If your employer has a salary sacrificing provider you must use, you may still have the option of separately finding the best deal you can on a novated lease. This is done through what’s known as a self-managed novated lease.
A novated lease provider like Novated Lease Australia can guide you through the process.
What is a self-managed novated lease?
A self-managed novated lease gives employees a way to arrange the finance for their lease separately to the company that administers their employer’s salary sacrificing program.
The benefits are the same as a standard novated lease, but with a self-managed novated lease, you get help shopping around for the best deal on your finance.
The alternative would be having everything done through your employer’s preferred salary packaging partner, which may limit your finance options. To use the industry jargon, that’s known as a fully-maintained novated lease.
The aim of a self-managed novated lease is to have greater choice at the crucial early stage of the process. After all, the deal you get on your finance, including finding the best novated lease interest rate, will have a major impact on your costs throughout the life of your lease, and ultimately how much you will pay for your car.
It’s also an opportunity for employees to seek out the best customer service and expertise available. Novated leases can be complicated, and having your choice of expert available to guide you on the journey can be invaluable.
How does a self-managed novated lease work?
With a self-managed novated lease (sometimes called a third party finance lease), an employee sets up the finance for their lease separately to the company that provides salary sacrificing services to their employer.
Usually this involves using a specialist novated lease provider to assist with the finance on the lease – potentially allowing the employee to secure better finance terms with lower costs.
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Step 1: Secure your lease finance
The ‘third party’ (for example, Novated Lease Australia) helps you set up your lease in the most cost-effective and efficient way. They will:
- Calculate your novated lease costs so you can see exactly what you’ll pay and how much tax you save.
- Shop around for lease finance among multiple specialist lenders.
- Help you submit the finance application, with expert guidance on getting it approved.
- Help you find a car to buy, leveraging their relationships with dealerships to negotiate the price on your behalf.
- Calculate a suitable budget for the car running costs on your novated lease, based on your estimated usage and the car you’ll be driving.
- Provide you with quotes to show you the most cost-effective lease term and residual amount to suit your situation.
- Ensure your lease is set up to maximise your tax savings (for example, by advising which vehicles qualify for additional tax savings and offsetting any fringe benefits tax that could apply to your lease).
- Answer any questions you have throughout what can be a complicated process, particularly for those who are getting a novated lease for the first time.
- Prepare the novated lease documentation for you to sign and guide you through getting these countersigned by your employer's salary packaging provider.
Step 2: Submit the paperwork
You then simply submit the already-prepared and signed lease documentation to your employer’s salary packaging supplier. That company will administer the lease on an ongoing basis together with your employer. That involves:
- Deducting the regular salary sacrificed amount from your salary and using it to cover your lease payments.
- Providing you with a fuel card to use (if applicable).
- Advising on how you will be reimbursed for any car running costs you pay for yourself and then claim back (e.g. your annual car insurance premium).
There is usually an admin fee charged to you by your employer’s salary packaging provider for the ongoing management of your lease.
Self-managed novated lease versus fully-maintained novated lease
| Fully-maintained novated lease | Self-managed novated lease |
|---|---|
A single company sets up your novated lease and manages it on an ongoing basis. | You set up your novated lease with the help of a specialist provider, and then a separate company manages the ongoing admin once the lease is established. |
This often involves doing everything through a company that has an exclusive contract with your employer (this is common for government employees). | You open up the potential for finding deals and savings beyond what your employer’s contracted salary sacrificing provider can offer. |
More questions about self-managed novated leases
Can I do a self-managed novated lease?
It’s generally possible to do a self-managed novated lease, even if your employer has a salary packaging provider that you must use for the lease admin. It’s a good idea to double check with your employer whether it’s possible (usually through the HR department) and by confirming with their salary sacrificing provider.
Bear in mind that it’s generally in the interest of your employer’s preferred salary packaging provider that you don’t do a self-managed novated lease, and instead do everything through them. They may try to dissuade you from choosing the self-managed route.
But remember, there is usually no additional cost to you for doing a self-managed lease, with minimal extra admin. You could save a significant amount by shopping around with other providers.
Can I sort my own finance with a self-managed novated lease?
It’s also possible to take things completely into your own hands with a self-managed novated lease and source and apply for the lease finance yourself. This gives you full control over your lease costs and responsibility for setting things up correctly.
The downside is that doing this can be very time-consuming. If you are not experienced at setting up novated leases, it may also be a difficult process to navigate.
For example, you will need to simultaneously deal with the car dealer and the finance provider to coordinate the purchase, calculate your own running cost budget, and work out the pre- and post-tax contribution levels for your regular repayments to ensure there is no fringe benefits tax liability.
Using a specialist novated lease company means you get support with the complexity that a novated lease can present, while also getting the benefit of being able to access multiple finance options.
Can I get a novated lease without my employer?
Ultimately, you can only do a novated lease (including a self-managed one) if your employer agrees to facilitate it. Your employer will need to be part of the agreement and, once it’s established, deduct the lease payments from your salary and pay them to the lease company on your behalf.
Can you get a self-managed novated lease as a sole trader?
It’s only possible to do a self-managed novated lease if you’re an employee of a company and paid a salary. If you’re wondering whether you’re eligible, speak to our team and we’ll talk you through your options.
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Find my best dealWritten by
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CEO
Bevan Guest
Reviewed by
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Editor
Sean Callery
