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When most people think of novated leasing, they often imagine new cars straight off the showroom floor.
However, did you know that you can also get a novated lease for a used vehicle?
Novated leasing a used car can offer all the benefits of traditional novated leasing like tax savings and bundled running costs but at a lower price point.
In this post, we’ll explore how a novated lease for a used car works, the benefits of choosing a used vehicle and why it’s a cost-effective option for many Australians.
Can You Novated Lease a Used Car?
Yes, you can! Many people are unaware that novated leases are not just limited to new cars. Whether you’re considering a reliable used Toyota, a pre-owned electric vehicle like a Tesla, or another quality vehicle, you can take advantage of novated leasing for a used car through salary packaging.
The process of leasing a used car through a novated lease works similarly to leasing a new car:
- You choose the used vehicle you want.
- Your employer arranges for the lease payments to be deducted from your pre-tax salary.
- Running costs, such as fuel, insurance, registration, and maintenance, can be bundled into your lease payments.
- At the end of the lease, you have the option to buy the car, re-lease the car, get a lease for a new car or sell it.
Why Choose a Used Car for a Novated Lease?
There are several advantages to opting for a novated lease for a used car:
1. Lower Vehicle Costs
The most obvious benefit of leasing a used car is the lower purchase price compared to a brand-new vehicle. Cars depreciate rapidly in their first few years, meaning you can get a high-quality used car for a fraction of the cost of a new one. This lower price translates to lower lease payments and potential savings throughout the lease term.
2. Tax Savings
Just like with new car leases, leasing a used car through salary packaging reduces your taxable income. Since the lease payments are deducted from your pre-tax salary, you’ll pay less income tax, which can add up to significant savings over the term of the lease.
3. Bundled Running Costs
A novated lease allows you to bundle all car-related expenses like fuel, insurance, registration, and maintenance into one convenient payment. This means that even with a used car, you can enjoy simplified budgeting and avoid the hassle of managing multiple bills. Importantly, these running costs are also deducted from your pre-tax salary, offering further tax savings.
4. Reduced Depreciation Concerns
When you lease a new car, depreciation is a significant factor. New cars lose value quickly and this depreciation is reflected in higher lease payments. With a used car, the initial steep depreciation has already occurred, meaning your lease payments are based on a more stable value, resulting in potentially lower costs.
5. Flexibility and Lower Risk
A novated lease for a used car gives you flexibility. If you’re unsure whether you’ll want to buy the car at the end of the lease, the lower residual value of a used vehicle makes the decision easier. You can either purchase the car, sell the car at the end of the term or lease another vehicle. This flexibility allows you to upgrade regularly without worrying about high residual payments.
How to Arrange a Novated Lease for a Used Car?
Arranging a novated lease for a used car is simple and follows a process similar to leasing a new vehicle:
1. Find the Right Used Car
Start by selecting the used car you want to lease. You’ll need to ensure that the car meets the eligibility criteria for novated leasing, which typically includes factors like the vehicle’s age and condition. Reputable used car dealerships often have vehicles suitable for novated leasing, or you can lease a car you already own through a sale and leaseback arrangement.
2. Request a Novated Lease Quote
Once you’ve found the right vehicle, request a novated lease quote. The quote will outline the lease payments, residual value, and any bundled costs like fuel, insurance, and maintenance. This will give you a clear picture of how much you’ll be paying and the tax savings you can expect.
3. Agree on the Lease Terms
Work with your employer and the leasing company to finalize the lease agreement. You’ll need to decide on the lease term (typically 2 to 5 years), how much of the running costs to include, and any other preferences.
4. Drive and Save
Once the lease is set up, you can start enjoying the benefits of driving your used car. Your employer will deduct the lease payments and running costs from your pre-tax salary, giving you immediate tax savings and bundled car expenses.
Used Electric Vehicles and Novated Leasing
One of the most exciting opportunities in the novated leasing space is the ability to lease used EVs. As more Australians transition to greener transport, there’s an increasing number of used EVs available for lease.
Electric vehicles offer reduced running costs and lower environmental impact. When leased through salary packaging, they can also offer substantial tax benefits.
For example, if you’re interested in a used Tesla, you can still take advantage of all the benefits of novated leasing, including tax savings and bundled running costs like electricity for charging.
Things to Consider When Novated Leasing a Used Car
While novated leasing a used car can be a great option, there are a few factors to keep in mind:
– Age and Condition of the Car: Some leasing companies have restrictions on the age or condition of the car being leased. Be sure to choose a vehicle that fits within these guidelines.
– Running Costs: While a used car typically comes with lower purchase costs, running costs like maintenance may be higher than with a new vehicle. However, these can still be bundled into the lease and paid for with pre-tax salary, helping you save on out-of-pocket expenses.
– Residual Value: Since used cars depreciate more slowly than new cars, the residual value will likely be lower, which can make it easier if you plan to buy the car at the end of the lease.
Conclusion: Novated Lease for a Used Car – A Cost-Effective Choice
Leasing a used car through a novated lease is a smart way to drive a quality vehicle while enjoying tax savings, lower depreciation, and bundled running costs. Whether you’re looking for a reliable family car or a pre-owned electric vehicle, novated leasing can make car ownership more affordable and stress-free.
If you’re ready to explore your options, consider requesting a novated lease quote for a used car today. With the flexibility and savings that come with novated leasing, you can drive the car you want without breaking the bank.
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