1 / 7

Which is Better? A Novated Lease or a Car Loan?

A novated lease is not for everyone because it has some disadvantages. Firstly it’s a commercial agreement where the interest rate is not disclosed to the individual. Secondly, at the end of the lease, the borrower will not own the vehicle. To better understand this type of financing, check out these slides.

AutoCarLoans
Download Presentation

Which is Better? A Novated Lease or a Car Loan?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Should I Get Novated Lease or A Car Loan?

  2. I would suggest a car loan for most people. It is situation dependent, but the key things to understand with the novated lease are that it's actually a commercial agreement. That means that you do waive your consumer rights when you sign up for it. The interest rate is often not disclosed, and of all the people I've ever spoken to who have a current novated lease, none knew what their interest rate was. That's because it wasn't told to them at the point of application or when it was settled or when they got the car. The other thing to understand is that all novated leases have a mandatory balloon residual payment. So after the term of the novated lease, be it three, four or five years, you're not going to be the owner of the car. You’ll

  3. have the option to buy it for the residual amount, but you'll find that over the course of your novated lease, you’ve actually built no equity in the car at all. A further thing to understand is that novated leases, often because they are commercial contracts, can have big costs associated with them. Looking ahead three, four or five years, you may not know if you're going to be with the same employer. If you need to leave your employer and it becomes just a regular loan agreement between you and the lender, there is going to be a break cost. The interest rate is going to be a lot higher and the tax benefits are no longer applicable.

  4. I think a lot of the time that's oversold to the person. You'll be an employee and then the novated leasing company will come in and give you their spiel about all the tax savings that you could get by paying some of your car pre tax and some of the post tax. But I've never seen anybody who has had an overall cost saving by doing a novated lease. It's always presented to them that they'll save x amount of tax by taking out such a lease, but unless they're going to drop two tax brackets, then that's often not the case.

  5. IN THIS VIDEO: Senior Asset Finance Broker Francis Valente shares his insights on why a car loan makes a better option than a novated lease.

  6. AutoCarLoans can help you get all the information you need and find you the lender with the most competitive option. Compare loans and save today by visiting our website.

More Related