Novated leasing expert, Andrew, talks us through some common (and not so common) questions about novated leasing and salary packaging.
Question: What happens with my novated lease if I change employer?
Put simply, you can likely transfer the lease.
However, there are a few things to consider…
Firstly, who is Andrew Pantelis?
With years of experience in the novated leasing and vehicle finance industry, Andrew has helped countless clients use pre-taxed income toward their car costs at Positive Salary Packaging. Find out more about Andrew by getting in contact.
But back to changing employers with a novated lease.
Andrew is quick to point out, “a novated lease or vehicle salary package is an agreement between three parties; a borrower, a lender and an employer. So, if you change employers, it affects the loan agreement.”
“It’s very common and not a difficult issue – if you own a vehicle purchased using salary packaging, you’re not locked into staying with your employer by any stretch of the imagination. You can change employers as you see fit”
“Oh, and of course, you still keep your car”. Adds Andrew.
So, what options do you have?
Typically, those who benefit from vehicle salary packaging have a few options when they change employers.
Transfer the lease
“From a financial standpoint, the most beneficial option is to transfer your lease to your new employer. This is because novated leasing (or vehicle salary packaging) uses pre-taxed income to pay the loan. Without an employer agreeing to do this, you’ll have to use taxed income dollars.” Says Andrew.
“If you change employers, ask the new one if they support vehicle salary packaging – transferring an agreement is not a difficult process.”
For more information on transferring leases, give the team at Positive Salary Packaging a shout.
Continue paying the lease and running costs as a traditional car loan
“This option suits people who move to a new employer that does not offer novated leasing or vehicle salary packaging.” Explains Andrew.
“Basically, it means changing the agreement from having three parties (the lender, borrower and employer), to only consisting of the borrower and lender. In other words, a traditional car loan.”
“The major benefit of a novated lease is using pre-taxed income to service the loan and pay for vehicle running costs like insurance, servicing and fuel. This lowers your taxable income and typically frees up more disposable income.”
Andrew continues, “converting a novated lease into a traditional car loan is doable, but make sure you understand all the details and go over the numbers as you’re unlikely to see tax or GST savings.”
Pay out the amount owing
“Some people may wish to complete the lease ahead of schedule.”
Andrew clarifies, “it’ll mean parting ways with whatever amount is left owing on your novated lease when you leave your employer. You’ll have to make that payment if you choose this option, however, it will be in post-tax dollars with no income tax or GST savings.” He explains.
Is there anything else to consider?
Andrew points out that as vehicle salary packaging and novated leasing include an employer in the agreement, borrowers should take this into consideration.
“If you plan to stay in the workforce for a limited amount of time, selecting a matching lease term is often a good idea.”
“For example, if you plan to retire in four years, a four-year lease or less would suit. Or, perhaps you sign a three-year contract with your employer and don’t plan to continue after it expires, there are short lease terms available.” He says.
“Novated leasing programs always come with a residual, so you can look at re-leasing if you decide to stay longer.”
“By the way, I always like to point out that ‘lease’ doesn’t mean you’re leasing a car like you may do on holiday from a car hire company. A novated lease allows you to register the vehicle in your name in the same way as in a traditional car loan.” Adds Andew.
The next step
To find out how you could benefit from vehicle salary packaging / novated leasing, get in contact with Andrew and the Positive Salary Packaging team today.
Other information that might help
What’s the difference between novated leasing and salary packaging?
Stay tuned for more Q&A with Andrew Pantelis as he answers your questions and clears the confusion around salary packaging.