Some Novated Lease salary package outsourcers are becoming extremely greedy.
They are charging exorbitent amounts of lease brokerage. They are also adding other items to the Novated Lease rentals to be paid for by the employee effecting the initial finance lease.
A recent scenario saw a $67,000 leased value car have a $8,000 Lease brokerage amount added. The vehicle also had over $4,000 in Gap and Lease Protection Insurance added by the outsourcer.
In addition, the Novated Lease outsourcer's insurance company quote was over $1,400 p.a. more expensive than the premium that the employee could have obtained personally.
The Gap and Lease Protection Insurances are not car operating costs as defined in the FBTAA. So these could be assessed for non concessional FBT as a Residual or expense payment Fringe Benefit. This could create a $4,000+ extra FBT liability for the employer.
This is despite the Gap and Lease Protection Insurances being included in the Novated Lease rentals payable by the employee.
The employee could justify around 30% business use of the car. So as a result, the Novated Lease outsourcer was $1,000's more expensive than if the employee had effected a car consumer loan. I.e. The employee would have paid all of the operating costs from take home pay with no salary sacrifice arrangements.
The Novated Lease outsourcers Novated Lease effective interest rate including brokerage and gap/lease protection insurances exceeded 15%.
The employee did not have a suitable associate, so the normally preferred option of an Associate Car Lease was not applicable.
Luckily for the employee, their employer allowed a quote for the Novated Lease outside of the outsourcer. Bob Millikin from Salary Packaging Gurus obtained an interest rate less than half of the outsourcers effective interest rate.
This much lower rate and the employees own insurance company quote, now made the Novated Lease a viable proposition, compared to the outsourcers figures.
The saving over the 60 month lease term with the lower interest rate and cheaper insurance premium, exceeded $22,000, compared to the outsourcers figures.
The moral here is if you have an option to choose your own Novated Lease Lessor, do your homework and get other quotes. Do not just rely automatically on using the incumbent provider arranged by your employer.
If you don't have a choice of electing your Novated Lease Lessor, then please
check that the after tax cost of the Novated Lease does actually save you money compared to no salary packaging.
Non salary packaged consumer car loans can have cash or car trade in equity deposits utilised. You can have zero balloon payments at the end date of the consumer car loan. Novated Lease arrangements allow neither of these advantages.
Salary Packaging Gurus can assist you with these calculations.