Andrew Daly, Group Executive Customer Development, Maxxia, offers insights into what a novated leasing arrangement can bring to employees.
How does a novated lease deliver dollar savings to employees buying a new car?
The immediate savings for employees come from paying less tax and securing the car they want for a competitive price. By paying for a vehicle out of their pre-tax salary, they could reduce their tax bill, now and for the duration of the lease contract.
But they could also benefit from having a third-party expert who can source the vehicle of their choice from a national network of preferred dealers. Not only does this save a lot of leg work, it also allows someone else to do the bargaining on the employees behalf.
A novated leasing specialist like Maxxia purchases a significant number of vehicles each year for their clients and is in a good position to secure a competitive deal.
The dollar savings can also mount up over time as employees enjoy the benefits of competitive pricing on insurance and genuine value from a trusted network of service and maintenance providers. So the financial savings can be there from the outset and for the life of the vehicle.
Does novated leasing offer significant savings for all employees, regardless of their salary?
Anyone taking part in novated leasing could save money on their tax and the purchase price of their car. Of course the potential savings will depend on your marginal tax rate and this in turn depends on how much income you’re earning.
If you earn more, and pay a higher rate of tax as a result, then any savings on your tax bill from a novated lease are potentially going to be more substantial. And if you’re buying a more expensive vehicle in this way, you’ll also potentially reduce your taxable income by a greater amount and cut your tax bill more.
Are there other ways for novated leasing to enhance the employee experience and drive retention?
Although the potential dollars saved on tax and the purchase price are the primary incentive for employees to take up novated leasing, the convenience it offers can be just as important. Initially, there’s much less hassle involved in every aspect of buying the car - from arranging finance, to getting the best price and ensuring everything is arranged for transfer of ownership, registration, insurance etc.
But peace of mind for the employee continues as the leasing contract also takes care of arranging servicing and repairs, registration and insurance renewal. So they get peace of mind from knowing their vehicle will always be up-to-date with maintenance and administration.
When one company we work with were making the call on whether to withdraw novated leasing from their benefits package, we surveyed employees on what they valued most about the arrangement.
We discovered that they placed very high importance on having a third-party manage every aspect of running their vehicle. And they no longer need to budget for the large occasional expenses that come with car ownership because they’re all included in a regular pre-tax payment.
Car ownership is seen by many people as essential and is likely to be one of their biggest household expenses. So when it comes to lining up reasons to stay or jump ship, employees who have taken up novated leasing for their car have at least one more pro to add to the “stay” list.
Andrew Daly is Group Executive Customer Development, Maxxia. By delivering best-practice employee benefits programs, Maxxia help strengthen the employee value proposition, so organisations can attract and retain the right talent.
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