When considering a novated lease, it is essential to ensure you fully understand the agreement’s terms, benefits, and potential drawbacks.
A novated lease involves an employee, employer, and a finance company, allowing the employee to lease a vehicle with payments deducted from their pre-tax salary. With this in mind, these questions could guide your enquiry.
The Basics
First, ask for a detailed explanation of how a novated lease works. Understanding the mechanics is crucial, including the roles and responsibilities of the employee, employer, and finance company. Clarify how the payments are made, how they affect your salary, and the duration of the lease. Besides the lease payments, ask about administration fees, early termination fees, and any other charges that may apply throughout the lease term.
The basics also extends to the financial benefits and drawbacks of a novated lease. Seek specific details on the financial advantages, such as tax savings from salary packaging, and potential drawbacks, including any hidden costs or fees. Compare a novated lease with other financing options to determine the most beneficial arrangement for your situation.
Your Choices
Ask about the range of vehicles available under a novated lease. Some arrangements might limit your choices to certain brands or types of cars, so it is important to understand your options. Knowing whether you can lease your preferred vehicle is a key consideration.
Request a detailed breakdown of costs included in the lease. A novated lease can cover various expenses like maintenance, insurance, registration, and fuel. Understanding what is included and what you need to pay out-of-pocket helps avoid unexpected expenses and ensures you have a clear picture of the total cost.
Clarify the options available at the end of the lease term. Knowing whether you can purchase the vehicle at a residual value, return it, or lease a new one is crucial for long-term planning. Understanding the end-of-lease process will help you prepare for future decisions.
Ask how the residual value of the vehicle will be determined. The residual value is the car’s estimated worth at the end of the lease term. Ensure this value aligns with industry standards, as an inflated residual value can lead to higher costs at the lease’s end.
You should also discuss insurance options available. Insurance is a significant part of vehicle costs, so enquire about the insurance options included in the lease and whether you have flexibility in choosing your provider. Ensure the insurance coverage meets your needs and preferences.
Analysing the Lease
Understand the implications of a novated lease on your employment. Since the lease is tied to your job, ask about what happens if you change jobs or become unemployed. Knowing the lease’s impact on your employment situation is crucial for financial planning.
It is also useful to gauge flexibility to modify the lease. Life circumstances can change, so enquire about the ability to adjust the lease terms, such as changing the vehicle or lease duration, if needed.
The Fincar team is here to help you with all your financing needs. Contact us today to help arrange your next car or equipment loan.