How Much Are Novated Lease Balloon Payments?
A novated lease is a great way to finance a car through your employer, offering tax advantages and the flexibility to choose a vehicle that suits your lifestyle. One key aspect of a novated lease is the balloon payment, which is a lump sum due at the end of the lease term. But how much can you expect to pay?
What Is a Balloon Payment?
The balloon payment is a final, one-off payment made at the end of your novated lease agreement. It represents the residual value of the car and is calculated based on factors like the length of the lease and the car’s expected depreciation over time. Essentially, the balloon payment is the amount the car is worth when the lease finishes, which you’ll need to pay if you wish to own the vehicle outright.
Typical Balloon Payment Amounts
The amount of your balloon payment can vary depending on several factors:
Length of the Lease: Longer leases generally have smaller balloon payments as the car depreciates more over time.
Car’s Value: Higher-value cars will naturally have larger balloon payments.
Residual Value Guidelines: The Australian Tax Office (ATO) has guidelines on the residual value of vehicles. For a five-year lease, the residual value is typically around 28.13% of the car’s original value, but this can vary depending on the terms of the lease.
For example, if your car's original value was $40,000 and your lease term was five years, you might be looking at a balloon payment of around $11,252 at the end of your lease.
Options for Managing the Balloon Payment
When your novated lease ends, you have several options:
Pay the Balloon Payment: This allows you to take ownership of the car outright.
Refinance the Balloon Payment: You can extend your lease or seek other finance options to pay the remaining amount.
Understanding how much your balloon payment will be and your options at the end of the lease is essential to managing your novated lease effectively.
Ready to explore novated leasing further? Contact us today to learn more about how a novated lease can benefit you, and we’ll help you find the perfect car for your needs.