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How long is too long for a novated lease?

28/06/2018 by Kirsten Brent in Novated Leases

If you've been thinking about a novated lease for your next vehicle then you probably already know about the many advantages it offers. You know that it's the smart tax-effective way to get behind the wheel of a brand new car while keeping more money in your pocket each payday. That's because lease and running costs are paid from your pre-tax salary.

But perhaps there's one question that you still haven't found an answer for: What's the ideal length of a novated lease? How long should I keep the vehicle?

A novated lease typically runs for between one to five years, after which you can either trade the vehicle in for a new one, refinance it and keep it, or otherwise buy it out. So how long is long enough and how long is too long?

There are four very good reasons why experience has shown us that the ideal length of a novated lease should be no more than three years.

Rising maintenance costs

It's a fact that vehicle maintenance costs start rising significantly after three years as those kilometres start climbing. With every 40,000 kilometres the costs of maintaining your car keep going up rapidly.

Depreciation

Just as those kilometres start accumulating after three years of age, so too does the depreciation on your vehicle, wiping thousands off its value. Ouch! All vehicles depreciate, but some do so much more gradually. With this in mind the smart thing to do would be to research the vehicle you like and how it depreciates over time.

Unpredictable failures

All vehicles require regular servicing to keep them running smoothly and prevent breakdowns. But with a vehicle over three years old you can expect the unexpected, or in other words parts that fail unpredictably requiring unscheduled maintenance and repairs.

That's a lot less likely in a car that's less than three years old.

Enhanced features

Vehicle technology is advancing at an astonishing pace with features such as blind spot warning, driver attention detection and active braking systems now becoming common.

By updating your vehicle with a new novated lease every three years you'll be keeping up-to-date with the latest safety, comfort and convenience features that manufacturers keep introducing with each new model, or model update.

For all these reasons, three years is the perfect time to hold a vehicle on a novated lease. That way you can be sure you're driving a modern, reliable car that's up-to-date with the latest features and that you're enjoying those benefits in the most tax-effective way possible.

Need to know more about the many advantages of a novated lease? Call Fleetcare today on 134 333 for an obligation-free chat.

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