Residual Value of a Novated Lease: Everything You Need to Know

Vehicle_Solutions novated lease residual value

Here’s everything every prospective car buyer must learn about novated lease residual value.

When purchasing a car, one of the biggest questions people have is whether or not they should opt for a Novated Lease. Not only do Novated Leases offer a way to save money on taxes, but they also give you several other financial benefits. One such benefit is receiving a residual value at the end of your lease term. Here’s everything you need to know about the Vehicle_Solutions novated lease residual value.

What is Residual Value?

The residual value of a Novated Lease is the amount that remains at the end of the leasing term after all payments have been made on your car. It’s usually calculated as a percentage of the total purchase price. For example, if you purchased a car for $25,000 and the residual value is 10%, then the amount remaining at the end of your lease will be $2,500.

How do Novated Leases Work?

Novated Leases are a leasing agreement allowing you to pay for a car through an employer-sponsored salary sacrifice arrangement. Your employer pays for the car on your behalf, and you make lease payments out of your pre-tax salary. This means that the amount of tax you pay is decreased.

How Does Residual Value Impact My Novated Lease?

The residual value of your car will have an impact on the cost of your lease payments. Generally, cars with higher residual values will result in lower monthly repayments. The higher the residual value, the lower your total lease amount.

The residual value of a Novated Lease also affects other costs associated with ownership, such as fuel and maintenance. A car with a higher residual value may require less money spent on repairs over its lifespan, resulting in long-term savings for you.

How is the Residual Value Calculated?

When purchased with a Novated Lease, the Vehicle_Solutions novated lease residual value is usually predetermined based on the vehicle’s age, condition, and model year. Your financial institution will determine the residual value of your car before you sign any agreement. Knowing this figure is important so you can decide how much to pay for the car.

When Does My Residual Value Come Into Play?

At the end of your Novated Lease, you will have to decide what to do with the residual value of your car. You can pay off the remaining balance or roll it into a new lease agreement to purchase another vehicle. You can keep or resell the car for a profit if you pay off the residual value.

Understanding the residual value of your Novated Lease is important if you want to get the most out of your vehicle purchase. Knowing how this figure impacts your monthly lease payments can help you decide whether or not Novated Leases are right for you. With this in mind, you can make the most of your car purchase with a Novated Lease.

What Are the Benefits of a Novated Lease?

Besides saving on taxes, there are several other benefits to consider when choosing a Novated Lease. One benefit is that you can choose any make and model car without worrying about having the money upfront. Additionally, you can switch cars anytime during your lease term. Finally, if you decide to keep the car once your lease term has ended, you will have already paid off a large portion of the purchase price.

Another significant benefit of a Novated Lease is that you can make additional payments anytime during your lease term, meaning you’ll pay off the car faster and achieve an even higher residual value. You also can make flexible payments, such as splitting the cost between up to three different parties. 

What Happens at the End of a Novated Lease?

You can either pay off the residual value or roll it into a new lease agreement at the end of a Novated Lease. If you choose to keep the car, you will have already paid off most of its purchase price and will only need to make one final payment. Alternatively, if you decide to return the car, you won’t receive any money back beyond the residual value. You may also be subject to additional costs and fees if you opt to return your car before the lease term ends.