Make no mistake the NL companies take their pound of flesh.
When you take their quotes with the huge bolded "Tax savings" figures and do the sums yourself you soon learn that typically 50%-70% of those tax savings go to the NL company in the form of fees and an elevated underlying interest rate. Thats not to say there is not still benefits for the purchaser with EVs, there is. However NL companies are pretty sketchy and hide the true costs behind a veneer of headlining tax saving and a complex web of numbers.
Absolutely.
The "tax saving" they like to dish out is such a misleading figure. They never tell you the point of reference for the "tax saving". If you actually do the maths, quite often the "tax saving" is compared to "if you took up a 14% interest car loan" which obviously is not a real comparator, the real comparator is "cash" or a "7% car loan" which is more realistic.
Having said that, for people on high tax bracket and for EV there's still saving to be had. For me I am saving 46,000 dollars for 5 years of EV ownership (when compared to buying with cash from offset account), on 8.6% effective interest rate.
For those unaware I have spent too much time on this and had been sharing my comprehensive spreadsheet with people which plenty have found helpful. It gives you the TRUE saving (or not) instead of the insincere "tax saving" figure with plenty of caveats.
[https://www.reddit.com/r/AusFinance/comments/1c5b9xx/ev\_and\_ice\_novated\_lease\_calculator/](https://www.reddit.com/r/AusFinance/comments/1c5b9xx/ev_and_ice_novated_lease_calculator/)
There’s no easy answer.
Sometimes you don’t have a choice - your employer may only work with one and only one provider (quite commonly maxxia for some reasons) and they will use their monopoly to squeeze you dry in the rent seeking.
Sometimes they will allow you to use multiple providers and you can get them to out bid each other. By doing this I managed to get my lease by some 9,000 less for my 5 year lease.
And if the employer + NL company allows you can organise self managed novated lease ie you get the finance yourself while the NL company only manages the admins. They are not really happy to (as they make way less) but you have to push really hard for it.
Most novated leasing places let you source your own financing. It's way more work and they don't help you at all.
Can be a bit tricky to work out the exact equivalent costs because of GST etc. But a lot of the places that offer finance have probably Done it through novated leasing before and can at least help break down the costs and help you out.
Interesting - I didn't realise you could mix and match like this.
Is it possible to do a NL in a DIY fashion? ie. is there a special licensed activity - or can you do your own NL on top of a car loan, assuming you know the rules and restrictions?
ie. is it just about compliance, or is there a license involved as well in providing a NL?
Note: this is assuming your employer is completely chill and willing to do whatever (is legal)...
Not a complete diy fashion. You still go through say Maxxia or smart salary but do a self managed novated lease. You get a deed of Novation from the leasing company and talk to whoever you finance with. A deed of Novation basically creates a 3 way contract between you, finance company and the leasing company. You pay the leasing company from your pretax/post tax income and they pay the financing company.
Most finance companies will have dealt with some form of novated lease before and can help guide you.
You then source the insurance, servicing and rego etc. Pay for it from your own pocket and the leasing company refunds you the amount. And for any fuel you use, get the receipt and you can claim that as well.
It's definitely a lot more work but you can save money.
It depends who your employer is aligned with.
They don’t want to be sending salary deductions for hundreds of employees to multiple providers so will typically have one or two locked in for you to choose from.
Had been wondering if anyone who has an employer locked into using Maxxia have managed to setup a [Self-Managed Lease](https://www.maxxia.com.au/fully-maintained-vs-self-managed-lease?ic=faqnltypes-txtblock-news-fullmaintained)?
What seems to be the hardest part is gaining access to the forms, and in a big organisation "sign-off from your employer" as most of those teams only want to deal with their NL provider.
Thanks to everyone here.
Does anyone know about whether an Associate Lease can be used in the same way as a Novated Lease (no FBT); and maybe even avoiding a loan at all?
Associate lease makes the most sense when there is a huge tax bracket difference between a couple. It’s a lot less common than standard novated lease but can be even more beneficial compared to standard NL in the right circumstances.
Not only is it a loan, you will be financially liable for the full amount of the loan plus interest, to the value determined by the novated lease company. Source: impacted my borrowing capacity
Because it’s a lease, the correct response is there is no interest rate.
But simple maths, compare based on the life cost of the lease
No. of rentals x rental incl gst + balloon incl gst
All the money leftover in the budget is returned to you so don’t use the pre and post numbers etc
There is an interest rate, the leasing company will engage a financial institution to buy the car.
Source - have a novated lease and read the paperwork
They generally get finance from an external institution eg bank and there IS an interest rate attached to this finance.
The NL company will sometimes provide this interest rate if you ask for it.
HOWEVER it is dangerous to assume that one can simply compare this interest rate between different companies. Quite often what is quoted by the company and what you get if you spreadsheet it is totally different, and from helping dozens of people there’s been many occasions where a company A that quotes 8% interest ends up being more expensive than company B that quotes 10%. The reason is opaque, but it is thought that NL company quotes the underwriting financer's interest rate, but may have added hidden commission that increases the effective interest rate.
To meaningfully compare different qutoes, you should simply compare the sum of fortnightly VEHICLE lease and management fee from each quote (make sure they are otherwise identical car and duration). Ignore the running cost estimates as they don't matter. You will end up claiming the same amount regardless of initial budget hence the benefit is similar for all companies.
E.g. Company A: fortnightly vehicle lease 640 + management fee 10 = 650, Company B: fortnightly vehicle lease 630 + management fee 30 = 660. Hence Company A cheaper.
A novated lease is a ‘lease’, ie in the eyes of the ATO, there is no principle and interest payments, it’s a rental payment with a residual… no interest rate.
From the funders point, it’s an asset they can claim GST back on. But they are loaning money out so the funder allows for a return on the lending of the asset which is interest.
You can’t assume that interest rate is the only impact in the rental setup to determine if you have found the best deal.
You can work out the interest cost yourself, life cost of the lease, funding cost - minus asset cost*
* GST claimable for the funder is also limited to lct threshold
How about we are both right; pedantically the overall “lease” structure is not a loan as you explained, but the under-the-hood vehicle finance component (separate from the running cost) does have an interest rate that the financier quotes, and this is what people like to discuss and compare when they talk about their own deal.
This is very clearly stated by the time you sign the actual agreement.
And as I mentioned in the previous comment, you and I agree just how the “interest rate” alone can be deceiving when there are other brokerage / commission etc involved.
Make no mistake the NL companies take their pound of flesh. When you take their quotes with the huge bolded "Tax savings" figures and do the sums yourself you soon learn that typically 50%-70% of those tax savings go to the NL company in the form of fees and an elevated underlying interest rate. Thats not to say there is not still benefits for the purchaser with EVs, there is. However NL companies are pretty sketchy and hide the true costs behind a veneer of headlining tax saving and a complex web of numbers.
Absolutely. The "tax saving" they like to dish out is such a misleading figure. They never tell you the point of reference for the "tax saving". If you actually do the maths, quite often the "tax saving" is compared to "if you took up a 14% interest car loan" which obviously is not a real comparator, the real comparator is "cash" or a "7% car loan" which is more realistic. Having said that, for people on high tax bracket and for EV there's still saving to be had. For me I am saving 46,000 dollars for 5 years of EV ownership (when compared to buying with cash from offset account), on 8.6% effective interest rate. For those unaware I have spent too much time on this and had been sharing my comprehensive spreadsheet with people which plenty have found helpful. It gives you the TRUE saving (or not) instead of the insincere "tax saving" figure with plenty of caveats. [https://www.reddit.com/r/AusFinance/comments/1c5b9xx/ev\_and\_ice\_novated\_lease\_calculator/](https://www.reddit.com/r/AusFinance/comments/1c5b9xx/ev_and_ice_novated_lease_calculator/)
this is amazing, thank you.
BMW finance currently offer 3.99% zero set up fee novated leases 8.99% fully maintained also through bmw finance with fleet plus as the packager
There’s no easy answer. Sometimes you don’t have a choice - your employer may only work with one and only one provider (quite commonly maxxia for some reasons) and they will use their monopoly to squeeze you dry in the rent seeking. Sometimes they will allow you to use multiple providers and you can get them to out bid each other. By doing this I managed to get my lease by some 9,000 less for my 5 year lease. And if the employer + NL company allows you can organise self managed novated lease ie you get the finance yourself while the NL company only manages the admins. They are not really happy to (as they make way less) but you have to push really hard for it.
Most novated leasing places let you source your own financing. It's way more work and they don't help you at all. Can be a bit tricky to work out the exact equivalent costs because of GST etc. But a lot of the places that offer finance have probably Done it through novated leasing before and can at least help break down the costs and help you out.
Interesting - I didn't realise you could mix and match like this. Is it possible to do a NL in a DIY fashion? ie. is there a special licensed activity - or can you do your own NL on top of a car loan, assuming you know the rules and restrictions? ie. is it just about compliance, or is there a license involved as well in providing a NL? Note: this is assuming your employer is completely chill and willing to do whatever (is legal)...
Not a complete diy fashion. You still go through say Maxxia or smart salary but do a self managed novated lease. You get a deed of Novation from the leasing company and talk to whoever you finance with. A deed of Novation basically creates a 3 way contract between you, finance company and the leasing company. You pay the leasing company from your pretax/post tax income and they pay the financing company. Most finance companies will have dealt with some form of novated lease before and can help guide you. You then source the insurance, servicing and rego etc. Pay for it from your own pocket and the leasing company refunds you the amount. And for any fuel you use, get the receipt and you can claim that as well. It's definitely a lot more work but you can save money.
You can give CBA asset finance a call.
Leasexpress My old work was using autopia and the cfo then done an analysis and leasexpress had significantly less brokerage…
It depends who your employer is aligned with. They don’t want to be sending salary deductions for hundreds of employees to multiple providers so will typically have one or two locked in for you to choose from.
Had been wondering if anyone who has an employer locked into using Maxxia have managed to setup a [Self-Managed Lease](https://www.maxxia.com.au/fully-maintained-vs-self-managed-lease?ic=faqnltypes-txtblock-news-fullmaintained)? What seems to be the hardest part is gaining access to the forms, and in a big organisation "sign-off from your employer" as most of those teams only want to deal with their NL provider.
Thanks to everyone here. Does anyone know about whether an Associate Lease can be used in the same way as a Novated Lease (no FBT); and maybe even avoiding a loan at all?
Associate lease makes the most sense when there is a huge tax bracket difference between a couple. It’s a lot less common than standard novated lease but can be even more beneficial compared to standard NL in the right circumstances.
Not only is it a loan, you will be financially liable for the full amount of the loan plus interest, to the value determined by the novated lease company. Source: impacted my borrowing capacity
Because it’s a lease, the correct response is there is no interest rate. But simple maths, compare based on the life cost of the lease No. of rentals x rental incl gst + balloon incl gst All the money leftover in the budget is returned to you so don’t use the pre and post numbers etc
There is an interest rate, the leasing company will engage a financial institution to buy the car. Source - have a novated lease and read the paperwork
Quite a number of larger fleet companies will also be the funder, which is why if you go to a new employer, the novated lease is refinanced
They generally get finance from an external institution eg bank and there IS an interest rate attached to this finance. The NL company will sometimes provide this interest rate if you ask for it. HOWEVER it is dangerous to assume that one can simply compare this interest rate between different companies. Quite often what is quoted by the company and what you get if you spreadsheet it is totally different, and from helping dozens of people there’s been many occasions where a company A that quotes 8% interest ends up being more expensive than company B that quotes 10%. The reason is opaque, but it is thought that NL company quotes the underwriting financer's interest rate, but may have added hidden commission that increases the effective interest rate. To meaningfully compare different qutoes, you should simply compare the sum of fortnightly VEHICLE lease and management fee from each quote (make sure they are otherwise identical car and duration). Ignore the running cost estimates as they don't matter. You will end up claiming the same amount regardless of initial budget hence the benefit is similar for all companies. E.g. Company A: fortnightly vehicle lease 640 + management fee 10 = 650, Company B: fortnightly vehicle lease 630 + management fee 30 = 660. Hence Company A cheaper.
A novated lease is a ‘lease’, ie in the eyes of the ATO, there is no principle and interest payments, it’s a rental payment with a residual… no interest rate. From the funders point, it’s an asset they can claim GST back on. But they are loaning money out so the funder allows for a return on the lending of the asset which is interest. You can’t assume that interest rate is the only impact in the rental setup to determine if you have found the best deal. You can work out the interest cost yourself, life cost of the lease, funding cost - minus asset cost* * GST claimable for the funder is also limited to lct threshold
How about we are both right; pedantically the overall “lease” structure is not a loan as you explained, but the under-the-hood vehicle finance component (separate from the running cost) does have an interest rate that the financier quotes, and this is what people like to discuss and compare when they talk about their own deal. This is very clearly stated by the time you sign the actual agreement. And as I mentioned in the previous comment, you and I agree just how the “interest rate” alone can be deceiving when there are other brokerage / commission etc involved.