What is a Novated Lease?
A novated lease is a three-way agreement between employer, employee and Enlist.
There are two separate parts to a novated lease;
- A finance lease – a contract between the employee (lessee) and Enlist. The lease is a fixed monthly rental agreement over a nominated period with a residual value (see below) at the end of the contract.
- A deed of novation – a separate agreement between all three parties (employee, employer and Enlist) that sits behind the finance lease. The deed transfers obligations of the lease (with the exception of the residual) from the employee to the employer for the duration of employment or until lease end, whichever is first.
Residual value: This is a lump sum at the completion of the lease contract (lease term is anywhere between 3 and 60 months) which is the responsibility of the lessee.
There are three options available to the lessee when the residual is due:
- Refinance the amount for a further term and continue to enjoy the benefits of the Novated lease through Enlist Pty Ltd
- Pay out the residual value in full, cease the salary sacrifice arrangement and revert to paying all running costs out of your after tax salary (not rrcommended if you intend to keep the car)
- Sell the vehicle and pay out the residual value, purchase a new vehicle and commence with a new Novated lease arrangement through Enlist
Note: All lease contracts must have a residual value in accordance with ATO guidelines. A residual is a final lump sum payment at the completion of a lease contract. It is the lessee’s responsibility to pay the residual value in full. If there is a shortfall between the sale price of a vehicle against the residual value, then the lessee must make up the difference. If there is a surplus between the two, then the lessee is entitled to keep the profit.