Written by a Guest Blogger
If you’re looking to lease a vehicle, novation is an option not many people fully understand nor accept. A novated lease is one that’s taken out with your employer. In a way, it’s a joint lease, usually in connection with employment. Employers enter into a split, split-full, or partial arrangement.
The split novation arrangement is a lease agreement where an employee enters into a lease with a financing company, the employer enters into a lease agreement with the employee and the financing company, and the employee and employer agree on how much of the lease the employer will be responsible for.
A split arrangement usually means that the responsibility is split between the employer and the employee. So, for example, the employer may pay for the monthly lease payment and the employee pays the end-of-lease costs. Or, the employee may pay the monthly payments and the employer pays the end-of-lease costs.
The employee and employer may also split the monthly lease payments.
A split-full arrangement is one where the employer is responsible for making the monthly lease payments as well as guaranteeing the residual value of the vehicle at the end of the lease. In other words, you’re responsible for the monthly payments and the end-of-lease costs, if any.
The employee simply drives the vehicle. Fleetcare provides novated leases of both the split and split-full variety, so that you can choose which option makes the most sense for you.
At the end of the day, what matters is whether the employee and employer can afford the lease, who wants to share the responsibility, and who can afford to share responsibility for the lease payments. Not all employees can afford novated leases that are split arrangements.
At the same time, not all employers want to pay for an employee vehicle. Yet, some businesses need to pay for vehicles for business use. But, when a novated lease makes sense, it’s usually the best option, compared to a full-on company vehicle that’s purchased via a bank loan.
Partial novation means that there are two distinct and separate lease agreements. The lease is with the finance company and the employee for the vehicle. There’s also a lease agreement where the employee separately sub-leases the vehicle to the company. Under this arrangement, the employee will essentially sign the lease over to the company, forego payments for sub-leasing, and the employer becomes responsible for the lease payments.
This is usually a beneficial option for the employee and the employer because the employee gets the benefit of having the vehicle, while the employer maintains control over it.
GST can be handled one of a few ways. But, by far, the most common way is for the finance company to create a contract where it is liable to pay GST on the lease. Of course, there are some situations where you pay the GST.
Associate arrangements can and often do vary from case to case, so check with your finance company for details.
About the Blogger
Jamie Holden is always on the lookout for ways to save money and still live well. When she finds something interesting, she likes to sit down and share it with others on the web. Her informative posts appear on many business, finance and lifestyle websites and blogs today.