"Vehicle Salary Packaging - How Can it Save You Money?" Part 2

Saving on the GST
The second way to save money when you salary package a vehicle via a Novated Lease (when you purchase from a car dealership) is through the GST savings. When leasing a vehicle, the financier claims the GST as an input tax credit, which means the employee is not required to finance this part of the total invoice.
Basically this happens because the finance company owns the vehicle and the employee is renting / leasing the vehicle from the financier.

"Vehicle Salary Packaging - How can it save you money?" Part 1

Saving on the Purchase Price
There are three main ways to save money when you salary package a vehicle via a Novated Lease. The first way of saving money is on the purchase price of the vehicle. Some employees will be able to access additional fleet discounts normally only available to corporations with large fleets of vehicles. This discount is available to you because the account manager at the novation company can often buy at fleet prices as a result of the large amount of business he puts the way of car dealerships. The discount will depend on the quality of the novation company you choose and the type of car.

Some Eye Candy for the Car Lover...

The distinctive Bugatti (Bugatti Veyron FBG par Hermes I believe) at the International Geneva Motor Show (Salon International de l'Auto) earlier this year.

photos: P. Olney

Car makers love displaying their wares at this show because it is considered to be the most level playing field. Switzerland does not have its own auto industry, and so it is felt that in Geneva there is less chance of bias towards any particular manufacturer.

The History..

This extract from Wikipedia sums up the Bugatti company in a nutshell..

..."Bugatti was founded in Molsheim, France as a manufacturer of high performance automobiles by Ettore Bugatti, an Italian man described as an eccentric genius.
The original company is legendary for producing some of the most exclusive cars in the world as well as some of the fastest. The original Bugatti brand failed with the coming of World War II, like many high-end marques of the time. The death of Ettore's son Jean was also a contributory factor. The company struggled financially into the 1960s eventually being purchased for its airplane parts business. Today the name is owned by Volkswagen AG who have revived it as a builder of very limited production sports cars."...

I asked my brother about the Bugatti and he said ..."its very fast (400 kmh)... its very expensive (if you have to ask how much then you can't afford it)"... Check out the Bugatti web site - that's a fantastic experience in itself!

What Does the Word 'Novation' Mean?

Well I'm glad you asked... According to the Macquarie Dictionary, the word 'novation' is a law term and means:

...'the substitution of a new obligation for an old one, usually by the substitution of a new debtor or of a new creditor.'...

In terms of a novated lease this means that the employer - through the process of salary packaging - packages the employee's financial obligation to lease his car as part of his salary in pre tax dollars. Thus the original Financial Lease Agreement becomes a Novated Agreement.

What Types of Cars Can You Novate?

A broad range of cars can be novated.

You can novate a new car - either sourced by you or by the novation company.

You can novate a used car. The used car can be purchased:
- through a LMCT (Licenced Motor Car Trader) dealership;
- from a private seller; or
- from yourself! (your own car) *conditions apply

Yes, you can ask the novation company to organise the purchase of your own car by the financial institution, and then arrange to have the vehicle leased back to you through a novated lease. This was a particularly popular method of novation when interest rates went up and people wanted to move the lump sum they had invested in their car on to their home mortgage.

*The amount paid for your car will be determined by an evaluation obtained by the finance company and the novation company.

Can You Novate a Car if You're Self Employed?

The simple answer is 'yes'. My husband - who knows about these things - tells me that if you have a ABN number and you draw a set wage from your business you can novate a car. Your company is the 'employer' and you are the 'employee'. You get all the pre-tax benefits that any other person would get. If you don't draw a set wage from your business (i.e. draw random amounts of cash), but still pay PAYE tax, you can also novate a car, but it will require a little more paper work from your end.

Who Can Novate a Car?

Wondering if you can novate a car? Well if you work on a full-time basis for a company who allows their employees to salary package vehicles, then you can. Many companies nominate a particular novation company for their employees to go through, although some leave that decision to the employee. The type of car you can novate will depend on your salary scale and your other committments. You're probably not going to get approval for a $120,000.00 car if your annual salary is less than $50,000.00! The novation company will work with the employee, the employer and the financier to broker the deal.