I have signed a Novated Lease through an employer. After 6 months, I have got no car yet. Can I cancel it?
If you've signed a novated lease through your employer and have yet to receive your car after six months, it's understandable that you might be considering cancelling the lease. However, it's important to be aware that terminating a novated lease early can lead to significant financial consequences.
Early Termination Penalties
Financial Obligations: If you choose to terminate your novated lease, you will likely be required to pay the remaining balance of the lease. This includes any outstanding principal and interest, which can be a substantial amount depending on your lease terms. The financial burden could be more than anticipated, so it's crucial to fully understand what you might owe.
Penalties: Leasing companies typically impose penalties for early termination. These penalties often include:
Full payment for the remaining lease term.
An early termination fee, which might be structured on a sliding scale (e.g., three extra payments if terminated within the first year).
Additional costs related to the vehicle's return, such as preparing it for sale and dealing with potential negative equity.
Tax Implications: Novated leases offer the benefit of making payments from your pre-tax income, reducing your taxable income. If you terminate the lease early, you may lose these tax benefits, which could increase your tax liability for the year.
Options for Cancellation
If you're still considering cancellation, here are some potential options to explore:
Return the Vehicle: If you've already received the car, returning it to the leasing company is a straightforward option. However, you should be prepared to incur penalties and fees associated with early termination.
Transfer the Lease: Some lease agreements allow for the lease to be transferred to another party. This could be a viable option to mitigate some of the financial losses you might face. The new lessee would take over the payments, potentially saving you from paying the remaining balance yourself.
Negotiate with the Lessor: It's always worth contacting your leasing company to discuss your situation. They may be willing to offer alternatives or negotiate the penalties based on your circumstances, especially if the delay in receiving the car is due to factors beyond your control.
Conclusion
While cancelling a novated lease is possible, it's typically associated with significant financial penalties and obligations. Before making any decisions, it's advisable to carefully review your lease agreement and consult with a financial advisor to fully understand the implications. This will help you explore the best course of action based on your specific situation.
If you're unsure about your options or need help understanding the financial impact of cancelling your novated lease, reach out to us for tailored advice for your situation. It's important to make an informed decision to avoid unexpected costs and ensure your financial well-being.