NOVATED LEASE

Novated Leasing is a flexible and convenient way of acquiring a motor vehicle for both the employee and employer, while the inclusion of a vehicle in an employee's salary package is viewed as an attractive benefit.

The employee can lease a motor vehicle of their choice while the employer pays the lease payments and other running costs directly from the employee's pre-tax salary. With a Novated Lease, the employee has ultimate responsibility for the vehicle, including the residual, and has the flexibility of keeping the car (with the option to re-novate) even if transferring to another employer.

How it Works

Novated leasing is simple to arrange.

1. The employee selects the car they want, providing that the repayments can be managed within their overall budget (and subject to Future Finance credit criteria being met). 
    
2. The employee arranges a lease with Future Finance for the car, and novates the agreement to their employer. Under the lease:
   

   • the employee's obligation of paying lease rentals is effectively transferred to the employer;
   • the employer's monthly lease payments are deducted from the employee's gross salary and paid directly to the financier, and;
   • as lessee of the car, the employer provides the car to the employee for their unrestricted use, including total private use.
    

Changing Employment

In the event that the employee leaves their employment, the novation agreement automatically ceases and the employer no longer has an obligation to make future payments on the vehicle. The lease reverts to the employee, unless re-novated to their new employer.

Disposing of the vehicle

At the end of the lease the financier may accept an offer from the employee to purchase the vehicle.

Benefits

A Novated Lease has attractive benefits for both employers and employees.

1. Employer benefits:
   

   • Providing cars to employees is consistent with modern remuneration policy. This is an easy way to provide a value-added incentive without the burden of managing vehicle fleets.
   • The employer pays the lease rentals and other running costs, which are normally deducted from the employee's total remuneration package.
   • Should the employee leave, or on conclusion of the novation agreement, repayments on the car are no longer the employer's responsibility, but that of the employee.

    
2. Employee benefits:
   

   • Cash savings through the utilisation of pre-tax salary (Salary Sacrifice).
   • Freedom to choose the type of vehicle within the guidelines set by the employer.
   • The opportunity to retain use of the vehicle, even if the employee changes employment.
   • With employer agreement, more than one vehicle may be leased.  

While this product profile aims to provide an overview of Novated Leasing, both employees and employers should obtain their own independent advice.