at BP service stations and fleet discounts on the vehicle purchase price.
These savings really add up over the life of the lease.
Simplified budgeting
What is a novated lease? It’s peace of mind, convenience and confident budgeting. Employees with a novated lease don’t need to worry about out-of-pocket vehicle expenses, even if they get into an accident.
Expenses are predictable and controlled, which is a big benefit in today’s economy.
Greater choice
By partnering with a reputable partner like Fleetcare, your employees can get the car they want without dealership delays.
Our national purchasing power means we can source almost any vehicle, including electric vehicles (EVs) and used cars, with fleet discounts on the car and accessories.
Common misconceptions about what a novated car lease is and how it works
Given all the benefits of novated leasing, you might be surprised to hear that some employees aren’t on board.
In our experience, that’s because they were previously given dodgy information about what a novated lease is. Here’s the truth behind some of the misconceptions you might hear:
- Employees can only choose from a limited range of vehicles: Employees aren’t restricted. They can choose the car they want, including new and used cars or the car they already drive.
- The process is complex: We make novated leasing simple to help employees access all the perks without adding to your administration burden.
- You’re expected to purchase the car eventually: Employees can choose to pay out the residual value at the end of the lease, but they’re not obliged to. They can also refinance or trade-in or trade up.
- Novated lease agreements hide extra costs: We’re committed to transparent, consistent novated lease agreements. You can point employees to our online calculator so they can understand the costs involved and see how much they’ll save.
- The vehicle is ‘all business’: A novated lease vehicle isn’t just for work. Employees have full use of the car in their personal time as well.
Still have questions? Reach out for personalised advice or read our business owner’s guide to novated lease vehicles.
Six tips to educate employees and answer the question “What is a novated lease?"
1. Start with the basics
Explain that a novated lease isn’t the same as a company car. It’s a way to finance a new (or used) car by salary packaging vehicle and on-road payments through salary deductions.
2. Provide clear information
Ensure employees understand what a novated lease is and how it works. Use simple language and real-world examples.
3. Highlight financial benefits
Emphasise the potential tax and GST savings and cost benefits associated with novated car leases in Australia. Provide tools like our online calculator to help employees see the potential savings.
4. Showcase vehicle options
Remind employees they can choose their ideal car, and actively dispel myths about limited choices.
5. Simplify the process
Work with an experienced novated leasing provider like Fleetcare to make the process easier. We handle the heavy lifting and provide all the resources, support and information your employees need to make an informed choice.
6. Encourage independent research
Novated leasing is a significant financial decision. Point employees to places where they can find more information and encourage them to seek professional advice before signing on the dotted line.
Fleetcare is Australia’s novated leasing partner
Novated leasing is gaining traction as an employee perk. It offers convenience, cost savings, simplified budgeting and access to a new car, all of which build your employer brand.
Still, many Australian employees are in the dark when it comes to car financing solutions.
By understanding exactly how novated leasing works and the value it brings, you can help your team unlock a path to savings.
Contact us at 134 333 or online to discuss novated leasing plans and find the right fit for your team.