Is Novated Lease Worth It in 2024?

There’s a common misconception that novated lease is only worth it for high flyers, but that’s not true. Any and all car buyers are looking to get the best bang for their buck - and that means looking at everything, such as whether buying a car outright is the right choice or if financing car running costs is better.

It’s a form of financing that can suit a wide range of car buyers and users – regardless of how much money you’re earning. Even on a modest salary, reducing your taxable income equals paying less tax.

Here are a few points to consider as to whether a novated lease is worth it and how it can work for you in 2024.

Pay less tax, always in fashion

As the saying goes, there are two certainties in life – death and taxes. However, if there was a way to pay less, many of us would certainly jump at the opportunity. 

Paying the least amount of income tax possible is never going to go out of fashion. And this is one of the best reasons why novated leases are worth it – it’s both cost and tax-effective, meaning more post-tax income for you to spend throughout the lease term.

A novated car lease is considered the last decent tax break for employees. Under the lease agreement - and unlike a car loan - the employer makes the novated lease payments and all the car’s running costs directly from the employee’s payroll. 

This significantly reduces the employee’s taxable income at no cost to the employer - making it a more alluring option than a standard car loan when it comes time to pay tax.

No minimum kilometre requirements

Another myth about novated leasing is you have to drive a minimum number of kilometres each year. This used to be the case, but since the changes to the FBT laws in 2011, it’s no longer required to get the best tax savings. Now, the FBT - better known as Fringe Benefits Tax - liability is no longer determined by the number of kilometres travelled in the FBT year. 

Regardless of whether you drive 10,000 km or 50,000 km, the flat 20% fringe benefits tax (FBT) liability rate remains. In fact, driving lower kilometres on your novated lease may have a positive impact on your novated lease residual value when you come to trade the same car in at the end of the lease!

Wages growth is low

If you don’t see a pay rise on the horizon, there are other ways you can still save yourself money. In the last 12 months, the wage growth in Australia has slowed down, so it’s time to take matters into your own hands. 

Instead of asking for a raise to their pre-tax salary (or hopelessly waiting until the market takes a more positive turn), opt for a novated lease to reap the financial rewards of an employee contribution method that works for everyone.

Cars are expensive, but a necessary part of our life. When the chances of a pay rise don’t seem likely in the foreseeable future, getting the funds together to purchase a new or used vehicle can be difficult – or even impossible. Even a car loan can be a difficult investment.

A fully maintained novated lease can provide the perfect solution, even if wages are at an all-time low. No deposit is required and substantial discounts on the vehicle purchase price make it a practical option for low-income earners or anyone still hanging on for a pre-tax income boost.

Rear view of a woman driving her car along a road in the sunshine.

Salary packaging super has reduced

Salary packaging part of your income into superannuation is a smart way to set yourself up for retirement. This tax-effective strategy is best for income earners of more than $37,000 a year. 

However, with recent caps placed on the amount of super you can salary package, it’s worthwhile looking at novated leasing, especially if you’re looking at retiring in the next few years. A novated lease could be a great way to get the car you have always wanted for your retirement with worry-free car payments.

You’ll get a fuel card

A novated lease arrangement also comes with the perks of a fuel card. One of the best reasons why novated lease is worth it, aside from the fantastic tax benefits, is that it provides a convenient way of organising all your car-related expenses at once. 

Knowing in advance that these additional running costs are taken care of proves a sense of relief and can take the financial pressure off forking out the funds for everyday expenses, like fuel.

Another benefit of having a fuel card as part of your novated lease is you’re able to track your fuel usage over the year. This is great for both employees and employers and can be used to reduce expenditure and further save money.

A novated lease arrangement also includes regular servicing and maintenance, automatic registration renewal, insurance and replacement tyres.

Get a novated lease worth your money from easi

Easi is a leasing company with 20 years of experience in the industry of car leasing and car finance - meaning we can use our knowledge to deliver effective business car solutions every time. Our wide range of novated lease vehicle options come under flexible contract terms ranging from utes, to large SUVs, to hatchbacks and more.

As Australia’s novated leasing specialists, Easi have developed an unparalleled expertise and understanding of the entire novated leasing process, providing tailored solutions to meet your individual needs. Our approach simplifies what can often be a complex process, making it Easi for all employees to benefit from tax-effective financing for their vehicles. 

Our highly trained team is dedicated to providing exceptional customer service and helping customers optimise both the financial and practical benefits of novated leasing. Plus, with offices all over Australia, you’re never too far away from starting your novated leasing journey with the best in the business.

For more information on novated lease pros and cons and whether it’s right for you in 2024, speak to one of our staff to see how we can use our skills as a premier novated lease provider to help get you into your new car!