Can I Pay Off My Novated Lease Early?

11 Oct

Yes, paying off your novated lease early is an option, but there are several financial implications to consider before making this decision.

1. Payout Figure

To pay off your novated lease early, you’ll need to cover the payout figure. This typically includes:

Remaining Lease Payments: Any outstanding monthly payments left in the lease contract.
Residual Value: The estimated value of the vehicle at the end of the lease, which you may need to pay if you want to take ownership of the car.
Early Termination Fees: Many lease agreements include fees for breaking the contract early, which can increase the overall cost.

2. Financial Consequences

Paying off your novated lease early can result in unexpected costs. The payout figure could sometimes exceed the current market value of the car, which may leave you in negative equity, meaning you owe more than the car is worth. Additionally, early termination fees and administrative charges can add to the total expense.

3. Consulting Your Leasing Company

It’s essential to contact your leasing company to get an accurate payout figure and a breakdown of any fees involved. They can provide the exact amount you’ll need to pay and help you understand the financial consequences of early termination.

4. Tax Implications

One thing to keep in mind is the potential impact on your tax benefits. If your novated lease was part of a salary packaging arrangement, terminating the lease early might affect any tax savings you’ve been enjoying. It’s best to consult a tax advisor to ensure you understand any liabilities you may face.

5. Alternative Options

If paying off the lease in full isn’t financially viable, there are alternative routes you can explore:

Lease Transfer: You could transfer the lease to another individual, if allowed by your leasing company, to avoid early termination fees.
Negotiation: You might be able to negotiate with your leasing company for more favourable terms, which could reduce your financial obligations.

In conclusion, while paying off a novated lease early is possible, it’s important to consider all the costs and tax implications involved. Contacting your leasing company for detailed information is a crucial first step.

Thinking about paying off your novated lease early?

Mathew Lloyd