What happens at the end of a Novated Lease?

By June 27, 2019 July 11th, 2019 News

If you are thinking about Salary Packaging, and in particular buying a car on a Novated Lease, it is important you do your research and know exactly what to expect. You have a few different options to consider at the end of a Novated Lease, and we will explain some of them here.

We often get asked the following questions:

What happens when my Novated Lease ends, and what should I do?

Do I refinance the same car?

Do I buy a new vehicle?

Do I pay out the vehicle?

Do I dispose of the vehicle?

What is the process when I near the end of my lease?

Will I be contacted when I near the end of my Novated Lease?

How long before the end of lease does SPA contact?

What can help me prepare for the end of my lease?

 

Do I refinance the same car?

For many people, their first instinct is to keep the car that they have and re-lease the residual at the end of the Novated Lease period.

On the surface, this would seem to make sense. Re-leasing your current car saves all the hassle of selling or trading your current car and also avoids having to decide on what to buy next. Cars these days have never been more reliable. This means that for many people there may not be too much wrong with what they’ve got. There are, however, some very good reasons to change over that you may not have considered.

One aspect that often gets overlooked is reliability. Even though your car may be very reliable at the moment there’s no way of telling what mechanical trouble is around the corner and what it might cost to fix. Even with cap priced servicing a 90000km major service can cost upwards of $1500 for some makes. There is also plenty of data out there to show that on average close to 75% of four-year-old cars have some sort of serious mechanical issue. That’s almost double the rate of three-year-old cars.

Any savings that you make to your cash flow by reducing your repayment when you re-lease would be fast eaten up by having to budget for much higher maintenance costs.

Do I buy a new vehicle?

Many people find over the period of their Novated Lease, their vehicle needs change. Families grow and shrink, we buy a boat or caravan or we purchase toys that need a dual cab to carry them. This is normally the main deciding factor for refinancing into a new vehicle at the end of a Novated Lease. Some people just want to drive something different, try a different brand or just update to the latest model.

When you want to purchase a new vehicle at the end of your Novated Lease period, you will finalise your existing agreement, pay the residual, or alternatively trade your car in on a new car, and the trade in value can offset your residual. You then enter into a new leasing agreement, whereby you can negotiate, price, accessories, insurances, and roadside assistance, to suit your needs at that time and into the future.

At Salary packaging Australia, our vehicle-leasing specialists assist clients everyday with making smart decisions about their next vehicle purchase.

Do I pay out the vehicle?

If you find yourself in a good financial position at the end of your Novated Lease, there certainly is an option to pay out the residual and own your vehicle forever if you choose. All you need to do is contact us, we can give you a payout figure and then after settlement the vehicle is yours. It is worth noting that you can’t buy the vehicle outright with pre-tax funds. We can advise you the salary packaging implications with regards to this along with account balance summary.

Do I dispose of the vehicle?

Salary Packaging Australia can assist you to dispose of your vehicle at the end of the Novated Lease period. We have an extensive dealer network and wholesale network, which can help sell the vehicle for you. This option, helps our time-poor customers, into their new vehicle quicker. Just give us a call and we can discuss.

What is the process when I near the end of my lease?

SPA will make contact with you, we will run through options of trading, selling, re novating or paying out. SPA runs some examples on the potential scenarios that may occur. You then assess your option and then come back to us when you are ready to enact your decision.

Will I be contacted when I near the end of my Novated Lease?

We will contact you via email to arrange a suitable time for a consultation to run through the process and steps involved in the lease coming to an end.

How long before the end of lease does SPA contact?

Between 3- 4 months out from the end of term. Giving the employee enough time to look at options, such as, availability of new cars/changing over cars etc.

What can help me prepare for the end of my lease?

This is the time to get everything in order for the can; Is your rego up to date? Does the car need a service or tyres changed? Could it do with a detail before being sold? Get your expenditure sorted and out of the way whilst it still forms a tax exemption.

How we can help.

Salary Packaging Australia has the ability to monitor the value of the car midterm and look a the optimal time to trade in compared to market value/remaining value. SPA prides itself on being up-front, transparent and informative about the whole Novated Leasing process. Our dedicated customer support team are here to answer any questions you have about buying a new or used car on a Novated Lease, and your salary packaging options as well.

 

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