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Saturday, August 9, 2008

End of Novation Period - What Options? Part 4

Say you no longer want the car and simply want to hand it back. There is an option for you. Note: This option is very rarely used as it does not favour the driver in any way.

Option 4 - Hand the Vehicle Back

If the vehicle is handed back to the financier at the end of the Novated Lease period, the financier then auctions the vehicle for the best price offered (no reserve).

What Happens after the Auction?

The money raised from the sale (less costs) is used to pay out the residual amount plus GST of your Novated Lease. If there is a difference between the net funds (from the auction) and the residual amount plus GST, this amount is treated in either of the following ways:

a. Any shortfall between the net sale price and the residual amount plus GST is still the responsibility - and liability - of the driver. (you still owe them money!)

b. Any surplus between the net sale price and the residual amount plus GST is retained by the financier. (They keep it!!)

Summary
You do have a variety of options available to you at the end of a Novated Lease. You can keep the car or not. Whatever option you choose, remember that the residual value must be paid.

End of Novation Period - What Options? Part 3

If you don't want to keep the car you novated - maybe you want to move on to bigger and better things - you have another option at the end of your Novated Lease period.

Option 3 - Upgrade the Vehicle

Under this option you can trade in your existing vehicle and upgrade to another vehicle. A new Novated Lease is then set up for this replacement vehicle.

Two points need to be made here in regards to the trade-in amount of your existing vehicle:

a. If the trade-in value is less than the residual value plus GST on your existing novated lease, then the short fall is still due and payable by you (the driver) to the financier.

b. If there is a surplus amount between the trade-in value and the residual amount plus GST, then this surplus is paid directly to you (the driver) and cannot be used to reduce the purchase price of the replacement vehicle.

End of Novation Period - What Options? Part 2

If you want to keep the car you've got a Novated Lease on but can't afford it at the end of the lease, you might consider option 2.

Option 2 -Refinance the Residual Amount


If the driver wishes to retain the vehicle but can't afford the residual amount plus GST, he/she can arrange to have this amount refinanced over a further period - again Salary
Packaging this new Novated Lease from their salary.

End of Novation Period - What Options? Part 1

At the end of the novation period, the agreed residual value plus GST needs to be paid to the financier.

There are four options available to you.

Option 1 - Offer to Purchase the Vehicle

If the driver wishes to keep the vehicle, he/she makes an offer to purchase it from the financier for the agreed residual amount plus GST. This amount has been pre-determined and accepted by both parties in the initial contract. The offer is generally accepted by the financier. Funds are transferred to the financier and clear title of the vehicle is then passed to the driver.