The Novated Lease Pros And Cons

The Novated Lease Pros And Cons

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Vehicles are virtually everywhere one looks in Australia – the entire world, really. As Australia is burdened with more debt than any country on planet Earth, many residents don’t have enough money to cash flow the purchase of a vehicle.

As such, most people are left with one option – leasing – or going without a vehicle. Most opt for the former option, rather than walking here, there, and everywhere.

The Definition Of A Novated Lease

To novate something, more or less, means to transfer responsibility for something to another paty.

In the case of a Novated Lease at Stratton Finance, an employee will already have the option of a novted lease in their benefit packages – nonfinancial compensatory packages typically including health insurance, among other forms of pay outside of money – and then select a vehicle they want to drive.

Their employer takes financial responsibility for the vehicle. Does the employee ever leave their position? Then he or she takes responsibility, and even has the opportunity to transfer the lease back to another employer, given they get a new position somewhere.

What’s So Good About A Novated Lease?

What could be so good about letting one’s employer take care of a vehicle lease? Most Australians are already familiar with the many benefits of novated lease agreements, though the rest of the world might not be.

Novated lease payments are taken by employers directly from workers’ paychecks. The key benefit this provides workers is that no income taxes are taken out on them.

Further, any sales tax that would otherwise be paid to financiers – which isn’t forked over in the case of the esteemed, helpful novated lease – doesn’t exist in the case of the novated lease.

Employers also tend to provide employees with handfuls of benefits that typically wouldn’t be available if they had opted for leases without the intermediary that employers act as in novated lease agreements.

Why Might Someone Not Want To Choose A Novated Lease?

Any vehicle, such as the Mazda¬† someone signs up for with a novated lease typically must be purchased in order for the lease to be settled. Even if the employee isn’t granted the vehicle at the end of the novated lease, he will still be responsible for a balloon payment at the end.

This might not be convenient, or even doable, for some people. As such, better options are available for getting one’s hand on a vehicle.

However, given that one has enough money to afford the residual payment, a novated lease is a great idea.