How can novated leasing put you behind the wheel of a better car?
Leasing a car in Australia instead of going for a financial arrangement with a lender can give you $16,000 in savings. Whether you loved or hated maths class, you can't help but be a fan of numbers like that.
The financial benefits of a novated lease with Smartleasing take this a step further, which means that you have the option of either spending less than you thought or putting those savings towards a better car.
This is something many Smartleasing customers have already learned. Mark Biggart, the head of Smartleasing's vehicle buying service, sat down to discuss what the team has observed about the cars customers are getting with a novated lease.
More buying power, right off the bat
Let's start by taking a closer look at the price difference between the two main finance options. Say you budget $900 each month for car payments over a three-year period. With a loan, that gives you the ability to afford a car with a sticker price of about $30,000. If you opt for a lease instead, that same budget can put you in the driver's seat of a car that costs $46,000.
"Quite broadly, that's a significant difference in the spending power in terms of what a family might be faced with in what they can look at from a vehicle perspective. That means instead of going for a hatchback or a low-end sedan, they can actually afford the family-sized SUV," Mark says.
"If they didn't want to spend $900 a month, but they still stuck with a car worth $30,000, their equivalent monthly payment under a lease arrangement is significantly lower."
It's important to remember that this is just how much savings you can expect from a lease compared to buying a car with a loan. With a novated lease, however, there are additional financial benefits – like with GST, your monthly tax burden and the overall cost of a vehicle, among others.
With that much money freed up straightaway, it's no wonder that Smartleasing customers can opt for higher-end vehicles – whether it's from a more expensive manufacturer or a car with more features within the range.
You can put the money you save through a novated lease towards a car with more features. You can put the money you save through a novated lease towards a car with more features.
What is a residual, and why does it matter?
For drivers who are nearing the end of a lease period, it's possible that your vehicle will provide an extra financial boost. At the end of a leasing term, customers have a number of options, including moving on to a new lease vehicle, continuing with the same car or even buying the car outright.
This ability to move to a new vehicle every three, four or five years is one of the major benefits of a novated lease. When you go from one vehicle to another, there are two figures to be aware of – your car's residual value – how much the car would cost to buy in its current state – and its current worth.
"At the end of that period, there's a residual to pay off. Anything the car is worth over and above that residual is the customer's. It's their money, and it goes back to them in full," Mark explains.
Your car's value at the end of a lease can put money back in your pocket.Your car's value at the end of a lease can put money back in your pocket.
Let's look at how this works with the Hyundai Tucson – one of the top five cars at Smartleasing right now. Over a three-year lease period, which will entail a 46% residual rate, the Tucson is projected to retain 64% of its value – meaning customers can expect to walk away with 18% of the initial cost of the vehicle returned to them.
What are Smartleasing customers driving?
One of the main draws to higher-end models is that they tend to come with the bells and whistles that really enhance the on-road experience. Useful gadgets like reverse cameras, built-in GPS navigation systems and entertainment units are not always standard inclusions with most manufacturers. While drivers could purchase devices like these through a third party, that is changing.
Manufacturers are now building these systems into their vehicles with in-house technology, which means customers will need to go above the base vehicle for these options.
It's not just the utilities that make a higher-end model an attractive option – the latest safety innovations still haven't made their way into a standard package with many auto makers. Things like blind-spot sensors and rear-view cameras are much more common with premium models.
Of course, with the savings you see through novated leasing, these higher-end vehicles are within reach.
"When I do analyses of what we've ordered for our clients, it's certainly weighted toward the top-of-the-range vehicles as opposed to the bottom," Mark notes.
"Bear in mind, the majority of our clients are federal and state government employees, so the average salary is lower than what it might be in a corporate environment. I would definitely say that the fact our customers are going for the more expensive variants within a range is demonstrating that the novated lease is letting them do that."
Finding the right car
So, you know that a novated lease lets you afford a better car, but how can you find the perfect one? That's where Mark and his team come in – working with a network of dealers all across Australia to find the exact make, model and configuration you want, without the hassle. In 2015 alone, 70% of Smartleasing customers got their car through this service.
"We offer our customers a really great service in that they don't have to lift a finger – well, they have to lift a finger to use the phone, but they don't have to get off the chair – and within four or five business hours to a day, we've essentially shopped around for them," Mark says.
"It takes out the hassle of them having to spend a day or two traipsing around dealerships."
Thanks to Smartleasing's relationship with dealers around the country, the vehicle buying team is able to secure the best price – and some incredible discounts – for customers. In the last 12 months, they have helped customers save over $12 million off the sticker price of a new car.
To learn more about your options for salary packaging a higher-end car, get in touch with Smartleasing today.