Industry expert, Andrew, talks us through some common (and not so common) questions about novated leasing and salary packaging.
Question: What’s the difference between novated leasing and salary packaging?
Put simply: When it comes to cars, they are the same. However, there are a few more things to think about…
Firstly, who is Andrew Pantelis?
With many years of experience in the novated leasing and salary packaging industry, Andrew serves as Novated Leasing Strategist at Positive Salary Packaging. To find out more about Andrew, get in contact.
But back to the difference between novated leasing and salary packaging
As Andew explains, “Novated leasing is simply another option in car ownership. Novated leasing always refers to vehicle finance.”
“The name can be confusing, you don’t actually ‘lease’ the vehicle in the same way you would lease from Hertz or a leasing company… you own an increasing amount of it in the same way you own a car during a car loan term, in other words… it’s all semantics” He adds.
What about salary packaging?
“Salary packaging can cover more than just vehicles. We often refer to it as ‘vehicle salary packaging’ when it comes to cars. This is why novated leasing and vehicle salary packaging are the same.” Says Andrew.
“Minus the vehicle part, and salary packaging can include things like additional superannuation, mortgage repayments even dining out meals. Vehicle salary packaging is often the most popular, so the names can get a bit confusing”.
So, how is vehicle salary packaging [aka: novated leasing] different from a regular car loan?
“It relates to tax, or really, taxable income. With a regular car loan, you get your salary paid into your bank account, then make the loan repayments. This means using already-taxed income to pay some of the car loan repayments.” Explains Andrew.
“A novated lease works the other way around. You pay your car loan repayments before your salary goes into your bank account. That way, you’re using pre-taxed dollars for your repayments. Depending on the circumstances, it can mean more disposable income.”
When asked ‘why doesn’t everyone do vehicle salary packaging / novated leasing instead of a traditional car loan?’, Andrew had this to say;
“The program is only available if the employer allows it, it’s a simple restructure of the employees PAYG so it would have to be approved by the employer. For starters, an employer will need to agree to it, with a traditional car loan, they won’t have anything to do with it. Typically, an employer will offer novated leasing as a benefit to their employees as it could give them a pay rise with no extra cost to the employer”
“Furthermore, the program suits permanent employees or rollover contracts of certain industries and, just like any form of finance, everyone’s situation is different. In other words, vehicle salary packaging [novated leasing] isn’t an off-the-shelf product, it’s a tailored service.” He explains.
The next step
Got any more questions? To see if you and your situation can benefit from vehicle salary packaging / novated leasing, get in contact with Andrew and the Positive Salary Packaging team today.
Stay tuned for more Q&A with Andrew Pantelis as he answers your questions and clears the confusion around salary packaging.