What is novated leasing?

Car leasing is one of the most attractive ways of buying a new car. Recently, many car manufacturers are fond of offering low –rate and zero percent car financing options just to entice buyers.

In this article, we are going to reflect about the concept of leasing, this will help you to know whether or not leasing is a good option for you or not.

According to the available statistics, some of the luxury cars and over 30% cars you see on the road are leased.

What is the real meaning of novated leasing?

When we talk about a novated lease, we are referring to a three-way agreement between:

  • You,
  • Your employer and
  • A financial institution

Novated leasing gives you the privilege of leasing a used car or a new car. It has so many great benefits, and to find out more about novated leasing click here to get started.

How a novated lease work?

In this case, the financial institution either a bank or credit union will buy the car on your behalf, on a particular sum, and will give you the car. Your job will be to be paying for the agreed sum every month through a single lease payment. The payment can be made between 2 to 5 years.

At the end of the contract, you have the right to refinance the car, buy it for its residual value or even sell the car. The finance company will be deducting your pre-tax salary. In this case, you will be increasing your take-home pay every month.

Another good thing is that all your running costs such as:

  • Registration
  • Insurance
  • Tyres
  • Servicing, and
  • Fuel will be included in the fortnightly pre-tax or monthly payment.

What do we mean by residual value?

This is the percentage of the money you financed originally. If you want to own the car out rightly, you will have to pay it at the end of the lease term. More so, you have the sole right to sell or refinance the car.

The percentage you will pay will depend on so many factors such as the actual value of the car and the length of the lease.

For some employees, it is better to buy a car out rightly after making the final payment, than leasing a new car every 2 to 5 years. Some people are also happy leasing out a car they were unable to afford to buy.

Advantages of car leasing

Principally, there are benefits of car leasing:

First, you have the option to drive a new car at all times. The good news is that the car will be under warranty and doesn’t need more routine maintenance.

Secondly, you can easily get a more luxurious, strongly built and better-equipped car.

Negotiating for a car lease

It is essentially important to note that when you lease a car, the cost is always negotiable. This will depend on a number of factors for instance, if the overall price is low, there is a possibility that the lease payments would be low as well. While negotiating for a car lease, ensure you understand the terms and conditions on the lease.

Before hitting the dealerships, make sure you arm yourself with all the necessary tools you should know. This will enable you to make an informed decision about the lease.