Can You Get Out Of A Novated Lease Early?
Yes, it is possible to exit a novated lease early, but it's essential to understand the potential costs and processes involved. Here’s a breakdown of what to consider when ending a novated lease before the term expires.
Reasons for Early Termination:
Employment Changes: If you leave your current job and your new employer doesn't offer novated leasing, you may need to terminate the lease.
Financial Difficulties: Unexpected financial challenges might make it hard to continue paying for the lease.
Lifestyle Changes: Changes in your personal life, such as relocating or needing a different type of vehicle for family reasons, may prompt you to end the lease.
Costs of Early Termination:
Payout Figure: To exit the lease, you usually need to cover the remaining lease payments plus the residual value of the vehicle. This can sometimes exceed the car’s market value, meaning you may end up paying more than what the vehicle is worth.
Early Termination Fees: Breaking the lease agreement may come with penalties, such as administrative fees, costs for preparing the vehicle for sale, and possibly storage and transportation fees for returning the car to the leasing company.
Negative Equity: If the vehicle’s current value is less than the payout figure, you could face negative equity. This means you owe more on the lease than the car is currently worth.
Steps to Take:
Review Your Lease Agreement: Go through your lease contract to understand the specific terms and penalties for early termination. This will give you an idea of the financial impact.
Consult Your Employer and Leasing Company: Speak with both your employer and the leasing company to explore any available options for ending the lease, such as transferring the lease or reducing costs.
Seek Financial Advice: It’s wise to consult a financial advisor who can help assess your options and guide you through the financial aspects of terminating the lease early.
Tips for a Smooth Transition:
Plan Ahead: Try to time your exit strategically, such as aligning it with financial events like receiving a bonus or tax refund to cover some of the costs.
Maintain Communication: Keep clear and open communication with your employer and the leasing company to avoid misunderstandings and ensure a smoother process.
Keep Records: Document all conversations, agreements, and paperwork related to the lease termination for your reference.
Exiting a novated lease early is possible but may come with significant costs and penalties. By understanding your lease agreement, consulting with your employer and leasing company, and seeking financial advice, you can navigate the process more effectively. Being informed and proactive can help minimise the impact on your finances.
Need advice on managing your novated lease? Contact us today to explore your options.