Do Banks Offer Novated Leases

Yes, many banks and finance providers in Australia, including major players like Commonwealth Bank and Westpac, do offer novated leases. A novated lease is a popular financing option that allows employees to lease a vehicle while enjoying potential tax benefits.

How Novated Leases Work Through Banks

When you opt for a novated lease with a bank, a three-way agreement is formed between you, your employer, and the bank. Essentially, your employer agrees to deduct the lease payments from your pre-tax salary and pay the bank directly. During the lease term, the bank owns the vehicle, and you benefit from driving it as part of your employment package. Lease terms typically range from two to five years, and at the end of the term, you may have the option to purchase the car by paying the residual value.

Benefits of Novated Leases from Banks

One of the main advantages of choosing a novated lease through a bank is the potential tax savings. Since the lease payments are deducted from your pre-tax salary, this reduces your taxable income, possibly saving you a significant amount over time. Additionally, when you use a novated lease, you can avoid paying GST on the purchase price of the car as well as on running costs such as fuel, servicing, and maintenance.

Another benefit is the flexibility to upgrade your vehicle at the end of the lease term. If you enjoy driving a new car every few years, a novated lease can make this process smoother. Moreover, if you change jobs, your lease can usually be transferred to your new employer, provided they agree to take it on.

Things to Consider

Despite the benefits, there are a few important points to keep in mind. Since the bank owns the car during the lease term, you won’t officially own it until you’ve paid out the residual value at the end. Additionally, if your employment ends unexpectedly, you will need to take over the lease payments yourself. Furthermore, some banks may charge interest, and administration fees, and you may incur fringe benefits tax, which can add to the overall cost of the lease.

In summary, banks offer novated leases that come with tax-saving opportunities and flexible car ownership options. However, it’s crucial to understand the terms and conditions thoroughly before signing up to ensure it aligns with your financial situation and long-term goals.

If you're ready to explore novated lease options and save on your next vehicle, reach out to today to learn more.