What’s better – salary package car via Novated lease or buy outright?
The decision to buy or lease a car is something that needs to be given full consideration because it is an investment to our means of livelihood. Most of us cannot afford to buy a car outright or even if one can, it is at the cost of something valuable such as an investment in a property. Therefore, while making such decision, a thorough investigation, in the beginning, may lead to a decision with pleasant outcomes.
A Novated lease is a three-way agreement between you, your company and the finance company. It is both practical and cost saving for you as you can buy a new or used care according to your needs and budget. In purchasing a car through a salary package via a Novated lease, the car would still be owned by your company because it will be paid through your pre-tax income.
When buying a car outright, the first thing you need to consider is your budget and your preparedness in owning a car. The good thing about buying outright is that you will be the one who will decide what your preferred payment method would be and the car will not be bound to anyone; except to the car company if you’re planning to buy the car in instalments.
Both the options have advantages and disadvantages which you should consider before reaching a final decision. The advantage in using Novated Lease is that you will be able to save tax as the salary-sacrifice has a tax shield. Another good thing about Novated leases is that you will have an easier processing because the agreement and coordination with the finance company are to be held by your company not you. Besides, with a fraction of your salary you can enjoy a brand new vehicle and that too without sacrificing your rainy-day saving accounts.
One thing that most people do not like about Novated leases is that the car you will purchase will bind you to the company you are in. If you are in your company for the long run, then that means a Novated lease would be good for you but if you aren’t, you better think twice about it.
On the other hand, if you have already saved a lot, then buying an outright option is advantageous for two reasons; the car is yours outright and you do not owe anything after purchase. But definitely it is a big jerk to your savings!!
Which deal is better?
In the context of financial savings, Novated Lease makes sense and it is quite more practical to avail Novated lease if you are planning to work in your company for a longer period of time and enjoy new wheels without losing much on your take home salary.