An operating lease also known as a Novated operating lease is a type of agreement that allows employees to enjoy certain benefits of using a rented car. This agreement is usually between three parties that are the lender, the employer and the employee. Under this kind of agreement, the Novated lease lender gives the employee a vehicle to use and the employer pays for this vehicle. Listed below are additional details about what is operating lease?
The word operating implies that the lender provides the car to the employee to use and the employee returns the car at the end of the contract’s tenure in a good condition. In such a type of Novated agreement, the employee is not responsible to pay for residual cost of the vehicle. There are two types of operating lease agreements offered to people in Australia. The main difference between an operating lease and a fully maintained operating lease is the cost of running.
Under a fully maintained operating lease the employer pays 1 monthly payment to the lender towards various expenses such as fuel, insurance and registration. However, in the case of a regular operating agreement, the employer only pays the lender the cost of the lease and not the cost of the running expenses. This means that, it is the responsibility of the employee to pay for all running costs of the vehicle.
There are a few differences between fully maintained operating lease and fully maintained Novated lease. The main difference is that, the buyer does not pay the residual cost of the vehicle for an operating lease however, in the case of a fully maintained Novated lease the buyer has to pay this residual fee. It is important to note that being responsible for the residual value of the car is not always a bad thing especially for people who opt for long term contracts.
There are many benefits of opting for a fully maintained operating lease and these benefits include, the buyer gets to use the selected car without worrying about paying separately for insurance, registration, road side assist and other running fees of the vehicle. However, fully maintained operating lease agreements cost more than non maintained lease agreements since fully maintained operating agreements offer maximum benefits. If you do not want to pay residual value of the car and you want to enjoy maximum benefits then you should consider opting for a fully maintained operating lease.
While learning what is an operating lease it is important to note that, before choosing between an operating lease that is fully maintained or a lease that is non maintained, you should look at the long term benefits. For instance, non maintained agreements may be cheaper in the short run but fully maintained agreements are definitely cheaper in the long run.