Novated Car Leasing--What's that!?

Novated what--? Yes, we know. It sounds like a term used for an accountant under topical anesthesia, but no--it's not.

Novated car leasing, in simplest terms, is having a third-party--like your employer (or with the addition of a third-party financier)--to join you in paying your car's lease payments. Depending on your salary package arrangement, it might mean deducting a small portion of your pre-tax salary every month to pay for your vehicle's lease plus other expenses like fuel, maintenance, insurance repair, and other services.

Advantages

So what are the benefits? First, you'll have more disposable income at your fingertips, since your income tax will now be calculated using your "now-reduced salary".

Second, you can bundle-up all your running costs in one convenient, easy payment each month so you won't have to do separate payments for your lease, fuel, and many others.

Third, you can get more volume discounts if your employer has many vehicles that are under novated car lease.

Fourth, your vehicle stays with you. Should you decide to transfer to another company, then you can ask your new employer to continue paying your car's lease for you.

Disadvantages

Of course, that's not to say it doesn't have its disadvantages. First, your new employer might not want to shoulder the responsibility of paying for your vehicle. This means you will now have to pay for the vehicle yourself--or worse--terminate the entire lease and lose your vehicle if you can't afford to pay for it.

Second, it might require you to pay higher interest rates, since there will be additional charges, like administration fees.

Unfortunately, this type of car leasing option isn't available in the Philippines, which makes us wonder why. Perhaps it's too much of an expense for some companies to shoulder, but we think it can be a highly-attractive option to entice the best people to work for them. It's common in countries like the United Kingdom, Australia, and the United States, though, so you might want to migrate there if you really want to have this type of car financing option for your vehicle.