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novated lease comparision
To best illustrate the benefit you can achieve simply by choosing to salary package your next car using a novated lease, we have created a comparative view using a generic finance product with the same terms and conditions as the novated lease.
The table below shows two employees, Jenny and Chris. Jenny's employer offers the salary packaging of a car, whilst Chris' employer does not, so he is unable to use a novated lease to finance his vehicle.
In the comparison you will see how Jenny achieves an annual saving of $2471.00 compared to Chris.
They earn the same wage, are buying the same car at the same price from the same dealer, travel the same amount of kilometers each year with no business usage. This means they only use their car to drive to work each day, for running around on the weekend, and also for the occasional driving holiday.
Jenny will pay a Residual Value at the end of her lease and Chris will have a balloon payment, both of 35% of the financed amount. This is a GST inclusive value at the end of the lease.
The comparison does not include the following additional benefits Jenny may receive, such as;
1 Access to substantial discounts on the recommended retail price of the car through nlc and also through her employer's vehicle manufacturer relationship
2 Access to the nlc repair authorisation service.
Let's take a look.
| Jenny | Chris | ||
|
Vehicle Purchase
Jenny saves on the GST of the purchase price of the car as the GST credit from the purchase is passed on to her. |
Vehicle Cost | 35,000.00 | 35,000.00 |
| GST Savings | 3,086.00 | 00.00 | |
| Finance Amount | 31,914.00 | 35,000.00 | |
|
Finance
Because Jenny's is only financing the ex GST amount, her Annual Finance cost is less than Chris'. |
Amount Financed | 31,914.00 | 35,000.00 |
| Term of Lease (Months) | 48 | 48 | |
| Annual Finance | 7,578.00 | 8,239.00 | |
| Annual Kilometres | Private | 18,000 | 18,000 |
| Business | 0 | 0 | |
| Total Kilometres | 18,000 | 18,000 | |
|
Running Costs
Jenny also saves on the GST on her running costs because her employer will claim the GST back and chooses to pass the credits back to her. (Check your employers salary packaging policy for details).
*inc nlc packaging fee |
Registration | 770.00 | 770.00 |
| Insurance | 1,230.00 | 1,353.00 | |
| Fuel | 2,700.00 | 2,970.00 | |
| Maintenance | 1,065.00* | 842.00 | |
| Total Running Costs | 5,765.00 | 5,935.00 | |
| Total Annual Vehicle Costs | 13,343.00 | 14,174.00 | |
|
Annual Wage
nlc use the Employee Contribution Method (ECM) to calculate her Packaging costs to provide her with the biggest benefit. Her Post Tax Deduction attracts GST.
|
Taxable Salary after Super | 65,000.00 | 65,000.00 |
| Pre Tax Deduction | 7,171.00 | 0.00 | |
| Taxable Salary after Packaging | 57,829.00 | 65,000.00 | |
| PAYG Income Tax | 11,766.00 | 14,025.00 | |
| Post Tax Net Income | 46,063.00 | 50,975.00 | |
| Post Tax Deduction | 6,790.00 | 14,174.00 | |
| Total Take Home Pay | 39,273.00 | 36,801.00 | |
| Annual After Tax Benefit | 2,471.00 | 0.00 |
For all the assumptions used in this comparison please go the "novating with nlc" movie presentation.