Can You Sell Your Car Early On A Novated Lease?
Yes, you can sell your car early if it’s under a novated lease, but it’s important to understand the financial implications and potential costs before making a decision. Let’s break down the key factors involved.
1. Understanding a Novated Lease
A novated lease is a three-party agreement between you, your employer, and a leasing company. It allows you to lease a car using part of your pre-tax salary. If you decide to sell the car before the lease term ends, you’ll need to pay off the remaining balance to the leasing company. This process can be more complex than selling a car you own outright.
2. Payout Figure
When selling a car under a novated lease, you need to obtain a payout figure, which includes:
Remaining Lease Payments: Any outstanding payments for the remainder of the lease.
Residual Value: The value of the car at the end of the lease term, which you’ll need to cover if you wish to take full ownership.
Early Termination Fees: You may also face additional fees for ending the lease early, such as administrative fees or penalties outlined in your contract.
3. Selling the Car
You have two main options for selling a car under a novated lease:
Selling Before Paying Off the Lease: You can sell the car and use the sale proceeds to pay off the lease. If the sale price is higher than the payout figure, you can keep the difference. However, if the sale price is lower, you’ll need to pay the shortfall.
Private or Dealer Sale: You can choose to sell the car privately or through a dealer. Some leasing companies may also offer assistance in selling the vehicle, but you will still need to settle the lease balance.
4. Considerations
Market Value vs. Payout: It’s crucial to compare the market value of the car with the payout figure. If the car’s market value exceeds the payout, selling the car may be a viable option. However, if the market value is lower, you could be left covering the difference.
Tax Implications: Selling a car early under a novated lease might have tax implications, especially if the car is used for business purposes. It’s a good idea to seek advice from a tax professional to understand any potential tax liabilities.
5. Alternative Options
If selling the car isn’t ideal, you can explore other ways to exit the lease early:
Pay Off the Lease: You can pay off the remaining lease balance and residual value to take ownership of the car.
Transfer the Lease: If allowed, you may be able to transfer the lease to another party, subject to approval by the leasing company.
Selling your car early on a novated lease is possible but comes with financial considerations. Understanding the payout figure and market value of the car will help you decide whether selling is the best option. Always consult with your leasing company and a financial advisor to navigate the process smoothly.
Ready to discuss your novated lease options? Contact us today for expert advice.