Chances are that you are reading this article because you have considered opting for personal finance options to get a car of your dream and you have also considered about novated lease agreements. Listed below are some details about personal finance vs. novated lease and how a lease agreement can benefit you in many ways.
Many people who want to purchase a car consider opting for personal finance options such as loan in order to get the car of their dreams. While a personal loan allows people to enjoy using a car for a long time, a personal loan also causes the person’s credit history to be affected and his lifestyle to be affected when it’s time to repay the loan. Hiring a car is usually a much easier and cost effective option for most people since hiring a car doesn’t involve the credit history of the person to be affected and it also doesn’t cause the person to worry about repayments.
By opting for novated lease agreements you can get a car that you want without having to worry about paying repayments to a lender. A novated agreement is a contract that is between three parties that are, you, your employer and the lender. Through a novated contract, you can get to use a car that you want while your employer vouches for you and also pays the lease amount every month. This monthly payment is deducted from your pre tax salary amount and such contracts are known as salary packaging or salary packaging of vehicles.
Employees in Australia can either opt for a finance lease or an operating lease if they are looking for basic novated agreements however if employees are interested in opting for good novated agreements then they can opt for a fully maintained lease agreement that ensures that all the running costs of the vehicle are paid by the employer in one monthly payment.
If you opt for an operating novated lease then in most likelihood you will not have to pay for the residual value of the car. However if you opt for a fully maintained lease then you will have to pay for the residual value of the car. These are benefits of opting to pay for the residual value of the car and the main benefit is that the lease agreement is usually cheaper since there is no risk involved for the lender if you are responsible for the final residual value of the car.
Remember, the residual value of the car will depend on various factors such as the type of car, make and model along with the price of the car. It can be concluded that in the fight of personal finance vs. novated lease, the latter often wins since it offers many benefits.