What is Novated Lease?
Novated lease is a financial lease agreement for the lease ( & eventual purchase) of a good condition vehicle between a bank which has the novated lease product, an employee and his/her employer.
Under the agreement, the employer guarantees the lease payments to the bank for the vehicle through salary deductions from the employee’s salary deductions or their vehicle allowance.
These lease payments not only cover the cost of the vehicle, but also maintenance/service and insurance costs of the vehicle.At the end of the lease period (and even during) the employee has the option to purchase the vehicle for the residual value, i.e. the amount that is still left to pay for the value of the vehicle after the end of the lease period. For example, if you have paid through salary deductions, K49,999.00 for a K50,000 car after three years (which is the end of the lease period), you can pay the final K1 out of your pocket and own the car out right.
What are the Benefits of Novated Lease?
1. The employer who takes part in the Novated lease gets to drive a brand new or recently new vehicle of his/her choice immediately, depending on the Novated lease agreement and the amount that they can afford to pay out of their salary package or vehicle allowance.
2. The Novated Lease program utilizes the government tax benefits on salaries, because Vehicle Allowance, like rental allowance, is tax deductable. Therefore, once you take part in the lease program, some of the taxes you pay to the State will instead go to paying for a vehicle that at the end of the lease period, you may own.
3. Employers can work the Novated Lease program into the salary packages of staff and potential staff, thus offering them a further benefit when employed with the company . Its great way to attract and/or retain talent.
Other Things You Should Know About the Novated Lease Program?
Car Warranty is important to the Banks and Employers under the Novated Lease program. Warranty is important because if there are any mechanical failures or issues with the vehicle purchased, the employee and employer can take the vehicle back to the car company under the terms of the warranty. Therefore, the banks only deal with reputable companies that offer extensive warranty on their cars on the program. Ela Motors, PNG Motors, Boroko Motors and Nuiford are all companies that the banks deal with under the Novated lease program.
The age of the vehicles is important under the Novated lease program. Generally the younger the vehicle, the better condition it is and the better value less rick purchase for all parties involved. New vehicles, rarely driven demos and one to three year old vehicles with good service records are considered for financing under the Novated lease program.
Which Banks offer the Novated Lease Program?
The Novated Lease product is offered by the Bank of South Pacific and the ANZ Bank.
In the next article we will look at the BSP Novated Lease product but in the interim, you can download the following information on the BSP Novated Lease Product here.
Also for further questions on Novated Lease and how your company (and you) can get involved please email Terry Pagun, Asset Finance Officer Terry Pagun on This e-mail address is being protected from spambots. You need JavaScript enabled to view it or Asset Finance Officer Erami Smason This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
You can also call them on 302 5233/3025248.
