New cars can be expensive. If you are in the market for one, you likely know this already. One way of financing a new or used car is getting a novated lease. Novated leases are quickly becoming one of the most popular ways for people who’re shopping for new vehicles to get their hands on them. Of course, though there are some things that you need to think through and learn about before you can take one out. Until you are an expert on the topic of novated leases, getting one is unwise.
Here’s everything you need to know:
What Is Novated Leasing?
For the uninitiated, novated leasing is one of the cheapest and most tax-efficient ways of purchasing and owning a car. It is essentially a way of financing a car from your pre-tax salary. You need your employer’s agreement before you can do this, however. If you plan to consider novated leasing then you need to first talk to your employer and ask if it is something they would be interested in facilitating. If the answer’s no then obviously you won’t be able to. Without their approval, a novated lease cannot go ahead.
Reducing Taxable Income
One of the main advantages of novated leasing is that as you pay out of your pre-tax deductible income, your taxable income is reduced. You’ll pay less tax on the money that you earn because you are earning less. Taxes are very high at the moment so reducing your taxes by paying for something you would otherwise have to pay for out of your income is definitely worth considering. If you want to learn more about this, get in touch with a company offering novated leases and ask them any questions you may have.
Understanding the Risks
Obviously, any type of car finance comes with risks. If you lose your job, for example, your lease could be terminated. You need to spend time thinking about what taking out a car lease entails so that you can ensure you are fully prepared. Leasing a car when you do not know about the risks is a bad idea. A worse idea is leasing one if you know your job is on the rocks. If you are uncertain about your future then you might want to speak to your boss at work and just confirm they have no issues with you.
Choosing Car Carefully
A lot of people go overboard when it comes to car financing. Make sure that you choose a sensible vehicle. Don’t make the mistake of choosing one that is ridiculously expensive. If you are in a relationship or are married, talk to your partner about your car and see if you can come up with a good plan together relative to the make and model you want to buy. Choosing cars is not easy but is definitely something that you need to think about if you are in need of one and want to take out a novated lease.
Novated leases are a great alternative to a traditional finance arrangement. If you are interested in one, speak to a company offering them and to your employer.