Breaking a novated lease can be a complex and challenging situation, impacting both your finances and your mobility. A novated lease is a popular arrangement that allows individuals to lease a vehicle using pre-tax income, often through an agreement between an employer, employee, and a finance company. However, if circumstances change and you find yourself needing to break this lease prematurely, several implications come into play.
The Impact
Firstly, terminating a novated lease before the agreed-upon term can lead to significant financial consequences. When you sign a novated lease, you commit to making regular lease payments, typically over a specific period. Should you need to break this agreement early, you’ll likely incur substantial costs, including early termination fees, outstanding lease payments, and potentially additional penalties outlined in the lease contract.
The specific financial repercussions of breaking a novated lease can vary depending on the terms outlined in your contract. Some agreements may allow for early termination under specific conditions, while others may enforce strict penalties for breaking the lease prematurely. It’s crucial to carefully review your lease agreement and consult with the finance company or leasing provider to understand the financial liabilities you might face.
Moreover, the process of breaking a novated lease may involve negotiating with multiple parties involved—the finance company, your employer, and potentially a vehicle dealer. Communicating your situation clearly and transparently with these stakeholders is essential to explore possible options and minimise the impact of terminating the lease.
What Can I Do?
One potential avenue is transferring the lease to another party, commonly referred to as a lease transfer or novation transfer. Finding someone willing to take over the lease can help you avoid some of the financial penalties associated with breaking the lease. However, this option may not always be feasible or straightforward, as it requires finding a suitable candidate willing to assume the lease responsibilities.
In some cases, negotiating a settlement with the finance company could be an option, though this might involve paying a lump sum amount to terminate the lease early. This approach could potentially mitigate some of the financial burdens associated with breaking the lease, but it’s crucial to assess whether this option is financially viable for your circumstances.
Failing to comply with the terms of the novated lease agreement can have long-term implications, potentially impacting your credit score and financial reputation. Therefore, it’s advisable to explore all available options, seek professional advice if necessary, and work towards a mutually agreeable solution with the involved parties.
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.