Looking to buy an EV but don’t want to purchase it outright? There are a number of finance options available, including personal loans. However, a novated lease is a less-known, but better option for a number of reasons. But what exactly is it? A novated lease is an agreement between an employee and their employer. It’s a type of salary packaging that lets you finance a car, whether that’s brand new, used, or even a vehicle that you already own. There’s no doubt that a novated lease for an EV comes with plenty of benefits for the lessee. Let’s take a closer look.  

How does a novated lease work?

A novated lease is quite straightforward in terms of how it works. We’ll do all the heavy lifting and all of the finances will be handled by your employer.

Setting up your lease

The first step is to choose the car you want. Once you’ve picked your ride, an agreement will be set up between you, your employer, and the leasing company (in this case that’s CarBon). This means the vehicle will be leased under your name, while the financial side of things is looked after by your employer.

Making payments

One of the best things about this type of lease is stress-free payments. You won’t have to lift a finger, as money will be deducted from your salary each time you get paid (before tax) to cover the ongoing cost of the lease. 

The duration of the lease

You can decide how long you’d prefer the lease agreement to last. An average novated lease might last between three and five years. You can decide how long the lease should last, which is perfect for planning payments around your financial situation and goals!

Here’s an example of a novated lease agreement

Bobby is an employee at Smith Enterprises. He’d like to buy a new EV, and thinks that some kind of lease agreement could benefit him at tax time. He chooses a Tesla Model 3, and enters into a 4 year novated lease agreement between himself, Smith Enterprises, and CarBon. Bobby’s lease payments add up to $1,000 each month, including power costs for charging. The payments for his car are deducted from Bobby’s salary before tax. Over the course of the year $12,000 is taken from Bobby’s annual pre-tax salary of $100,000. Therefore, his taxable income is reduced to $88,000. Bobby loves the stress-free payments, as well as the fact he’s having a positive impact on the environment!

Things to think about when it comes to a novated lease

There are a few things to keep in mind if you do choose this kind of agreement. For instance, if you change employers while your lease is still running, it can have an impact on the agreement itself. You may need to renegotiate the novated car lease with your new employer, or discuss the situation with CarBon.

EV novated leasing with CarBon

At CarBon, we offer excellent novated lease terms for electric vehicles. We’re here to make the process as smooth as possible, so that you can save thousands of dollars on tax. Contact our team today to find out how you can benefit.

FAQs about novated leasing

Do I own the car at the end of a novated lease?

At the end of the lease, you’ll have a few different options. You won’t automatically own the vehicle once the lease is finished, but you may be able to purchase the vehicle, or choose to extend the lease. If you decide to, you might even be able to return the vehicle.

Can I sell a car under a novated lease?

No, you are not allowed to sell a car that’s still under a novated lease. This is because legally, the car is not yours to sell until the lease period ends and you choose to purchase the vehicle.

Do you pay for fuel/electricity with a novated lease?

You can choose whether or not fuel/electricity is included in your lease agreement. At CarBon we always include fuel/electricity in your quotes but it depends on what provider you choose to go with. If it is, it means that the pre-tax deductions from your salary will include a fuel allowance. Otherwise, you will need to purchase fuel/electricity as normal.

Is an EV novated lease good for tax?

Yes, there are significant tax benefits to a novated lease for an EV. This is because the payments that cover the vehicle and other extras are coming out of your pre-tax income, which at the end of the financial year, can mean less tax paid! You might even be eligible to avoid fringe benefits tax, because you’ll be driving an electric vehicle.

What is a balloon payment?

The amount of money that is due at the end of a lease agreement or a loan is called the balloon payment. Sometimes, you can elect to pay a larger amount at the end of the lease so that your initial monthly payments are lower.

What is the residual value on a novated lease?

The residual value is the estimated value of your EV at the end of your novated lease agreement. This is the amount that you’ll need to pay to own the car outright once you’ve made your final lease payment.