10 Steps to Getting a Novated Lease Car
A novated lease can be a great way to get the car you want while paying less. By using your pre-tax salary, you can lower your taxable income and save a lot of money as a result. A novated lease can seem complicated and confusing when you first look into it, even if you understand the benefits in a broader sense.
At leaselab, we’re all about sharing knowledge, cutting through the jargon so you can get on top of the basics of what that process involves. We’re passionate about helping people get a novated lease in Melbourne where we’re based, as well as all across Australia. Our mission is to make getting a novated lease as easy as possible for everyday working Aussies. So without further ado, here are the 10 key steps to getting a novated lease.
In Summary
First, a quick summary of the 10 steps:
Step 1: Research and due diligence
Step 2: Get a quote
Step 3: Review your quote
Step 4: Finance approval
Step 5: Reserve your car
Step 6: Sign your agreement
Step 7: Final approval and getting your car
Step 8: Welcome kit
Step 9: During your lease
Step 10: At the end of your lease
This might seem like a lot, but each step is fairly simple. Best of all, you won’t have to do much of the work. Now let’s get into the details.
Step 1: Research and Due Diligence
Start by checking if a novated lease is a good fit for you. You need to ensure your income tax savings will be enough to offset the cost of the lease. Novated leases may not be suitable for people on low incomes. You also need to be paid via a PAYG system through your employer (or yourself if self-employed).
Next, consider the type of vehicle you want and how often you’ll drive. Generally, people who use their car more often enjoy greater savings on fuel and other running costs included in the lease. Meanwhile, certain cars such as electric vehicles and utes below the luxury car tax threshold ($89,332 for FY 2023/24) are exempt from fringe benefits tax (FBT). This further maximises novated lease tax savings.
Step 2: Get a Quote
The next step is to get a free, no obligation quote from your preferred novated leasing company. This takes as little as 10 minutes and can be done over the phone. All you need to do is provide basic details such as what car you want, how much you’ll use the car and some information about your salary. If you’re unsure what car you want, a good novated lease provider can provide some advice on good options for your circumstances.
Step 3: Review your quote
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When working with a good novated lease provider, you should receive an easy-to-understand quote within an hour. These are typically only a page long and you can call back to ask about any details you’re unsure about. During this stage, it’s a good idea to chat to your employer to see if they offer novated leasing or if they’d be willing to if they currently don’t. The leaselab team has put together a simple employer guide that gives them everything they need. They can also get in touch with us and we’ll guide them through the process.
Step 4: Finance approval
If you’re ready to go ahead with your quote, the next step involves a reasonably short finance pre-approval application. Your novated lease provider can help you get this green lit for approval and guide you through any aspects of the process you’re unsure about.
Step 5: Reserving your car
Next, your novated lease provider contacts the dealership and secures your car. This means it’ll be ready for you as quickly as possible.
Step 6: Signing your agreement
You and your employer then need to sign some paperwork to set things up. The most important point is approving your employer to take car payments from your salary as part of a salary sacrifice arrangement. Your employer also signs a direct debit agreement, which is similar to the standard terms for direct debit.
Step 7: Settlement and getting your car
Once all the paperwork gets sorted out, your novated lease provider will take care of the settlement process. After that, you’re free to pick up your new car once it’s ready.
Step 8: Welcome kit
At leaselab, we send everyone we onboard with a welcome pack confirming your novated lease has been approved. Your employer also receives an email and info pack detailing how to add your lease payments to your pay cycle. It’s a set and forget process, with no other action needed from them after that. Our welcome kit will include everything you selected to be part of your novated lease package, such as your fuel card and service and maintenance card.
Step 9: During your lease
It’s time to enjoy your new car with all your running costs taken care of. During your novated lease, if you incur any fuel or servicing expenses and don’t use your novated lease account cards for, you’ll be reimbursed. Simply send through your receipts and we’ll pay you back. You can also get a report on your account balance at any time.
Step 10: End of your lease
A few months before the end of your lease, your novated lease provider typically gets in touch to see what you’d like to do next. Common options include:
- Keep your car — If you’re happy to keep the car, simply pay off the residual (remaining balance) and it’s all yours.
- Keep your car and enter a new agreement — If you’d like to keep your car but can’t afford to pay the residual, you can simply enter into a new novated lease for the residual. This will cost less than the original novated lease as you’re only financing the residual rather than the entire purchase price of the car.
- Upgrading your car — Get a new novated lease and get a newer car while paying the same amount. When choosing this option, you can sell your current car, pay off the residual fee (the balance remaining) and pocket the difference for another windfall
The option you choose typically depends on your circumstances. Either way, novated leases are set up to put you in the best possible financial position, not just in terms of tax savings, but the car and its value at the end of your lease. Speak to your novated lease provider about your decision or ask for advice. At leaselab, we handle everything for you, no matter what you choose to do.
Is a novated lease worth it?
A novated lease is simple to set up and can be a hassle-free way to get a car if you choose to include all of your running costs in your package. If you buy your car outright or go with a standard car loan, there’s a lot more admin along with higher costs.
Below are some real world examples of savings made by leaselab clients through novated leasing:
Got more questions? The team at leaselab love sharing knowledge and demystifying novated leases. We also have a great knack for finding the right novated lease package for each person’s unique situation. Call us today on 1300 888 594 to chat with us now. Alternatively you can email us on team@leaselab.com.au or contact us online via our website to schedule a callback at a time that suits you.
